Growing Canadian Search Market Continues to Help Reshape Business
April 20, 2023 – The executive search industry in Canada is a highly competitive and rapidly evolving sector that has experienced significant changes in recent years. With the Canadian job market becoming increasingly competitive, companies are relying more heavily on executive search firms to find top talent for their most senior positions. As a result, executive search firms have become crucial to identifying and recruiting executives with the necessary skills, experience, and leadership qualities to drive organizational success. The industry has adapted to new technologies and shifting demographics, including the rise of remote work and the changing expectations of younger workers. Firms are now leveraging digital platforms, social media, and other innovative methods to identify and engage with top talent. The industry has also focused on promoting diversity, equity, and inclusion, recognizing that a diverse workforce can drive innovation and better business outcomes.
The growth of the executive search industry in Canada is seen in the increasing number of firms entering the market and the consistent revenue growth. Last year, staffing, search, and recruiting firms generated more than $15 billion in revenue toward Canada’s economy.
One notable trend in the industry is the expansion of Canadian executive search firms beyond the country’s borders. Several firms have established a global presence, allowing them to provide clients with a wider range of executive search services, including board and CEO advisory services and leadership development programs.
Overall, the executive search industry in Canada is positioned for continued growth and innovation, as it continues to provide valuable services to both employers and job seekers in the country. The industry’s ability to adapt to changing market conditions and leverage new technologies to identify top talent is critical to its ongoing success.
“Uncertainty and increased volatility would best sum up the current Canadian business environment,” said Kevin N. Hall, managing partner of AltoPartners Canada. “This is due to: inflation; higher interest rates resulting in reduced consumer spending, reduced investment by corporations in capital projects and higher returns expected by investors; talent and labor shortage; continuing impact of COVID; expected recession; reduced global investment in Canada; geopolitical concerns (i.e. Ukraine, Russia, China); and overburden / uncertainty of federal and provincial politically driven policies, increased taxation and over-regulation.”
“Canada is a natural resources economy and much of this originates from Western Canada. Central and Eastern Canada have limited raw mineral mining operations and are more reliant on service and manufacturing/goods, and financial services,” said Keith Labbett, managing partner of AltoPartners Canada. “The natural resource sector (e.g. oil and gas, mining, lumber, pulp and paper) and related support industries are under increased pressure on all sides notwithstanding the global need for energy, lithium, and rare earth metals. All businesses are facing increased costs, particularly: raw materials, supply chain, and wage demands triggered by higher inflation.”
“Over the last several years, we saw growth in information technology, E-commerce, renewable energy and sustainability, financial products, innovation, and emissions reduction,” Mr. Hall said. “Decision-making in executive hiring has to a large extent slowed down (replacements notwithstanding) as boards assess their organization’s near and long-term paths forward. Hiring is still happening but deliberation is more commonplace than the urgency of the past year or so.”
Record Year
AltoPartners Canada and other search firms experienced a record year in 2022,” said Mr. Labbett. “This shows not only the strength of the industry but of the need of our clients to recruit top executive talent in a competitive market. The mass retirement resulting from covid exhaustion and the need for diversity, equity, and inclusion candidates have positively impacted the executive search industry.”
This supports Hunt Scanlon’s recent survey of Canadian search firm which found that 63.3 percent greatly exceeded goals for 2022, while another 23.3 percent said they were moderately successful and exceeded goals.
“Eastern Canada is more sensitive to rising or falling interest rates, the U.S./Canada exchange rates and consumer spending than it is to oil and commodity pricing which mainly affects our West,” said Mr. Hall. “The nature, size, and volatility of these economies impact the executive search market in Canada. Even with the uncertainty and adverse outlook, companies are not hesitating to retain experienced consultants when needed. DEI is driving firms to exercise full market due diligence to ensure they are covering the entire market.”
Mr. Labbett also notes that they are seeing organizations attempting to cut costs by hiring more employees into internal recruiting positions. “This has also been a repeat cycle over the past three decades,” he said. “This still has very limited success as few executives will respond to an advertisement placed by a competitor or return a call as it is very risky and potentially catastrophic when confidentiality is critical. Many hiring executives will admit internal executive and senior-level recruiting is almost never successful. They use internal recruitment as much as a competitive fact-finding exercise vs. economical senior talent growth.”
Challenges and Opportunities
“In summary, the current climate for executive search in Canada is characterized by both challenges and opportunities,” Mr. Hall said. “Companies are looking for leaders who can help them navigate the economic and cultural changes brought about by the pandemic, and executive search firms are poised to play an important role in helping organizations find the talent they need to succeed.”
“Within the financial services industry, we are seeing organizations preparing for a more challenging environment with continued market volatility on the horizon; as a result, we expect organizations to be budget conscious in their hiring decisions,” said Michael Henry, managing partner of Massey Henry. “As well, there are a lot of rapid shifts happening that are impacting business within the sector — digitization, climate change, and technology adoption, to name a few. The implication is that the industry will need to adapt accordingly and quickly to match the changes taking place.”
Related: Canadian Executive Search Market Adapting to Change and Moving Forward
Within the financial services industry, Mr. Henry anticipates that the upwards trajectory for hiring over the past three years will slow down considerably. “Firms with a public sector focus will find increased competition for roles, while firms that specialize in sectors or functions may need to further hone in on key areas of expertise,” he said. “Likewise, candidates might be more cautious to switch organizations given the concerns around a looming recession. Nurturing relationships with clients and candidates will be especially critical. Regardless of these considerations, the demand for executives — especially amidst labor shortage challenges and the increasing gap in critical skills at the leadership levels — will remain strong.”
A Look Across the Canadian Executive Search Market
The executive search industry in Canada is positioned for continued growth and innovation as it continues to provide valuable services to both employers and job seekers in the country. Critical to its ongoing success is the industry’s ability to adapt to changing market conditions and leverage new technologies to identify top talent. Canadian businesses are investing more in digital transformation and adopting new technologies to improve efficiency and productivity, as well as to stay competitive in the global market, according to Jason Carmichael, founder and CEO of Oxford + Richmond in Toronto.
“We also continue to see a sustained interest in succession planning mandates at the C-suite level, as well as a focus on hiring executives for key functions such as risk, cybersecurity, and client experience,” Mr. Henry said.
“Even in the face of a more cautious economic outlook in 2023, Canadian SMEs are largely optimistic about their industry and ability to grow in the next few years,” said Karen Swystun, CEO of Waterford Global. “Economists anticipate that business investment intentions are likely to be at about the same levels as they were in the first quarter of 2019. Inflation is still well above targeted levels, but supply chain constraints that had led to inflationary pressures earlier are now easing. Many organizations across industry sectors are focused on measures that increase productivity, talent acquisition, talent retention, and health, wellness, and work-life balance.”
Changing Employee Demographics
Many Canadian organizations are taking note of changing employee demographics and are formulating plans for strategic talent acquisition and succession planning for key leadership roles, recognizing that their competitive advantage can be dependent upon how they retain and build the expertise they have developed in their leadership teams over time, according to Ms. Swystun. “Thus, in the first quarter of 2023, our firm has witnessed an energetic demand for search services, and growing competition in agriculture and manufacturing organizations for top talent,” she said. “In the context of a cautious economic outlook, some organizations may follow a wait-and-watch approach for large-scale hiring projects.”
“Post-pandemic, HR is increasingly finding itself at the table in certain organizations where this was previously not the case,” Ms. Swystun said. “As a result, the market demand for strategic, as opposed to administrative/tactical, HR talent has increased. Other functional areas continue to express an ongoing need for leadership talent experienced in digital transformation, customer experience, cybersecurity, and leading cultural change brought on by the dynamics of our current post-pandemic economy. Additional leadership talent in strong demand includes all areas of supply chain. Among others, we continue to see robust hiring in agtech, medtech, and fintech.”
“We expect demand for executive talent to remain strong in 2023, with many organizations across industry sectors showing a commitment to, and a focus on, succession planning, change management, and building diversity,” Ms. Swystun said.
Adam Pekarsky, founding partner of Pekarsky & Co., said that across Canada he is seeing “mixed messages around the prospect of a looming recession. Some are already hiding under their beds; others don’t think it’s real,” he said. “Much of the reaction seems to be geographic. Ironically, those in the west — notably Alberta — who spent the better part of seven years from late 2014 to 2020 battling the two-headed monster of oil price challenges and COVID, are generally more optimistic than their eastern Canadian counterparts who, it seemed, were having a grand old time in spite of the commodity troubles in the west during those dark years. Things have changed and the tables, it would appear, have turned. For how long is the question.”
“This is our firm’s 14th year in business and we’ve never been busier,” said Mr. Pekarsky. “Not sure if that’s a product of the demand for search services broadly, or the demand for our firm. I hope it’s the former. High tides raise all boats, and such. But it could be the realization that our clients our growing wise to the myth of the ‘global firm’ as technology and sheer hustle have levelled the playing field. Add to this the focus on ESG and diversity in the executive ranks and around the board table and our firm is simply better equipped and more able to assist our clients in that brave new world? Why? Just look at the people who work here and then look at the people who work at the SHREK and other national firms.”
Mr. Pekarsky is also seeing “tremendous growth across our private equity clients who are investing in a broad range of portfolio companies and seeking us out to assist with key leadership roles within those portfolio companies,” he said. “The energy industry has certainly seen a revival and our work in the C-suite and public company board roles has increased significantly. We continue to be the ‘go to’ search firm in Canada for chief legal officers and general counsel roles and we enjoy a steady diet of corporate services roles across all industries.”
“We are extremely bullish looking ahead,” Mr. Pekarsky said. “We are in major growth mode, currently exploring new space that will allow our firm to double in size. The growth will most likely be organic as we continue to attract the best and brightest to our firm as an employer of choice where people really want to come to work.
Related: Women in Canada Lagging Male Counterparts in the C-Suite
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media
