Executive Search in 2024: Challenges, Trends, and Hopes for a Hiring Resurgence in 2025

December 12, 2024 – For many search firms in almost all industry segments, 2024 has been a tough year. There are many reasons for the recent downturn, and some firms have experienced a dip in revenues for even longer, according to Tim Tolan, founder, chairman, and managing partner of The Tolan Group. “Lots of changes are on the horizon for 2025 on the hiring front, and search firms are waiting with bated breath while hiring decisions are on hold, and draft fee agreements are (still) sitting in DocuSign waiting to be signed,” he said. “Decisions are dragging, as are active search engagements, as hiring managers and leaders struggle to make hiring decisions in the environment, we are all trying to navigate.”

In the Hunt Scanlon 2024 Executive Recruiting State of the Industry Report, the numbers reflected a double-digit downturn in demand for executive recruiting, with the private equity sector being the most affected. “We’ve seen and experienced that firsthand, but we feel positive changes are on the horizon,” Mr. Tolan said.

Mr. Tolan notes that there are many reasons for the executive search dip, but this current downturn appears to be based on several factors. First, he points to the election. “Everyone was waiting on the long-awaited results of the recent presidential election to learn who would win and take the helm in January of 2025,” he said. “Now that the election is over and the incoming Trump transition team gets ready to steer the ship, lots of changes are anticipated in the financial markets regarding interest rates, tariffs, and a new cabinet.”

These changes in governance predict a turnaround in hiring in the PE sector. According to many experts, portco hiring should be in full swing. A recent article in the Wall Street Journal stated, “Private-equity executives are bullishly deploying swelling cash piles, as the industry moves out of a deal slump that for years soured fundraising and cash distributions to fund investors.” Mr. Tolan thinks this sounds encouraging.

“Some estimate the deal flow and activity to be a repeat of 2021, which was a record year for hiring and overall deal-making in the sector,” Mr. Tolan said. However, he is not sure. “Others predict that 2025 should be robust and could result in deal volume of 2023 and 2024 combined,” he said. “We are all hoping those upside predictions come true. One thing is for certain—limited partners are pushing hard to get their returns for their previous investments, and there is a logjam as the hold periods have been extended to record levels, while some investors are concerned that valuations are too high.”

Something Must Give and Soon

For many search firms that traffic in portco hiring, there has been a slowdown felt by most firms, according to Mr. Tolan. “For many hiring managers and CEOs, the delays were based on the results of the election,” he added. “Now we have the holidays just around the corner. More delays. The continued hiring lull is waiting on the incoming administration to build the new cabinet, and then there are the confirmation hearings that start in January. Let’s not forget that some are waiting for the actual inauguration to take place. And the wait continues.”

Tim Tolan is founder, chairman, and managing partner of The Tolan Group. He has multiple decades of experience in both privately held and publicly traded companies in a variety of leadership roles. Mr. Tolan has deep PE expertise in placing executive leadership into portfolio companies across the healthcare sector.

Mr. Tolan also points to interest rates. “With two rate cuts in the last couple of months and more predicted in the New Year, this could also help PE firms with structuring more deals,” he said. “The Federal Reserve’s interest rate cut, the first since March 2020, signals a shift toward more favorable conditions for private equity deal-making and portfolio management. That’s a good thing.”

“Lowering the fed rates equates to cheaper leverage, improved cash flows for portfolio companies, higher valuations, and improved exit opportunities,” Mr. Tolan added. “These cuts may take a while to make a meaningful impact, but at least we have something positive to look forward to! Will there be an aggressive plan to lower rates even further in 2025? Who knows. We hope the newly appointed cabinet picks will be both pro-growth and pro-business. That appears to be the case. That would change things in a positive way for our industry. And we wait…”

Related: Predicting Talent Acquisition Trends for 2025

Another hot topic, and one that impacts hiring, is that many candidates refuse to work in a traditional brick-and-mortar environment, having grown accustomed to working from home, Mr. Tolan explains. “Some large employers are putting a stake in the ground, enforcing five days a week in-office mandates, while others are holding firm on a minimum number of days in the office to allow a hybrid model as their policy (at least for now),” he said.

“There have been many situations where C-level executives absolutely refuse to relocate, opting instead to travel weekly to be available a few days a week in person. The speed of the leader is the speed of the pack, so companies must deal with how to best handle this RTO hot potato. Some companies are now advertising higher compensation for those who show up to the office five days a week. It remains to be seen if this trend will continue or becomes the catalyst for pushing more workers back to the office.”

Artificial Intelligence

Where do we even begin with this game-changing technology? “AI is already transforming the hiring landscape, playing a critical role in interviewing and candidate vetting,” Mr. Tolan said. “AI is being leveraged to create tailored interview questions, analyze body language, and transcribe interviews. Many search firms are also utilizing AI in client kick-off meetings and weekly updates to record discussions and generate status summaries. These are big changes for most firms to embrace—but the AI train has left the station.”

A Look at Executive Search in 2025

The executive search industry, once dominated by relationship-building, has undergone a seismic transformation over the past decade. A new report from JGA Partners says that today success hinges on data-driven insights, niche expertise, and efficient, client-centric processes. James Abruzzo, managing partner of JGA, explores how these changes came to be, why they matter, and how search firms can adapt to maintain their competitive edge.

According to a recent survey, 24 percent of companies currently rely on AI for the “entire interview process,” a figure expected to rise to 29 percent by the close of 2025. Industry experts predict that the next major leap for AI in recruitment lies in AI-driven assessments. Nearly 70 percent of companies have plans to integrate AI into their hiring processes.

“While there’s widespread concern that AI might hinder the ability to hire top talent, many leaders argue the opposite,” said Mr. Tolan. “They believe AI can help screen out candidates misusing technology to game the system while simultaneously improving the interview experience for highly qualified and experienced applicants.

“There are lots of other trends to watch as we approach 2025 that will have an impact on hiring, but these topics are front and center and seem to be real drivers for our industry. Let’s all get ready because the hiring frenzy is about to start. That’s our wish for 2025.”

Related: Top 5 Hiring Trends for 2025

Contributed by Scott A. Scanlon, Editor-in-Chief and Dale M. Zupsansky, Executive Editor  – Hunt Scanlon Media