Interview: Weathering the Downturn in the U.K. — A Perspective from Anthony Harling in London

January 28, 2010 – Anthony Harling is a U.K. national with experience living and working in various European countries. He speaks English, French, German and Spanish. Based in the London office of Eric Salmon & Partners, Mr. Harling focuses his senior level recruiting work on general management and director level searches for companies in the technology, consulting, FMCG and industrial sectors. Prior to joining the firm, he was a partner with Heidrick & Struggles International. In the following interview, Mr. Harling discusses the U.K.’s emergence from recession, where the search industry might be heading, where growth is likely to come from, and how new pricing models might alter the competitive landscape in the U.K. recruiting market.
Tell us, Anthony — how is the U.K. recruiting business holding up now that we're far into this global recession and apparently just making the turn to come out of it?
The recruitment industry in the U.K. as a whole is definitely feeling the effects of the global downturn, although it’s perhaps not as severe this time as it was in the wake of the dotcom bubble in the late 1990s. In 2001/2002 we were coming off the back of a real boom; this time it was still a downturn but not as bad. At the senior end of the spectrum, there has been a significant decline in business for executive search firms, but nothing like 2001/2002. It’s my impression that firms who are well-positioned have held up pretty well. Lower level firms have suffered much more in this downturn.
In October when we were conducting our overseas visits with search firms it was reported that the U.K. remains in recession. Last week it was reported the U.K. finally was out of recession. Was that a surprise to you — and how do you think this affects the market psychologically?
The U.K. may have technically come out of recession now, the last of the major economies to do so, but I don’t think that will be enough to change the overall sentiment in the economy. In my experience a downturn in the executive search market usually takes two to three years to work its way out. Smart people will have built something like that into their forward planning. Psychologically we have to be positive and make sure we continue to deliver an excellent level of service to our clients. The market is still fragile and nobody is being too bullish at the moment.
When do you sense the recruiting industry might start to pull ahead?
In the U.K. we will have a general election sometime in the next few months. There are all sorts of factors that will impact the global situation, but at a U.K. level I expect companies to start planning for growth and we will likely see renewed executive search activity when the election is out of the way and the long term economic policies become clearer. We should start to see the benefits of that in the latter half of this year.
When we met in London you mentioned that business would be down by 40 percent in 2009. How did things end up?
Overall I think that business last year was probably down by about 40 percent, yes, across the industry. Luckily it wasn’t that bad for us. I get the impression that some firms have felt much more impact than others. Market positioning and long-standing client relationships count for a lot in times like this. That “flight to quality” makes a big difference.
Where do you see improvements coming from — which industries might be likely to show the first signs of recovery?
Interestingly the consumer goods companies are holding up remarkably well. Technology companies have not been so severely affected this time either. FMCG, healthcare and telecoms, in my view, are the sectors that will probably recover fastest.
Will financial services recruiting bounce back quickly do you think — or will we continue to see that sector as a loss leader into 2010?
I don’t personally get very involved in financial services, so it’s harder for me to predict that. What is obviously true is that the U.K. financial services sector has been hit very hard in the last couple of years. It won’t be back to former levels of activity for some time. More significantly, perhaps is the impact on the private equity firms. In the recent past PE deals have driven a huge proportion of top level executive search work in the U.K. Those deals are just not happening now, and it will take a very long time for the PE model to sort itself out. In the meantime PE firms are having to straighten out their existing portfolio companies, otherwise they risk losing even more of those companies to the banks. There’s a lot of drastic cost cutting going on and that means fewer search assignments.
What lasting effects do you think this long recession might have on executive search in the U.K. and globally?
In the longer term search firms need to think carefully about the quality of the service they provide. We will be pushed to be more responsive, to deliver results much quicker, and to think about ways that we can tailor our services to suit the needs of the client. More clients are using in-house search capability to handle requirements that might previously have been handed to external firms. I expect we will see even more of that in the next few years. If clients have access to good research and data from online sources, the search firms will need to make sure that we still offer a compelling proposition. The proprietary database on its own is no longer a competitive advantage.
Some of your colleagues have discussed client-driven pressure to reduce headhunting fees — what are you seeing?
There has always been pressure on fees and that’s something we have to live with. Some clients are less willing to pay a full one third of cash compensation and are more interested in the fixed fee model. As we emerge from the downturn we will be competing with a host of newly-emerging boutique firms with new pricing models. That could be interesting.

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