October 29, 2020 – No matter how much business activity is taking place in London, Hong Kong or Dubai, New York City rules as the world center of commerce and deal making. From Wall Street and its stock exchanges to the bustling world of retail, fashion and high tech, millions of people and billions of dollars come in and out of the City every day.
To be sure, the stalwarts of industry and commerce dominate here still: AIG, Colgate-Palmolive, Verizon, Avon, and Pfizer are just a few of the scores of Fortune 500 giants that call the Big Apple home. In recent years, New York City also has become a destination for top technology players. Four companies — Amazon, Apple, Facebook, and Google — have established big offices along the Hudson River, from Midtown to Lower Manhattan. With their expansion, comes fresh hiring. Or at least that was the plan until the pandemic struck seven months ago.
An Emptying City
Now that we are in the final weeks of 2020, we are beginning to see the havoc that the pandemic has heaved on business from the West Side to the East Side, and from Midtown to Wall Street. New York City, like most major business centers around the world, has been a ghost town for months. Instead of face-to-face meetings – an essential part of deal making across the City – it is technology like Zoom to which business leaders have turned to create new ways of interacting. Travel in and out of the City is down 90 percent by most estimates and that means few other places have taken the body blow that New York City has absorbed.
“New York City has been absolutely impacted,” said Brian McGowan, a managing partner at ZRG. “Businesses and decision makers have felt the worst of the pandemic here. The city is occupied by ghosts, the on-the-go culture has been altered, and the typical long business day has been replaced by 15-minute Zoom meetings from the Hamptons.”
New York City as a result has shrunk, said Mr. McGowan. “Businesses are relocating and following talent to new regional centers, which more often than not offer lower taxes, talent rich environments, and better quality of life.” That said, he noted, businesses and markets here will come back. “The winners have kept their eyes on the challenges, changes and growth opportunities,” he said. Technology, for one, is being embraced not only as a means of communication, but also for distribution and commerce.
“We have quickly educated and assimilated our clients and our candidates to a digital environment,” Mr. McGowan said. And that has created a silver lining of sorts for top executive recruiters who ply their trade here: “More communication, better transparency, and decision making based on data and analytics. Our clients are finding a more efficient search process, shortened and de-risked.”
“The biggest change in New York since the dawn of the pandemic has been, obviously, the emptying of the city,” said Dale E. Jones, CEO of Diversified Search. “The energy is beginning to pick up, slowly and cautiously, but never in our lifetimes could we have imagined the most dynamic city on the planet essentially going silent. It has been like something out of a movie.”
A Bigger Pool for Top Talent
As such, everything has been affected – from Broadway to executive hiring, said Mr. Jones. “But there is no shortage of ingenuity in New York, so it’s really no surprise that large companies and non-profits have worked quickly to manage the new world order.” Sectors in New York that have been most stressed by the pandemic – Wall Street, healthcare, the arts – are now seeing a clearer picture of the future, he added. “And, as such, they are looking for the right talent to navigate it. Many of them have discovered, the hard way, that they did not have the right talent to negotiate a once-in-a-century pandemic.”
“Everyone suddenly working remotely has definitely affected the market for talent, but not in the ways I think a lot of people would have expected,” Mr. Jones said. “A lot of business leaders were surprised by how quickly and efficiently their workforces adapted to remote work. I believe this will be the lasting change for business, and especially for C-suite talent.” Before the pandemic, he noted, it would have been unheard of to hire C-suite talent that was not committed to working in headquarters or physically in an office. “The shift to remote work now has many companies reconsidering this old model. And that means the pool for top talent just got a whole lot bigger.”
“We are, and always have been, a very high-touch firm, which has proved to be enormously helpful in the COVID-19 crisis,” said Mr. Jones. “Foremost, what clients want is reassurance that the quality of the talent pools generally and the search process specifically would not be adversely impacted by restrictions on travel and the lack of in-person contact. But we have been doing digital interfacing with candidates for a long time, so this was not really new to us. We have been able to quickly pivot and explain to our clients how this was all going to work and why it would not impact their search for top-flight leaders.”
Recruiting Next Generation Leaders
“There is a mass talent exodus of talent from New York City right now, which makes it a very competitive market,” said Mike Myatt, the founder and chairman of N2Growth. “Getting good talent to stay, while having a more traditional employer base react to accommodating distributed workforce dynamics in senior roles, is a challenge.” A silver lining is already starting to show for ‘switched on’ employers, he said. “For organizations willing to embrace the new normal, they can lean-out traditional cost structures and upgrade talent levels at the same time by not making everything New York City centric. Smart employers no longer concern themselves with where someone works, just that they work. This is an advantage for those who seize it.”
“Low switching costs for talent makes every market more competitive and this is true for New York City as well,” Mr. Myatt added. “Some may think it’s an ‘employer’s market’ given the number of unemployed here, but it is never really an employer’s market when it comes to tier-one talent. For those willing to widen the aperture of their geographic lens, it can take what might otherwise look like a shrinking market and turn it into an opportunity for talent growth.”
“Unlike many of our competitors who laid off or furloughed staff, or worse yet, altogether closed their doors, we have aggressively grown during this time to serve the needs of growth minded companies,” said Mr. Myatt. “Distributed workforce dynamics make the traditional hiring models and methodologies almost obsolete. Smart employers understand this and are looking for a different type of leader going forward. We’re helping clients attract the next generation of leaders who care less about where they work, and more about why and how they work.
“We’re helping clients find leaders who are the ultimate player-coaches,” Mr. Myatt said. “Those who can both lead and contribute, and who understand the hidden value that can be unlocked with self-led teams. There has never been a time in recent history where access to a pool of highly gifted, diverse leaders possessing 10-pound brains are so readily available to employers who have the right vision and perspective.”
Businesses, and Leaders, are Adapting
“What sets New York City apart from other large cities is its energy; there’s something about the hustle and bustle of New York that you can’t find anywhere else,” said Justin Cerilli, leader of the New York City and Stamford, Conn., offices at Russell Reynolds Associates. “While some of that energy is missing as locals and tourists have left altogether or gone virtual, the energy is still there, along with the ‘we are in this together’ spirit. Whether walking down the street or strolling through Central Park, the comradery is there as we recognize that everyone is going through this challenging time and, as New Yorkers, we need to band together.”
The smartest businesses with the best leaders are realizing that they can no longer wait for COVID-19 to be over. “Businesses are adapting, leaders are adapting, and they are moving forward on key roles across industries in New York City,” Mr. Cerilli noted. “Organizations are also assessing whether they have the right leadership and culture to not only get them through this crisis, but shape how the company will work moving forward. An opportunity that has come from this situation is that remote working has proven itself to be a more sustainable and flexible method of work. Clients and candidates are now fully adjusted to working remotely, resulting in more flexibility as people have shown that remote work indeed works. The challenge for leaders is to determine how this will impact their culture as we adapt to the new normal through and after COVID-19.”
“For us at Russell Reynolds, the shift to video calls has really humanized our relationships with our clients – we see their lives, their kids, their pets,” he observed. “It adds a whole new dimension to these people we typically see in a very corporate light. Being even more flexible is another big adjustment that we as a firm have embraced. We recognize that everyone is adjusting and playing it by ear, so sometimes we have to respond to client needs in new ways, like organizing socially-distanced meetings in backyards.”
“We believe the pandemic has forever changed the demand for technology in the executive search world and, like our clients, a race to find and build better processes using technology has begun,” said Kevin Mahoney, partner at Bay Street Advisors. “In our target market, financial services, there has always been an insatiable demand for technology and data from our clients. That demand has always been fueled by two pursuits: the search for a competitive advantage in the markets and an improvement in operational efficiency to reduce costs.”
First Order of Business: Survival
Executive search has always lagged in these areas as it is first and foremost a ‘people business,’ Mr. Mahoney said. “Technology can improve efficiencies in a search process and result in a better overall product for our clients, but a search still requires a high level of human touch at both the client and candidate level that simply cannot be replaced. In fact, we have always prided ourselves on meeting our candidates and clients in person no matter where they are in the world. The pandemic and WFH mandate have, of course, taken away that practice for the time being, forcing us to rely heavily on technology more than ever before.”
Another interesting dynamic is the realignment of coverage within search firms. “We’ve observed those with either too narrow of a focus or too broad of a coverage struggling to maintain business at pre-COVID levels,” Mr. Mahoney noted. “As a result, we’re seeing smaller firms either merge with one another to survive or their consultants have chosen to join larger competitors. Many of the larger search firms, on the other hand, have reduced headcount across markets that have been hit hardest by the pandemic.”
Further Impacts In New York City
“We are seeing search consultants working remotely more efficiently,” says Clark Beecher, managing partner of Beecher Reagan. “The search processes are speeding up because clients are more accepting of us using video. Candidates are working remote and many are looking to leave New York City for good. Of the last 20 candidates we spoke with, 17 are already in the process or are currently looking to redomicile by year end.”
“So, this does not shrink the market, it allows talent to be more fungible across city and state boundaries,” Mr. Beecher says. “I think it is excellent from a supply perspective. The companies that are embracing it from a demand outlook are enjoying a short-term competitive advantage in recruiting.”
Paul Heller, co-leader of the financial services practice and managing partner of the New York office at Caldwell said that firms that “foster a collaborative culture benefit from having practitioners with strong internal relationships, which in turn can maintain unity during this remote working period. Better managed firms can selectively use this time as an opportunity to strategically invest in new partner talent,” he said. “Search professionals at SHREK firms (Spencer Stuart, Heidrick & Struggles, Russell Reynolds Associates, Egon Zehnder, and Korn Ferry) have some uneasiness about compensation given their tendency to have a black box component to their comp model.”
Invest in Talent Wisely
Mr. Heller also noted that declining pools of fees being paid by clients shrink the market more than remote working. He tells his clients to “spend your investment dollars on talent wisely, but don’t forego this opportunity to have access to talent that can jumpstart or accelerate the execution of your strategic plan.” For Chris Pantelidis, managing partner at EMA Partners, the importance of New York City cannot be overstated. “The majority of major businesses across North America have offices in this city and some of the best leadership talent in the world can be found right here, particularly in the financial services, consumer markets, and high-tech sectors.”
Once the pandemic subsides, he said, “there will be a very strong desire for people to want to relocate to New York,” making the city a destination of choice as it has always been. “There will be long lasting effects on New York, yes. But the City is resilient.