February 15, 2015 – With its 2014 merger with Chicago-based Cavoure Partners, itself a high-end and established recruiter, Chartwell Partners seems poised to push its agenda forward within an executive search industry that is both expanding rapidly and changing almost exponentially. In the following interview, firm co-founder, R. Stuart Bush, discusses the many issues and challenges facing the industry today. He provides a candid view as to how he, and his partners, are guiding the mid-sized boutique into a new era in the recruitment sector. Prior to co-founding Chartwell Partners in 2004, Mr. Bush spent 15 years at Russell Reynolds Associates where he managed the firm’s Dallas office. In 1999 he joined Heidrick & Struggles where he directed the firm’s Managed Care and Health Insurance Practice.
ESR: Last year you decided to merge with Chicago-based Cavoure Partners. What led to this decision to merge?
Bush: It made sense for many reasons. Our two firms were modeled on the strong cultures of firms like Heidrick & Struggles and Russell Reynolds Associates, where several partners worked previously. As far as how the merger benefits Chartwell – we have been able to broaden our industry expertise and geographic footprint considerably. We now have deep practices in the consumer and industrial sectors, adding on to our existing strengths in healthcare, financial ser- vices and technology.
ESR: It’s more of a complement of industries and functional disciplines that you’ve brought together.
Bush: Yes, it is. We looked at this very closely, of course, and we were complementary to each other versus any significant overlap. There is a common strength around the CFO function and certain roles reporting to the CFO. The marketing function is yet another. Both Chartwell and Cavoure have significant strength in conducting chief marketing officer assignments. But our overall objective remains to specialize and dig deeply into each industry segment. We discussed that 10 years ago when we formed Chartwell. If you are going to compete for the best search assignments, you have to stay very specialized. It is a view that we share with the partners at Cavoure and another reason why we think the combination is an exceptional fit.
ESR: Further to that Chartwell is really a generalist firm made up of individually specialized practices. Is it a challenge to define the firm that is not a small specialist and not yet a large firm?
Bush: That’s a great question and one we talk about a great deal. The truth is that we have the Chartwell brand and the former Cavoure brand. We focus on four to five different sectors. So Chartwell can be categorized as a generalist firm. But if you drill down, we are really a collection of very collaborative boutique practices. We believe a small to medium-sized specialist firm is attractive to a client. They want consultants who can walk in and immediately grasp what the issues are, who the players are, and finish each other’s sentences. They also know and understand that when they retain us, the lead partner will be handling the assignment directly and it will not be pushed off to an associate.
ESR: Chartwell Partners is comprised of many partners who once worked for large firms. What benefits did the large firm experience have on you and do you think clients tend to follow the recruiter or the firm when there is a split?
Bush: As you know I spent 20 years with two of the largest firms in the industry, Russell Reynolds and Heidrick & Struggles. It was a great experience for me because I was trained by, and worked alongside of, some great people like Peter Crist, Chuck Kepler and Ferd Nadherny. They were terrific mentors and I really learned the process under their professional elbows. I learned that working on search assignments is a “top to bottom” process that requires an extraordinary attention to detail. Others here have brought that same training and element to Chartwell; it’s a highly professional and hands-on approach. So we have this large firm background and large firm product but it’s packaged in a more nimble and collegial boutique environment. And I think that is the best of both worlds, quite frankly. We feel that clients are looking for that type of approach. Relating to your second question when I left Heidrick in 2004, I was shocked that virtually every client followed. Now there are always some clients who felt a bit safer with the larger brand firms, but most followed. This is an individual relationship and trust-based business. Your clients know you, just as much as an individual as they know your firm association, and if they get used to working with a recruiter who does great work they want to maintain that relationship regardless of the firm they work for.
ESR: You worked for Russell Reynolds himself for many years. What influence did Russ have on your career?
Bush: Russ influenced my career a great deal. I was this 29 year old with the University of Texas and UVA credentials and somewhat apart from the Russell Reynolds Ivy League pedigree. Russ and others worried that I wasn’t based in one of the firm’s larger offices. The solution was that I would spend weeks and really months in Chicago and New York training with people like Peter Crist and Hob Brown and Steve Scroggins and I learned the business through them. I think the search industry owes a debt of gratitude to Russ because he set standards for executive search that are still widely used today. He also had an innate sense of doing things the right way and created an environment that fostered the growth and development of great search consultants who gave back to their communities and were viewed as well-rounded people.
ESR: Search firms today look and feel very differently. They are more full service human capital providers than in the past. How is Chartwell responding to this shift in structure?
Bush: Again a great question which is how do we as a firm think about our true positioning and what we need to do to address clients’ needs in this changing industry. I think we look at this in two different ways. The first is that we are still in the business of executive search. That is what we are known for, what we are retained to do and we always need to put that ahead of everything else. We have looked closely at the ancillary businesses that firms like Korn Ferry and others have developed. The senior partners at those firms today are focused on cross selling those different services. In our view it takes you further away from executive search. We think it makes better sense to refer our clients to experts who do this full-time rather than diversifying into other services that could also been seen as conflicts of interest. So we have developed relationships with other service providers, either by industry or geography, whom we can refer our clients to when it makes best sense.
ESR: So you are still serving your client by making that referral.
Bush: Yes, of course. But at the end of the day we feel that we need to stay focused for our clients. They have paid us a sizeable retainer to identify top talent and we would not feel comfortable, as part of that process, cross-selling a compensation study or some other service to them. In our view it’s not the reason we are in business. Now it may be appropriate for the larger firms to do this, and perhaps that is where part of this industry is heading but, for now, our focus will remain strictly on retained search.
ESR: How do you avoid potential conflicts of interest when you delve into other, ancillary lines?
Bush: For us right now the best way is to not diversify into these new ancillary lines. For those firms that are doing it, or are even considering it, they have to be careful. It’s a sensitive balance. On the one hand you want to execute at the highest levels and deliver to your clients the best possible candidates. That’s what we do. That is what all search firms do. But you also don’t want to compromise the good work you are doing by cross-selling something that may only be in your firm’s best interest but not the client’s. So where does that line get crossed? When is it appropriate to introduce something like compensation consulting? Is the client asking for this or are you offering it and should it be offered? These are the tough questions the industry is facing right now.
ESR: Do you think a firm like Chartwell Partners will be landing more C-level or senior level assignments in the future given that larger firms are perhaps getting too large and thus failing more often?
Bush: To be clear we conduct many CEO searches. But the question is really around the top 200 Fortune companies where the lead director is making a decision to go to a known brand versus taking the risk in considering a boutique. But I feel there is a shift going on where even the largest companies today are increasingly going to firms like ours or to Crist | Kolder and other high-end boutiques where you have partners with large firm experience and expertise but without the large firm problems or constraints. We know it depends who is driving the selection process internally. It might be a CHRO or a director who has come from another company where he or she maintained a relationship with a smaller search firm who had a reputation for a certain specialty and performed great work. And it’s that person who stands up and says, “This is an excellent firm; they do great work; they can perform at the highest levels and with far fewer blockage issues and we know we are working directly with the lead partner.” I believe we will see more boutiques develop in the near-term because, quite frankly, the large firms are getting larger and larger and, while that may be great for the overall firm in terms of its growth, is it best for our clients? I’m not convinced. So, yes, I do think there will be a shift at some point when the marquee assignments will be funneled to firms who perform high quality work but in a boutique setting.
ESR: So you do think there will be more boutiques in the future? There have been many more firms putting out a shingle in the last five years than ever before. Does this surprise you?
Bush: Not at all but I am surprised why, in earlier times, it was not more prevalent. My group of partners saw an opportunity to apply the many years of experience as senior partners of the largest search firms and replicate it in a smaller model. I think if a search consultant has an established reputation and a local client base, launching a search firm is really much easier than people think. It has also proven to be the most rewarding and enjoyable experience any of us have done professionally. I thought at one time I would see a myriad of sort of super-boutiques formed. What is interesting is that there are many very talented recruiters at large firms who talk about it, but few actually take the step. It may be that, at the end of the day, the entrepreneurial spirit is just not there and they cannot pull the trigger and leave the large firm brand. Many like the comfort and protection that a larger firm or brand offers. But I now sense more are beginning to break out and your statistic bears that out. I think it’s a confluence of many factors: a strong economy; a large differentiation between boutiques and large firms and the fact that retained search is just changing overall. I think over the next five to 10 years we will see a greater number of firms spinning off from the largest firms or launching organically.
ESR: I also think that a great many large-firm partners are not buying into the notion that bigger is better.
Bush: Part of it has to do with where recruiters are in their career cycle. Several of us had become frustrated with the direction the firm was taking, the overhead, cost structure, etc. In a large firm you are paying for a lot of company overhead. Heidrick is a great firm with a great brand but for me, at that time, it’s not what I wanted. And my partners all went through a similar process. You either make a decision to stay and work for a large brand but be subject to all of the problems, changes, issues and so on which, by the way, you cannot change. Or instead, take a chance and take control of your future. And, more importantly, do great work for your clients. Incidentally the reason our culture at Chartwell is so strong and works so well is due to the fact that we all had very similar experiences with larger firms but also shared the vision and the entrepreneurial drive.
ESR: Because it’s your own brand there is more at stake but, at the same time there must be great satisfaction that it’s all working because you were the ones driving it with your vision.
Bush: I agree completely. I think when it’s your name on the door it makes a huge difference. When you are the owner of the business you wake up every morning at 4:00 a.m. thinking about what needs to be done for your clients and the people you work with and so on. There is a vibrancy about it which comes with building a firm. If we are not doing great work for our clients, we have no one else to blame but ourselves. We are the firm.
ESR: Yes and there are so many potential issues with a large firm, particularly one that is publicly traded.
Bush: I agree with you. Do you want to be ingrained in a large firm where the fortunes of that firm rise and fall on their stock price or have to deal with issues that are detrimental to the firm and the brand over which you have almost no say or control? In many cases the answer should be obvious.
ESR: What do you think about the shift by many companies to use internal recruiters to conduct their own search assignments and have you seen any affects on your business?
Bush: I think the days of in-house recruiting are ahead of us rather than behind us. And it is a great concept. It makes terrific sense, not only from an economic standpoint but it makes the company smarter. However, I think it will have less of an impact on the top end of search, where we sit, because I think it’s far more difficult to execute the CEO, COO, CFO searches from inside. I think where in- house recruiting is effective is at the lower to mid levels where a company is perhaps working on a number of searches that are of a similar nature and of a similar profile. Interestingly we have been awarded several searches that have been previously tried by the in-house team. We recently conducted a search for a Fortune 50 health insurance company to identify an executive to run the central region of the U. S. The client had attempted to fill this from the inside but they just were not able to find the right combination. We took it on and we were very fortunate to complete it in 60 to 70 days. But, in this case it was an individual who would not have taken a call from an in-house recruiting team.
ESR: Also with in-house recruiters their net- works are in just one vertical.
Bush: I agree. When you are looking at just one vertical for talent you limit yourself to just those candidates in that sector. But senior-level search is far more complex. Take healthcare, for example. If you are looking for a CIO that person might not come from within healthcare at all. It could be someone from another high transaction volume, heavily regulated industry like telecommunications or financial services. Same with the CFO function. CFO jobs are becoming so much more complex, and we are increasingly looking outside our client’s industry. That cross-industry perspective is an area that in-house recruiters may lack.