January 28, 2021 – According to the latest Best Countries survey by U.S. News & World Report, Canada enjoys second best-ranked status among countries around the world. The Great White North is second only to Switzerland and jumped ahead of Japan in the latest roster, which is based on global perception metrics that include cultural influence, entrepreneurship, heritage, power, and quality of life – where it took the top spot. Survey respondents from 36 countries also rated the country as one of the best places to headquarter a company. For executive recruiters, Canada has been a particularly good place to set up shop. The country hosts an expanding number of diversified industries and dynamic growth sectors that are well-positioned to beckon talent.
Driving Digital Efficiencies
The impact of COVID-19 across Canada, of course, forced businesses to make some quick adjustments last year. “We transitioned easily to a virtual model as our team members were already supporting searches across Canada and the U.S. via video interviews and video client-progress meetings,” said Marty Parker, president and CEO of Waterstone Human Capital. “Like many search firms, our work was drastically impacted between March and June, with many engagements being put on hold or cancelled. But business slowly resumed in the summer and has been recovering ever since.”
Forecasting the executive search business can be a difficult undertaking, said Mr. Parker, who expects a “slow but solid” recovery period lasting until late this year or early in 2022. Powering the comeback, he said, is the rising need for e-commerce and digital marketing professionals, people and culture leaders, GMs, and chief technology officers. “Manufacturing, healthcare, consumer goods and consumer durables are clearly driving this economy forward,” he added.
Mr. Parker said the new Biden administration will be a friendlier and more cooperative partner for Canada, but tightened border control, due to the pandemic, will continue to have the biggest impact on the free movement of people and goods, at least for the first part of 2021. “There will be more collaboration, but real challenges persist,” he said.
Once the pandemic passes, said Mr. Parker, the country’s ongoing transition to a digital economy will have the biggest impact of all. “Talent will move more freely between companies as there will be less need for relocation, and search firms that can find how to better assess fit in the new digital culture will offer the greatest value to their clients,” he said. “Search firms that are nimble and that can speed up the traditional hiring process without comprising quality or fit will benefit most.”
Geographic location, firm size, or country of origin will become less important for search firms, he said, than an executive recruiter’s ability to drive digital efficiencies and to understand the new leadership type that clients desperately will seek as they adapt to a newly reshaped digital economy. “We’re there already,” said Mr. Parker.
Steven Pezim, managing director of boutique Bedford Consulting Group, said the Canadian market “pretty much mimics the U.S., but at 10 percent of the scale.” He said what is most attractive about Canada is its resiliency, but he said that was challenged during the pandemic. “Many of our competitors experienced a dramatic decrease in business in 2020,” he said. “While many search firms were downsizing and slashing bonuses in Q2, we felt this was exactly the time to let our staff know that we are in this for the long game,” and that they were safe, and their jobs protected. “People have long memories of how they are treated,” he said. “We were quite fortunate that our business grew double digits” last year, he added.
“We were off to a very strong start in January, with senior executive hiring in the technology (TMT), health sciences, financial services, non-profit, and education sector all enjoying rising demand.” He said his firm expects to see a full market recovery sometime in the second quarter of the year.
The Canadian executive search market is made up of global players and a large and expanding group of niche boutiques serving business, institutional and non-profit concerns. According to Pamela Ruebusch, CEO of TSI Group Inc., “Boutique firms largely have niche areas of specialty and represent professional level hires up to the C-suite,” she said. “Fewer only play at the executive leadership level. Boutique firms continue to dominate the market and success continues to be built on cultivating relationships with clients,” she noted. Interim executive search continues to have its place in the market, while many search firms, she said, are differentiating themselves by offering credible leadership assessment, corporate cultural evaluation, and succession planning services “to give clients confidence in their future hiring needs from a strategic value proposition vantage point.”
To be sure, COVID-19 has had a big impact on the entire Canadian recruitment industry, slowing hiring and pausing incoming new business for recruiters. “As such, Q2 and Q3 of 2020 seemed most impacted,” Ms. Ruebusch said. “Then, the pendulum began to shift, and hiring is now on its way to returning to pre-COVID-19 levels. The impacts of staff working from home was another adjustment that had to be made and forced the adoption of working remotely which has proved harder for some than others. I expect the second half of 2021 will show a surge in hiring. This will, however, depend on the success of the return-to-work strategies based on vaccines being administered, which is why countries need to make vaccine distribution a top priority.”
“Our manufacturing clients in healthcare and industrial manufacturing continue to hire at the leadership level and for inventory and procurement, sales and marketing, operations, finance as well as GM and president roles,” Ms. Ruebusch said. “Our clients in the integrated supply chain continue to streamline their operations and are active with middle to senior level hires that will improve people, processes, and technology. Some of our third-party logistics clients cannot keep up with hiring at all levels, given the increase in online purchases” that accelerated during the pandemic.
Given the virtual and remote workplace, Ms. Ruebusch believes – like Mr. Parker – that borders will continue to be less relevant when it comes to professional service offerings such as executive search. “With virtual meetings, hiring has leaped forward with decision makers becoming increasingly more confident with a virtual approach,” she said. “This includes board level recruiting.” Canada and the U.S. have enjoyed a strong working and trade relationship for years, she said; “I predict it will continue to thrive under the new Biden administration.”
De-Risking Hiring Decisions
According to recruiters who ply their trade across Canada, the country boasts a mature search market with a combination of big global players, many well-established domestic firms, and emerging boutiques. “The market has remained robust despite a slowdown in mid-2020 and has proven to be resilient as companies continue to engage,” said Robert Hosking, SVP and managing director of executive search at Lee Hecht Harrison Knightsbridge. “The trend within client organizations continues towards a heavier reliance on internal talent acquisition teams to deliver at all levels.
More organizations seem to be moving towards a structured RFP process to win work and are putting search firms through their paces to gain a spot on the vendor-of-record list,” he said. More organizations are now focused on finding ways to reduce the risk of a bad hire and are relying more on assessment to help, he said. “Throughout 2020 and already into 2021 we have seen an increased focus on diversity and inclusion, business transformation, succession planning and evolving leadership capabilities.” He said clients will seek ways to de-risk senior hiring decisions as the new year unfolds and they will also find ways to ensure that new executives can quickly onboard. “More search firms will offer executive assessments and first-100 days coaching programs as part of their offering,” as a result, he said.
Top search firms are continuing to adjust and fine tune their practices to find the optimal balance between a high-tech and high-touch approach to recruiting. “The more tools that are available, and the more data-driven our talent decisions become, the more search firms will be drawn to leveraging technologies to derive insights,” said Mr. Hosking. They are also becoming much more focused on building diverse networks of talent and becoming diversity consultants on behalf of clients. “Now more than ever before, companies are realizing that there is great economic and cultural benefit to be derived from diversifying their leadership teams,” said Mr. Hosking. “Increasingly, companies are turning to their search partners to help them achieve their goals in this key area and, as such, search firms are going to become much more deliberate about finding, developing and bringing forward candidates from under-represented groups.”
The Canadian search market is sophisticated in its service offerings, said Ward Garven, managing director of Stanton Chase in Calgary. “Like the U.S., the talent market in Canada is highly competitive and clients have an abundance of choice.” The Canadian market, he said, typically represents about 10 to 12 percent of the U.S. market size.
The Canadian and U.S. economies are tightly integrated, added Mr. Garven. “Most observers in Canada feel the new U.S. administration and our current government have an enormous amount of policy alignment,” he said. “So that is a strong reason for optimism. Our leaders believe the shared priorities between us, including the COVID-19 crisis, economic recovery, and climate policy will define the Canada/U.S. relationship under the new Biden administration. Getting back on track economically and in partnership with each other is a priority on the list of mutual policies.”
President Biden’s American Recovery Plan comes with a hefty price tag and will be followed by an ambitious recovery plan with some lofty goals for a swift economic recovery focused on infrastructure and expensive proposals to fight climate change, said Mr. Garven. “We see industries such as construction, consumer goods, technology, financial services, manufacturing, and renewables to be in line to benefit.”
Historically, he noted, energy consumption has always played a key role in raising the quality of life. “Canada is rich in natural resources and, in the recovery, there will be much higher demand for fossil fuels alongside an aggressive push to renewables.” Canada, he said, provides clients and their investors with low trade barriers, quality of infrastructure and a high-quality labor force, and the two countries have just renegotiated NAFTA. “These are enablers for more investment and increased cross-border activity.”
Active Year Ahead
Charlene Bergman, managing director, interim management, and executive search at Farber, said the Canadian executive search market is fairly mature with a combination of global and Canadian owned local, regional and national recruitment players. “A large portion of firms are concentrated around the major metro areas, with boutiques and individual operators making up the majority of the providers,” she said. “The industry has developed alongside commercial business development and regional growth—with search firms partnering with subsidiaries of global corporations or working with local, owner-operated companies. The Canadian economy is driven by small- to medium-sized enterprises that rely on search firms to bring top talent to their organizations.”
Farber’s client base is primarily mid-market with many owner-managed, family, or private equity-backed companies. “Unless they were in the travel or hospitality industries, most of our clients managed to hold their own in 2020,” said Ms. Bergman. “Some of our financial services clients did well and have been growing their talent base. Many are going through some form of digital transformation and therefore needed to hire executives with skill sets that accommodate this shift. We also placed interim executives and, although there was not significant growth in this area, we experienced a consistent need across all industries for interim resources. We have been extremely active in various functional areas including finance, HR, general management, digital transformation, and marketing.”
She anticipates increased demand for talent in 2021, “and we are seeing very positive indicators in the market,” said Ms. Bergman. “We grew our team in 2020 and plan to continue adding to our practice throughout 2021. While it is still early into the year, our contacts have indicated they need strong leadership talent to grow or different competencies to augment their leadership teams. We anticipate an active year across most sectors and functional areas within the executive and senior leadership ranks.”
Expect More Volatility
For the most part, Canadian executive search tends to specialize by city market although video communication has certainly expanded that reach, said Bruce MacDonald, managing partner at MacDonald Search Group. “I believe most clients are looking for a local solution to their recruitment needs,” he said. “That’s why we have multiple offices across the country. It is a definite expectation that all candidates are met personally so, as such, our team builds long-term relationships with local candidate pools.”
“By mid-March 2020, we were on our way to our best month ever,” Mr. MacDonald said. “Then, we ran over the COVID-19 cliff and everything changed rapidly. The difference between COVID-19 and the last major downturn, in 2009, is that back then things came to a stop; this time it was a pause. By mid-May things began to re-start and from June to October we billed about 75 percent of our regular business. By November we were back at 100 percent and December was our best month ever.”
“I believe the market will continue to see volatility with ups and downs for the first nine months of 2021,” said Mr. MacDonald. “When Canada reaches herd immunity, hopefully by Q3, I believe that Q4 will be our best. The economy will see explosive growth. Canada has generally abided with the necessary precautions of COVID-19. That means there will be a large portion of our population who will come out of isolation and go out to dinner, go on a holiday, buy a TV, and basically restart consumption. This will have a positive trickle-down effect to the categories we work in.”
New Economy Verticals
The Canadian executive search market is characterized by a blend of retained and contingency firms, but supplemented by a relatively healthy number of large, international search firms in Canada’s major business centers, said Fred Loewen, founding partner and COO of Waterford Global. “This competitive landscape is comprised, for the most part, of generalist firms serving a variety of industries and/or functional areas and boutique firms serving niche markets,” he said.
“As a firm that services and supports a large portfolio of clients providing essential services, as well as new economy companies, COVID-19 has actually had a growth impact on our firm,” Mr. Loewen said. “While the general business climate in Canada last year was one of caution, and continues to be so in 2021, certain sectors are experiencing growth and increased levels of capital investment and talent acquisition. By focusing on these sectors, our firm has been able to increase its book of work.”
“We anticipate that 2021 will unfold in the form of a slow economic recovery, with the evidence of a substantial recovery not likely arising until as late as Q4,” Mr. Loewen said. “Certain industry verticals, however, particularly those involved in the new economy, will continue to experience growth throughout the calendar year, albeit at a more measured pace. We expect that increased online stability and connectivity through widespread 5G system implementations this year will provide Canadian businesses with new ways to compete globally.”
“2020 pressure tested our business and our industry,” said Carl Lovas, chairman and CEO of Odgers Berndtson in Canada. “What we have seen is that firms like ours, that offer a one-stop integrated suite of executive search, interim executive, and leadership services, are coming out strong. There has been a significant demand for permanent and interim executive talent in growth industries such as technology, financial services, e-commerce and manufacturing.”
“The demand for CFOs went up dramatically over the last nine months, and we conducted a number of board searches given the focus on increased board diversity,” Mr. Lovas said. “Our leadership services have also grown as we work to provide executive coaching and development support to leaders during a time of great change and uncertainty.
“Looking ahead to 2021, we are already seeing organizations turn their attention to restructuring their teams for the future,” said Mr. Lovas. “And as the vaccine makes its way across the country, more businesses will make this shift to growth mode, unleashing a pent-up demand for experienced, transformational leaders at the executive and board level. This is where executive search firms with a breadth of leadership and talent services, and a global footprint, will really make an impact.”
Although on a global scale Canada is small, the executive search industry is expansive, said Mandeep Grewal, managing partner of Lakeshore Human Capital. “We have both locally-grown and international search firms operating in this market,” he said. The major markets are Toronto, Vancouver, Calgary, and Montreal, where most of the country’s head offices are located. The major global recruitment firms all have a Canadian office and there are an ever-expanding number of mid-sized boutiques and independents. “It is a very competitive market where companies typically work with individuals, or firms, they are familiar with and trust,” said Mr. Grewal. “Although it’s a busy search landscape, new entrants continue to enter the market,” and that makes for a robust dynamic among Canadian search firms at every level.