Executive Search Industry Navigates a Crisis

August 18, 2020 – Like industries across the country, and the world, executive search was devastated by the initial impact of the COVID-19 crisis. But a newly-released Q2 report on the industry by recruitment software developer Thrive suggests that recovery may be closer than many people expect.

Early on in the crisis, one Thrive survey revealed that nearly 80 percent of executive search leaders said they anticipated no growth for the remainder of the year. By the end of the first quarter, Thrive’s executive search data validated that outlook: In the last week of March, canceled and held searches increased by a breathtaking 766 percent and 340 percent, respectively.

“However, as we examine data from the second quarter, it seems that recovery could be closer than we think,” said Reed Flesher, co-founder and head of product of Thrive, which develops software for recruiters and talent executives. “Opened searches — the most important financial indicator for executive search — surged in June and completed searches could soon follow suit. Many industry leaders we’ve spoken to say the search cycle seems to be moving more efficiently, despite unprecedented working conditions.”

In the new report, Thrive analyzed searches across industries and functions for Q2, focusing on four key performance indicators: opened, held, canceled and completed executive searches. These metrics can be adapted to both external and in-house executive recruiting functions.

A Closer Look

Overall, in Q2, opened searches were down 22 percent and completed searches were down 29 percent, year-over-year, said Thrive. “While both figures are cause for concern, a closer examination of opened searches actually reveals the first significant sign of recovery,” said Mr. Flesher. “Opened searches were down dramatically at the start of the quarter, but in May improved 22 percent month-over-month. We predicted that continued MoM growth would bring the industry back to average performance levels in June.”

“To our surprise, the results exceeded that expectation when opened searches soared 13 percent YoY in the last month of the quarter. This metric is an early, but important, indicator of a possible recovery, as it shows companies are ramping up executive hiring after months of slowed activity.”

Completed searches, however, have yet to see such a rebound. Though the metric did increase every month during the second quarter, Thrive said, the year-over-year results have not been improving at the same rate as opened searches.

“This isn’t necessarily troubling as there are a handful of factors at play,” said Mr. Flesher. “First, with fewer searches opened earlier on in the quarter (-40 percent in April and -35 percent in May), there were simply fewer searches to close.”

Overwhelming Uncertainty

“Similarly, drastic increases in held and canceled searches had a big impact on driving down the number of completed searches,” he said. “As these metrics continue to level off as we observed in the latter half of the quarter, completed searches should continue trending back up towards average levels.”

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Also, Thrive found that both hiring teams and candidates felt overwhelming uncertainty earlier in the quarter, which was clearly an influencing factor.

“The good news is that we seem to be on the right track,” said Mr. Flesher. “Opened searches have surged, held and canceled searches are at acceptable levels, and the initial shock and uncertainty has lessened across the board. This could very well lead to the bottom funnel filling out in the coming months.”

In general, the variation between function performance in opened and completed searches shows that certain roles have persisted, said the report. Companies continue hiring for roles they deem critical, and Thrive said it is inclined to label the mid- and high-performers as pandemic-resilient.

Adjacent Industries

“Opened and completed searches for financial services, healthcare and life sciences, and business services outperformed the quarterly average — which in our current environment certainly makes sense,” said Thrive. “Technology and telecommunications landed in the middle, with opened searches being on the lower-performing end of the spectrum and completed searches on the higher end.”

Opened roles in entertainment and retail industries performed +15 percent and +0 percent year-over-year, respectively. “While more searches were opened, completed searches fell below average for Q2. It’s possible these outliers even out in early Q3 as we’ve seen completed searches lag behind,” said the report.

During roundtable discussions in April, leaders in executive search reported exploring adjacent industries if their usual industry focus had been more negatively impacted. “For executive search firms, a pivot is possible as long as they don’t completely change lanes, as many roundtable participants warned,” said Thrive. “For in-house executive search teams, a similar sentiment can be applied to higher performing regions of the business overall.”

Related: Conducting Executive Searches During a Pandemic

“In either case, diverting recruiter resources to industries and functions that are performing well may be a wise game plan until your typical business rebounds,” said the study.

On the Rebound

Just as opened search trends revealed the first signs of devastation for executive search, they’ll also be the first to show us a sign of a recovery, said Thrive. “The year-over-year delta improved each month throughout Q2, leading us to believe a rebound may have already started to occur,” said the report.

The year-over-year delta began to shrink in May (-35 percent year-over-year); by June, opened searches soared 13 percent above 2019 performance. “This is an especially promising sign because the summer months are typically slower for executive search overall,” said the report.

The COVID-19 Impact on Executive Search
The COVID-19 pandemic has had an impact on every business sector, executive recruiting included, costing organizations billions of dollars in lost revenue. Goldman Sachs estimates that economic growth around the world will be zero in 2020 thanks to the virus. To many, even that seems grossly underestimated. But the coronavirus is causing far more than just financial damage. Leaders are scrambling to secure supplies, trying to keep fearful employees motivated to work and, in some cases, maintaining bold strategic plans that have been years in the making from falling apart.

Not all functions and industries, however, performed the same. Investment professionals not only outperformed the quarterly average, but saw equal or more opened searches each month in Q2 compared to 2019, said Thrive. Board roles in May were down eight percent year-over-year, but still outperformed the quarterly average every month.

Low performers fell below the quarterly average at least two months of the quarter. Most low performers faced rough months in April and May, but saw an uptick in June, said Thrive. In fact, CIO/IT and services roles exceeded the number of opened searches in June 2019 by 31 percent and 40 percent, respectively.

High and Low Performers

When it came to industries, meanwhile, opened searches in retail were hardly impacted, falling just seven percent year-over-year in May, and by June improved 14 percent year-over-year, said the study. “This is likely, in part, due to low performance for opened retail searches in Q2 2019 (27 percent less than the 2019 average),” said Thrive. “Not surprisingly, opened searches in travel and hospitality fell 100 percent year-over-year in April, but by June were down just 22 percent—landing right at the quarterly average for 2020.”

Related: Companies Planning Big Comeback Post-Pandemic Crisis

All low performers, including travel and hospitality, improved month-over-month throughout all of Q2. “Opened searches are key to monitoring a real rebound, and the end of Q2 revealed we are definitely headed in the right direction,” said Thrive.

Still, the bottom funnel lagged behind in Q2. “While completed searches improved MoM from April through June, the YoY delta has not been closing at the same pace we observed with opened searches,” said Thrive. Completed searches, in fact, were down 27 percent year-over-year in June.

Three main factors might explain the sluggish recovery, said the report. First, the skyrocketing numbers of canceled and held searches in March resulted in the number of completed searches in April to drop 26 percent month-over-month. As held and canceled searches leveled off later in the quarter, completed searches started slowly trending back up.

Second, in April 40 percent fewer searches were opened compared to March. “With a lower volume of new searches being opened, as well as the influx of pre-COVID searches being put on hold or canceled, there were simply fewer searches to complete,” said the report. “And lastly, even for searches that have remained active, client and candidate hesitancy to move forward lingered.”

Claiming Recovery

To claim recovery, the software developer said it would like to see the search industry hit certain levels. “In 2020, Thrive’s data shows the average search cycle—from opened to completed—is 20 weeks,” said the report. “With that timeline in mind, opened searches will need to sit at or above the weekly average for 20 weeks in order for completed searches to catch up.”

At the end of Q2, the 20-week trailing average for opened searches fell 25.24 percent below all of 2020, said the study. By the end of June, however, weekly opened searches were up four percent compared to all of 2020.

“In short, the pipeline of average weekly opened searches recovered to above normal levels at the end of June,” said Thrive. “If this level of opened searches per week can be sustained at current levels, we could see a full and sustained rebound in the number of completed searches as early as November.”

To download the full Q2 report click here!

Related: Executive Recruiters Roll Up Their Sleeves as COVID-19 Crisis Unfolds

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