June 29, 2023 – As various pundits ruminate about the likelihood of a recession in 2023, executive search firms are already feeling the pinch, and many are seeing the industry stall when it comes to provocative thinking and creative problem-solving, according to Kelli Vukelic, CEO of N2Growth. “Executive search firms generally feel the recession first,” she said. “Tepid results and firmwide behavior across the industry support that notion. Indeed, some may recall the recession of 2008 when executive search firms stopped leaning in and challenging their clients. Instead, our industry merely became agreeable to clients to capture revenue.”
“Search consultants must engage in more provocative and somewhat uncomfortable conversations with clients and future leaders to push them toward growth to avoid the current economic headwinds,” Ms. Vukelic said. “Search firms may start to slide backward unless we boldly take conscious steps to lean in and address this imminent danger. Given the pervasiveness of DEI as a key criterion at the leadership level in almost every conversation in 2023, the future of talent in 2030 may hang in the balance.”
Several months ago, a client approached Ms. Vukelic and said, “I’d really like to hire a female executive for our board.” But first, N2Growth’s leader had to ask, “In what ways has your organization included women in your succession plans? How have you given C-1 and C-2 female executives access to your board for their professional development so that they can be board directors in another organization?” Collectively, recruiters don’t want to rock the boat, says Ms. Vukelic, yet those are the conversations that push them and their clients forward. It turned into a thoughtful conversation about leadership development and succession planning.
Coming off an economic roller coaster in 2022, the U.S. labor market remains relatively strong as the Great Resignation starts to lose steam last year. Employment growth has been moderate. Labor force participation is up, with the rate among prime age workers (25 to 54) reaching pre-pandemic levels. In addition, immigration has rebounded sharply, helping to boost the size of the labor force while reducing inflationary pressure that might stem from a tight labor market.
Yet we are already seeing a slower pace of growth and a sharp slowdown in hiring in 2023 as the economy returns to earth after a meteoric rise last year in one of the fastest recoveries we have ever seen, according to Ms. Vukelic. “The number of job openings reached its highest level in 21 years last year,” she said. “Specific sectors, such as healthcare, industrial, and hospitality, will remain strong, while there was a decline in employment in manufacturing, tech, and financial services. Yet the competition for talent is not easing, even with a slowdown in hiring. Nevertheless, even when the labor market contracts and hiring freezes spread, many are struggling to fill open positions and battling high turnover rates, the pandemic, and Great Resignation continue to present recruiters with a hefty challenge.”
Investing in Human Capital
As search firms attempt to maintain or sustain their business in more challenging markets, Ms. Vukelic says that search firms should focus on investing in human capital. “I know that sounds counter to what we are actually seeing many firms do,” she said. “We should use the excess capacity on our teams to enhance our consultant capabilities instead of reducing head count. This is an opportunity internally to invest and develop our consultants, building consulting and advisory skills instead of refining recruiting skills, and externally for talking with boards about upskilling the long-term talent pipeline to level up succession planning. Thinking ahead in this manner may allow us to emerge more robust in 2024 and beyond with more experienced consultants and a more cohesive strategy that really will support the lead-up to 2030 for our clients. Firms that choose to cut just to continue to produce a profit, which may happen in public companies because they are beholden to investors, will be left with consultants supporting clients the wrong way.”
Kelli Vukelic is CEO of N2Growth and is responsible for the firm’s global executive search and leadership advisory services. She is located in Vancouver, BC, Canada. Ms. Vukelic is an industry veteran, having spent her entire career in executive search. She brings over 20 years of experience to every team and client interaction—melding strategy with executive search, leadership development, and organizational psychology. Her areas of expertise include talent operations and strategy, and C-suite executive recruitment, mainly but not exclusively in technology organizations. Ms. Vukelic’s experience in these areas spans across geographies and organizations of varying sizes.
“If we don’t keep looking ahead and the industry cuts back too sharply, we may be caught flat-footed when the subsequent economic recovery arrives,” Ms. Vukelic said. “Right now, the tailwinds of 2021 and 2022 are headwinds in 2023, but we know it will inevitably swing back. Just look at the economic recovery that came after 2008.”
Leaning into Technology
When the economy rebounds, executive search firms will get busy again, says Ms. Vukelic. “But those who use a short-sighted strategy and cut back too much now rather than reallocating those resources will inevitably be understaffed,” she said. “And I suspect these firms will lean on technology to increase their speed because they do not have the human capital to meet demands. Notice that I said lean on technology, not lean into technology. Substantive difference and with AI becoming an increasingly prevalent tool in our industry and hovering over us as the next most significant trend, that’s potentially very exciting but also very concerning if overly relied on to replace the humans lost.”
While standing at the edge of the next significant technological era, the search industry must navigate economic and geopolitical uncertainty, according to Ms. Vukelic. “The natural inclination is to pull back. But now more than ever, leaders must lean into technology-driven strategies to create differentiation,” she said. “Executive search consultants must be masters of adaptability to keep up with the changing trends and platforms and CEOs of these firms need to rethink tech to give consultants more to serve clients. Experts often talk about the five fundamental forces of change that companies must harness over the next decade, including the need for total enterprise reinvention. Cloud, AI, and the metaverse have accelerated to such degrees that they dramatically speed up change, bend the innovation curve and create more and more value for every business and organization. While we must embrace and leverage technological advances, the executive search industry remains relevant because of our human connection, our ability to assess human behavior, and our face-to-face interaction with clients and candidates.”
Ms. Vukelic notes that leaders of executive search firms over the next decade must be inspired by purpose, guided by ethics, demonstrate a conscientiousness about technology, and embrace the ability to lead with a global perspective. She says that with technology constantly evolving and cultural shifts happening rapidly, leaders must be adaptable and able to navigate these changes.
DEI Means Inclusion Rather than Just Representation
Ms. Vukelic further believes that the future of DEI is evolving beyond simply representation to inclusion to ensure that people can see themselves and be themselves. N2Growth, she says, is engaged with Coca-Cola on a thought leadership paper about leadership development and succession planning, and that Coca-Cola offers a vivid example of how to address DEI. Since 2019, a Global Women’s Leadership Committee-led sponsorship program has paired high-potential female talent from around the world with the company’s executive leadership team to help prepare them for senior roles. The initiative supports Coca-Cola’s ambition to be 50 percent women-led globally by 2030 by building its leadership pipeline to mirror the markets they serve. Coca-Cola is focused on creating an inclusive workplace culture by listening to its employees and providing resources that empower change. Coca-Cola’s approach is being spearheaded by its chief people officer, Lisa Chang, who was placed into the C-suite as an external hire in 2020.
“The focus beyond representation for us is to look at all three legs of the stool, which are the inclusion, the representation, and the support that people need to have that type of environment,” said Ms. Chang. “We make sure that we have mentoring and sponsorship programs. We have special leadership development courses and cohorts designed to bring women together and bring different cohorts of people together for learning.”
Diversity conversations need to be more inclusive at the outset, according to Ms. Vukelic. “The meaning of an organization’s definition of diversity must be inclusive at the beginning,” she said. “Is there neurodiversity being recognized at the executive level with gender equality? Is there generational diversity in the C-suite in addition to racial diversity? Those are difficult conversations to have. From an executive search consultant perspective, do you lean in to challenge a board or CEO like that, or do you accept, ‘Yes, I understand that I want a candidate.’ That’s the difference between just generating revenue and actually serving your client.”
Ms. Vukelic says that search firms must integrate DEI principles into each of their search placements. She notes that firms must continuously explore ways to enhance this process and develop the expertise to attract a broader range of diverse candidates that align with DEI values. Gartner research from December 2022 revealed that 42 percent of employees believe that their organization’s DEI efforts are divisive, and two out of five say that a growing number of employees feel alienated by or resentful of their company’s DEI efforts. “This presents challenges and opportunities for our industry: We must challenge ourselves to broaden our reach and unearth new candidates; at the same time, the opportunities to reaffirm our value to clients by presenting them with a list of diverse executive candidates have never been more significant,” Ms. Vukelic said. “Do that by expanding diversity definitions to include these groups: generational, cultural/geographical location, neurodiversity, educational (including dropouts!), and more. The bottom line is any personal difference is worth presenting to a client if it has the potential to influence how people interact and work together. Get to know the humans you are recruiting as humans.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media