January 10, 2023 – With almost 25 years of experience in retained executive search, Chris Bull, co-founder and managing partner of executive search firm McDermott + Bull, is often asked what his firm is seeing in the market and what he expects moving forward. In summarizing what he has seen over the last 24 months, and making predictions for 2023, he says he feels that he can speak for the search industry, not just McDermott + Bull, as he has relationships with many individuals across the firm’s various global search competitors. “As I believe most are keenly aware, what we have experienced with executive recruiting over the past two years has been historic in nature,” said Mr. Bull in a recent report. “Most firms within the search industry have been at or, in many cases, over capacity since Q4 2020.”
The drivers for this activity, he says, include the dramatic increase in executive recruiting, which began in November of 2020, that came after almost two full quarters of extremely light activity given the uncertainty of business during the COVID-19 pandemic. There was also the need to “catch up” and execute new search engagements, which played out quickly as 2020 came to an end.
“With this material increase in recruiting activity, a supply and demand imbalance began, leading to the increase in executive compensation that we’ve all been up against since the early months of 2021,” said Mr. Bull. “Within months, the ‘candidate community’ became keenly aware of the dramatic increase in cash compensation and individuals became more likely to answer calls from executive search firms.”
The Great Reshuffle
And while the industry saw some topgrading during this time, demand fed off of the need to replace those who decided to retire or those who were poached by a recruiter to join a competitor, all leading to the “Great Reshuffle,” he said.
“Somewhat surprisingly, we’ve had clients become increasingly open-minded, entertaining quality candidates who may have a couple of recent moves or other items that would have previously been disqualifying factors for their roles,” said Mr. Bull.
“And lastly, and I get this question quite a bit, during this period we did not see equity increase as a part of the compensation package as we saw with the cash portion of the offering,” he said. “Whether this be restricted stock unit grants, options, real equity from private equity-sponsored portfolio companies, or synthetic equity, we didn’t see a material change in this area.”
Chris Bull is a co-founder of McDermott + Bull . He has over 20 years of experience in retained executive search. Mr. Bull has a track record of partnering with client organizations to deliver senior talent with private and public companies, private equity firms and their operating companies.
As 2023 begins, with talk of a pending recession, the search industry is undergoing a certain change. “As executive search firms complete existing engagements, we’re all realizing some economic apprehension, leading to a slowdown of new business as corporate leaders navigate the current and future economic states of their organizations,” said Mr. Bull.
He also offered his thoughts on what changes will be coming in the year ahead:
1. “At the risk of wandering slightly out of my lane, from what we are all hearing, we will certainly be moving into a recessionary period sometime during the first three or four months of the year,” said Mr. Bull.
2. The “candidate market” that we’ve all been navigating over the past 18 to 24 months will start to change. “I’m not suggesting that compensation expectations will be lower than what we’ve seen recently, but I am saying that they will stabilize, and this will allow us all to manage expectations when we collectively begin our search processes,” he said.
3. “Here is the tough news: candidates will start hunkering down in 2023, meaning they will be less likely to quickly answer our calls or respond to our various forms of outreach as they look to mitigate personal risk,” said Mr. Bull. “While not as dramatic as what we saw during the ‘Great Reshuffle,’ candidates will most certainly look to stay with the devil they know vs. considering those they don’t.”
4. “This reality,” said Mr. Bull, “will sharply contrast to the environment we’ve operated in during the past couple of years, when it seemed like every functional leader was in-play and candidates had more than just a couple of professional opportunities to consider when they were considering a change.”
“We should feel fortunate that – with all of the readily available information shared by professional economists – the outlook for the 2023 American marketplace is something we can all digest and navigate,” said Mr. Bull. “Here’s to the close of 2022. We wish you the best over the holiday season, and throughout the year ahead.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media