Executive Search Firms Adapting to the New Normal

February 16, 2021 – 2020 was an unprecedented year in most respects, and a challenging year for many in the executive search industry. Senior executives across the sector, however, are generally optimistic in their outlook for the year ahead. According to two leading reports, one from Bullhorn and the other from Hunt Scanlon Media, optimism reigns supreme. According to Hunt Scanlon, 93 percent of recruiting leaders said they are expecting growth in 2021, while 80 percent are bullish on business prospects for the new year. A full 75 percent of search executives in the 2021 Hunt Scanlon Pulse Rankings survey said they expect full growth to return by June. Fifty-nine percent of those polled said they expected to meet their targets for 2021, while 41 percent said they would exceed targets set for the year.

“Growth and expansion were the key buzzwords in place last year at this time when COVID-19 was barely a blip on the radar,” said Scott A. Scanlon, CEO of the Greenwich, Conn-media concern. “Since then, much has changed. And one year on, recruiters are refocused on improving their businesses, doubling down on advancing their brands, and scaling for the future.”

Last year also saw a dramatic rise in the number of executive search firms employing a digital transformation strategy, according to Bullhorn‘s 2021 Global Recruitment Insights and Data (GRID), a survey of more than 2,000 recruitment professionals. Forty-three percent of global recruitment firms now have a digital transformation strategy in place, compared to 25 percent a year ago. Eighty-two percent of those firms with a strategy in place (and two-thirds of all respondents) said that COVID-19 directly caused them to adopt or ramp up their digital transformation efforts. “The leading staffing and recruiting firms today are focused on digital transformation, a three-pronged journey that combines the digitization of huge volumes of data with automation and, eventually, artificial intelligence, to unlock new levels of productivity and truly transform the way businesses operate,” said Matt Fischer, president and chief technology officer at Bullhorn. “The challenges facing firms over the last year has underscored the need for this approach.”

Bullhorn asked respondents, “How do you expect revenue to change in 2021?” Seventy percent said they expected revenue to increase and just three percent expect a decrease. Firms that had a good year in 2020 were even more positive about their outlooks in 2021 (80 percent of these respondents expect an increase in revenue). Will agencies ramp up their investments in 2021? Roughly two-fifths of businesses plan to bolster their tech and operating budgets in the year ahead. Asked about changes in their business in the new year, search firms said they were most likely to invest in technology, with more than half of the respondents (54 percent) expecting to increase their budget for tech investments.

Top Priorities & Challenges

While the industry underwent a lot of change in 2020, the top three priorities for recruitment businesses remain the same: it’s all about candidates and clients. Four out of the top five priorities for search firms in 2021 revolve around candidates and clients. Small firms were twice as likely as their larger counterparts to prioritize marketing efforts in 2021.

For the first time in a decade, the talent shortage was not the No. 1 challenge for staffing firms. That said, the talent shortage was still a key obstacle. Despite historic unemployment, firms reported challenges placing qualified talent.

It’s not surprising to see economic uncertainty as a top challenge for 2021 (24 percent), but this number actually represents a decline year-over-year (28 percent cited it as a top challenge last year).

A lot goes into a single placement of a candidate: gathering client requirements, sourcing, screening, onboarding, back office administration and more. But when asked which processes could use an overhaul, staffing professionals said sourcing is the most challenging part of the recruitment lifecycle and is the process they’re most likely to automate.

Going into 2020, the talent shortage was the most persistent obstacle facing recruitment businesses, with respondents citing it as the top challenge for more than a decade. While COVID-19 and its impact on unemployment have impacted the candidate pool, it appears the talent shortage is still an issue most staffing professionals must contend with.

How would recruiters describe the talent pool in the industries they serve? While the majority of respondents across segments and verticals reported a talent shortage, some groups were more likely than others to do so. Seventy-two percent of firms serving the light industrial industry reported a shortage and small firms (60 percent) reported it at a higher rate than firms of other sizes. Interestingly, C-suite leaders (70 percent) were substantially more likely to report a shortage than recruiters (45 percent).

Customer Challenges

Building customer relationships is a top priority for agencies in 2021, but what’s standing in the way of that goal? While COVID-19 introduced some new complications into the mix, according to Bullhorn, many of the top challenges to winning and maintaining clients are all too familiar to recruitment agencies.

When Bullhorn asked respondents what their biggest obstacle was to winning new clients, nearly a third said client demand (hiring freezes or a lack of budget for staffing services). When asked what their biggest challenge was pertaining to their existing clients, respondents said changes to job reqs—either reductions in volume or increasingly challenging asks. This accounted for more than half of reported answers as the biggest challenge when it comes to maintaining clients.

The search industry changed in 2021 in expected and unexpected ways. When asked what would be the one thing they could change about the search industry for the better, recruitment professionals overwhelmingly said they were concerned about the reputation of the industry, though some believe the negative reputation is merited. Client relationships came in a distant second. Respondents said they want better communication, more transparency, and better rates from clients.

It’s Time to Complete Hunt Scanlon’s Annual Rankings Survey

Preliminary data on search firm performance has been pouring into Hunt Scanlon Media for the last couple weeks. With the global coronavirus pandemic sending shock waves through our daily lives and the economy, businesses were forced to navigate through the upheaval and unprecedented times. The industry as a whole was down, but recruiters say they expect a sharp rebound and a more profitable and productive 2021.Increasing profitability and pushing revenue forward is topping every recruiter’s priority list in 2021.

Achieving financial stability remains paramount, but recovery strategies and new expansion plans are now rampant among the boutiques, who view entering new lines of business as a key way to achieve growth. Our highly anticipated spring ESR rankings issue is now underway – and our editors are busy interviewing and recasting statistics for our four-part 2021 State of the Industry Report. These will be our most detailed, data-driven reports yet focused exclusively on the effects of the pandemic on executive recruiting. To advertise, please contact; erik@huntscanlon.com. Please join in and complete our survey today. We need your input by Thursday, February 25th. 

The Impact of COVID-19 on the Recruitment Industry

It’s hard to overstate the impact of COVID-19 on the recruitment industry. How will it impact the industry in 2021 and what will be the lasting legacy on the industry? A fifth of respondents believe COVID-19’s effect on the unemployment rate will have the largest impact on the industry in 2021, but the majority of respondents still think they will have to contend with a talent shortage this year.

When asked what will be the largest impact from COVID-19 on the way recruiting businesses operate, respondents largely pointed to remote work. Remote recruiting (31 percent), reduced office space use (24 percent), and remote onboarding (23 percent) were the three most chosen impacts. What will be the largest impact from COVID-19 on the staffing and recruitment industry at large? Since COVID-19, respondents have reported placing candidates in remote roles they never before dreamed possible.

Recruitment Technology

Recruiting technology is a substantial investment, but the majority of businesses expressed adoption woes. While many of the obstacles that prevent adoption are internal (lack of time and high turnover), the most common explanation falls on the vendor: limited training. When Bullhorn asked respondents how they would evaluate their team’s adoption of staffing technology, just 16 percent reported full adoption of their staffing technology. Last year, one-fifth of respondents reported full adoption, suggesting remote workplaces have had a possible effect on adoption.

Bullhorn also asked what the top obstacle was preventing internal adoption of their staffing technology and why businesses weren’t making better use of their recruiting technology. For the second year in a row, teams across all segments and sizes reported that a lack of training was the culprit: training-related reasons account for half of all responses. If limitations are preventing adoption, it might be time to consider a change in technology. However, one-quarter of respondents have either never changed recruiting technology providers or haven’t changed in a decade.

Remote Work

Like many other industries, the recruitment industry underwent a huge shift to remote work in 2020. And judging by the responses, don’t look for remote work to go away in 2021 or any time after. Bullhorn asked search firm how many of their recruiters will work remotely in 2021. Small businesses were more than twice as likely to operate entirely remotely (47 percent) as large businesses (21 percent) in 2021. When asked how many of their business’ internal employees they expected to work remotely after the COVID-19 crisis, roughly one half of companies who will operate entirely remotely in 2021 plan to stay remote permanently.

Digital Transformation

Historically, the recruitment industry hasn’t always been known for embracing technology, but that no longer appears to be the case. How do respondents feel about digital transformation—the integration of innovative technology into all areas of the business for the purposes of improving operations and delivering more value to clients and candidates? The results are clear: The digital transformation of the industry is both a positive development and an essential one.

The last year saw a dramatic rise in the number of recruiting firms employing a digital transformation strategy. Heading into 2020, just 25 percent reported a digital transformation process. COVID-19 has had a direct impact on respondent’s approach to digital transformation. Firms that don’t have a digital transformation process are now more likely to adopt one, and firms that had one ramped up existing efforts.

Obstacles and Benefits

According to respondents, the biggest obstacle preventing the adoption of digital transformation is internal resistance to technology, while the biggest benefits are efficiency and increased flexibility.

When asked which and recruitment trends would they be closely following in 2021, respondents said they were most closely following technology trends in 2021, especially those that intersect with digital transformation or the increased role of remote work. Respondents were also closely watching the role of DEI (diversity, equity and inclusion) efforts in the year ahead.

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