March 19, 2010 – Daniel Ebbert is president of Strategic Research Solutions, a firm he established in 2002. Prior to forming the company Mr. Ebbert was a consultant with a retained search firm focused on the pharmaceutical, chemical and consumer industries. Earlier he was with the healthcare services specialty practice of Korn/Ferry International where he managed the research function for the sector. Mr. Ebbert began his research career with Right Management Consultants where he assisted senior level executives from a wide range of industries with company and industry research as part of their outplacement and career transition services. In the following interview, Mr. Ebbert discusses his firm’s strategic approach and trends he is witnessing in today’s executive search market.
Explain how Strategic Research Solutions works with clients to fill their needs?
We have two sets of clients. Retained executive search firms are the first group. We help them identify, approach, screen and motivate candidates. Our services are typically referred to as candidate development and name identification depending on the level of involvement. We tend to work with retained firms which have fewer than five billers whose projects involve more than one industry sector. A firm of this size often has difficulty finding and keeping good researchers because they are constantly moving into new subjects and industries, and there is an unclear career path as a result. Firms of this size (particularly during recessionary times) often struggle to fully utilize a full time person. For them our firm is a “researcher on demand.” We provide a level of industry expertise that is greater than what can be sustained by an individual freelance associate and it is available at a moment’s notice. Larger firms use us as well for the same reasons, but smaller firms tend to appreciate us the most. Retained consultants value the classic strategy of targeting companies and surfacing candidates by direct sourcing over the telephone. This “old school” method is what we do. Corporate recruiting teams that want help on sourcing and multi-hire initiatives are the second group we work with. Typically the positions being filled are below the range where retained search applies. Building out a sales force, or a marketing department are good examples. Our corporate clients want to own the process. They just need help finding and motivating the passive candidate. When finished, we aggregate and report compensation data, report on level of interest overall, and organize all notes and contacts for future outreach by the client. Many of our corporate clients are referred to us by our retained search firm clients. Since we don’t conduct retained search ourselves, referring us preserves the client relationship while avoiding having to compromise on fee or level.
Which industries have remained the most active during the recession?
While we do work across a number of industries from financial services to retail/consumer to chemicals, the majority of our projects involve healthcare and the life sciences in some way. Either the positions are within healthcare companies or they are roles focused on or which sell to the greater healthcare sector. Our focus is entirely by design. Demand for healthcare recruiting tends to be less volatile than the demand for search in other sectors. Healthcare does not necessarily correlate with the economy as a whole and demand for it continues to increase. We have noticed that just about every other vertical sector remains significantly less robust compared to two years ago. Even healthcare has slowed, particularly across the pharmaceuticals and biotechnology. I think the consolidation of some of the largest pharmaceutical firms, and the shift in availability of financing for startups, has affected their growth and expansion. So, we have a skewed perspective. We have anecdotal feedback that retained search is picking up but mostly that is from consultants within health and life science practices. We do not hear the same level of enthusiasm from everyone else.
How do you think the economy has affected executive search?
Minimum fees have been renegotiated by many search firms and the terms that they get are under pressure. I don’t think search is going away, though, and I don’t think the fundamental pricing model for search is changing either. The fundamentals are still in favor of executive search. I would say that the expectations of assessment in executive search are now greater. With the rise of social networking sites, and a flood of people into unemployment, hiring managers think they know what search firms do. They think they can demand more of firms. Much of the mystique is gone in executive search. More people think they can do recruiting themselves. This change in the clients’ perspective is the real threat to search firms.
Some of your colleagues have discussed client-driven pressure to reduce headhunting fees — what are you seeing?
There is definitely pressure on retained firms across the board to either lower fees, or at least be more flexible on the terms. We have also noticed more retained firms taking on hybrid projects. An example might be working on a steady retainer as a kind of “talent scout.” If those found are hired then an uptick fee is earned. Others have reported spreading out the retainer payments more broadly through the project and others have made the final fee payable on completion or hire. Still though, the traditional model of 30 to 33 percent still holds; at least with our clients. Again, our perspective is skewed. When search firms compromise on fees and terms they typically try to take shortcuts around research too. I think the true C-level placement work probably faces the lightest fee pressure. Also, I would point out that the most experienced, specialized search people tend to have less price pressure put on them.
What are the advantages of being a boutique firm?
A better word for boutique might be specialized or focused. Even the largest recruiting organizations are not really generalist. They are multi-specialty. Specialization is the only way to go. Good old fashioned domain expertise matters. It is easier to keep track of the companies, the candidates and the industry as a whole when you are focused.
For the balance of 2010 do you believe overall demand for recruiting and human capital services will increase, decrease, or remain flat? How long will it take for the executive search industry to be at the level it was in the late 90s?
I think it is going to remain flat but shifting. Internal executive recruiting used to be uncommon but it has proven itself over the last five to 10 years. I think that going forward you will see more businesses take greater ownership of hiring for positions that reflect the lower price range in executive search and on operational roles that recur. Employers know how to hire away junior associates from search firms now. Social networking tools have also made it easier for employers to proactively source and manage recruiting relationships as well.