6 Reasons Why Executive Search is Ready for Disruption

The executive recruiting industry is being disrupted by the entrance of a multitude of new players offering advanced business models and new-fangled technologies. One of the latest, Carpe Diem Partners, lays out six reasons why the industry is evolving.

January 11, 2019 – The executive search industry continues to be in flux, and as a result search firms have been uncertain or wary about what their next move should be. To what extent will digitalization affect the industry? What about AI? How best to price and stay competitive? Should one offer diversified services? These are just some of the landmines that top recruiters and search firm chiefs around the globe are attempting to navigate.

After following the same “clubby” set of rules for decades, executive recruitment is primed for disruption and change, according to a new report by executive search firm Carpe Diem Partners. Technology, mobility and marketplace demand, among other key trends, are changing the industry as never before and posing tough new challenges for recruiters everywhere.

Driving the latest changes have been big developments in artificial intelligence – and questions about how the new technology will alter, and advance, the industry. Survey data collected by Hunt Scanlon Media over the past year indicates that demand is rising quickly for greater evaluative and predictive accuracy in identifying and selecting global talent, along with speed. Which search firm is up to the task?

Newly Launched

Launched last month by Jeff DeFazio, Carpe Diem Partners is a boutique consultancy focused on talent management and acquisition for board members, chief executives and senior-level executives. The firm advises public, private and investor-backed companies on leadership imperatives. It is headquartered in San Francisco, with a national presence and global experience in all regions. Mr. DeFazio is a former board member, CEO, CMO and executive search leader. An analytical strategist, he has over the last decade built a reputation for benchmark results and collaboration with clients. Previously, he was managing partner and global digital practice leader for Boyden.

Carpe Diem Partners shared six principles that govern its philosophy for change and how to best serve clients.

1. Generalists vs. Specialists

The search industry model is built on specialization. The thinking over the last 20 years has been firm specialization, translating into faster recruiting and deeper market insights. In reality, industry results don’t support this. Engagement cycle times, stick and close rates are no better today despite deeper specialization and more assessments, from boutique outfits to, and especially, the top 10 global firms, according to Carpe Diem Partners.

Related: Eight Trends for Recruitment Firms to Heed In Changing Times

“By definition, more specialization trends toward narrower thinking,” the firm said. “It can limit creativity and the diversity of thought. Today’s business needs vary and change. A strategic generalist better serves the client in many situations.” Don’t take their word, said the search firm, just ask its clients ranging from Fortune 500 public outfits to VC backed Unicorns.

2. Incentive Systems

Partner incentives in the search industry are built on volume. “This means a partner in a large firm must complete a greater volume of work to earn the same income in a boutique firm,” said Carpe Diem. “Misaligned incentive systems create cultures that shape and influence partner and team behavior often pushing less qualified candidates to clients.”

Conducting “new original” research and assessing new candidates is incredibly time consuming and costly (e.g. labor time = cost of goods sold). “A volume-based incentive system doesn’t align executive search firm behavior with the client’s needs,” Mr. DeFazio said. “We believe investing in better technology can allow our teams to spend more time in research and assessing candidates with attractive incentives without increasing our costs.”

 3. Technology

There is an outdated belief that a search firm’s CRM (Customer Relations Management system) and long record of relevant credentials is the yardstick of effectiveness and assurance of success, said Carpe Diem. The landscape is littered with dissatisfied clients following this decision path. Access to the world’s best talent has become commoditized because of LinkedIn and other trends.

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“It is no longer what distinguishes what great looks like in world class retained search firms,” said Mr. DeFazio. “Old proprietary enterprise technology platforms created just a decade ago are as outdated as your uncle’s El Camino.” He said Carpe Diem believes investment in disruptive technologies creates more collaborative teams, internally and externally, and stronger results in its engagements.

Related: Background Checking Candidates with Social Media

David Grundy, CEO of Invenias, a U.K. provider of cloud-based software for executive search firms, agreed. “Carpe Diem Partners makes a valid point that LinkedIn have provided a great source of unvalidated data, which is available to everyone,” he said. “The value that our customers are uniquely able to provide to their clients is the high value talent intelligence, insight and judgement.”

4. Transparency

The retained search industry has zero transparency on either the firm’s or the individual partner’s performance. Carpe Diem Partners said that today there is no player which collectively allows clients to have full access to the delivery process nor openly track and publish their results.

“Insights into the candidate funnel, firm and partner engagement results, end to end, have been kept hidden from clients,” the firm said. “Courtesy of the Cloud, the barrier to entry with digital technology has been eliminated and we can now operate more efficiently.”

 5. Ownership Structure

According to Carpe Diem, recruiting partnerships are inherently inward facing and political, which leads to cumbersome and slower decision making. “As a former CEO of private equity-owned companies and almost a decade in executive search as a top global billing partner in both partnership and single owner firms, I have found many ownership structures not optimally aligned to serving clients,” said Mr. DeFazio. “With this in mind, we designed Carpe Diem Partners’ ownership structure to shape culture, share the rewards of solving our clients most client problems.”

6. Performance Metrics  

The yardstick for search firm selection has historically been based on soft data – what network relationship the client might have with the firm/partner and what kind of relevant work (e.g. specialization) a firm has done in a very particular space.

10 Things to Consider When Selecting a Search Firm
Choosing an executive recruitment firm is nothing to take lightly. Recruiters, and the search firms they represent, are not all created equal. And whatever choice a company makes can have big consequences in terms of a proper working relationship between clients, recruiters, the candidates they provide and the ultimate choice for the job opening.

“We believe a better yardstick in the evaluation process needs to shift to actual performance scores (e.g. cycle times, stick rates, etc.) and client satisfaction scores at the midpoint and conclusion of the engagement,” said Mr. DeFazio. “Carpe Diem Partners has a 45-day average cycle time and high client engagement scores, which we believe clients value over hundreds of pages of credentials as a specialist.”

A View from Overseas

Taplow Group CEO Mark Firth said that most search firms have moved away from the clubby atmosphere Carpe Diem Partners talks about. “Sharing candidate details may not affect one firm here in the U.S. but in Europe, (the new privacy law) GDPR means we have to get a candidates permission to release there details to a client; so sharing info on rejected candidates/ potential candidates that decline an approach is problematic, although the metrics area is one that most search firms are trying to get to grips with but no one has of yet come up with the magic bullet,” he said.

“Maybe executive search is the recruitment industry’s ultimate disruptor, online and agencies rely on candidates’ actioning a response – search is a proactive approach that disrupts the recruitment model,” Mr. Firth added.

Related: Boutique Search Firms Step In Where Big Recruiters Falter

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media

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