Resilient Recruiting: How The Tolan Group Defied the 2023 Downturn

Six weeks into the new year, executive recruiters are looking to spring back after being challenged by a softening in private equity recruiting, broad changes to their industry, and economic & political headwinds. The Tolan Group founder, Tim Tolan, and managing partner Kaye Johnson share how and why their firm proved to be an outlier.

February 27, 2024 – The executive search sector faced a perfect storm of challenges in 2023. Founders, management teams, and recruiters themselves were weathering a downturn that early indications show likely resulted in a dip of 20 percent in annual revenues. There were outliers, of course, and much of how a search firm beat the odds depended on industry focus and business development skills. But one outlier worth taking a closer look at is The Tolan Group. In 2023, the firm stood out from nearly everyone else.

The Tolan Group has been acknowledged for years as a Hunt Scanlon Top 50 healthcare and life sciences executive search firm, a Hunt Scanlon Top 60 financial services search provider, and a Hunt Scanlon Top 100 private equity recruiter. The firm provides recruiting services for clients and candidates serving mid-cap PE with a focus on placing leadership for healthcare services, healthcare technology, and behavioral health organizations.

Tim Tolan, the founder, chairman, and managing partner of the firm, is an experienced healthcare executive with a strong background in healthcare-centric recruiting and contract staffing serving healthcare services, healthcare tech, behavioral health and finance and accounting regardless of industry.  “What I find impressive about Tim Tolan,” said Scott A. Scanlon, CEO of Hunt Scanlon Media and who has tracked the industry for more than three decades, “is the multiple decades of experience he has held in both privately held and publicly traded companies where he served in a variety of leadership roles. More than anyone I have come across in recent memory, it his firm’s deep PE expertise in placing executive leadership into portfolio companies across the healthcare sector that has made TTG  a distinct outlier in the field.”

Adaptability and Innovation

Kaye Johnson, a strong No. 2 serving as Mr. Tolan’s chief operating officer, has been overseeing all facets of the firm since 2018. Ms. Johnson leads day-to-day operations, major projects and is responsible for all search execution for the firm.. She works with the business development and client delivery teams and is hands on in every facet of the firm’s operations. Also a seasoned search consultant, Ms. Johnson has placed C-suite executives, EVPs, SVPs, VPs and countless individual contributors in sales, marketing, product management, talent.

What set The Tolan Group apart from other rivals during the turbulence of 2023 was a strategic blend of adaptability, innovation, and an unwavering focus on their client’s needs. Several macroeconomic factors — a volatile stock market, continued repercussions from the COVID-19 pandemic, and geopolitical instabilities — coalesced to create an uncertain business environment for everyone and that led companies in general to press pause on C-level recruitments. Not so for The Tolan Group.

The Hunt Scanlon editorial team recently sat down with The Tolan Group leadership team to discuss where they have been, where they are going and what we all can expect as 2024 unfolds. Both interviews have been condensed for clarity and space.

Tim, the recruiting sector hit some bumps in the road last year, but your firm seemed to pivot better than others. Why? 

Tolan: Good question. If you go back to immediate post-Covid period in 2021 – that year was an anomaly as PE firms had capital they wanted and needed to deploy. And the pent-up demand from 2020 was outrageous. As you know, 2021 turned out to be a record year for many search firms, but it was also a completely different environment. Interest rates were essentially at zero, PE firms had tons of dry powder to deploy and deal flow was at an all-time high. That all changed in 2022 with the war in Ukraine, rising interest rates and the increased cost of capital. Fast forward to 12 months later and many PE firms took a distinct pause and deal flow slowed down.

What was the impact on your firm?

Tolan: We felt that pause in 2022 but things really picked up for us later that year and we were subsequently very busy in 2023 as PE began to embrace the new business norm. So, at a high level that had an enormously positive impact on us. At the end of the day, we are deep subject matter experts in talent acquisition for healthcare services firms, health tech, behavioral health. That is where we live; that is where our strong network thrives. Nobody knows these sectors better than we do and no one is better connected with senior level candidates across the healthcare ecosystem that we are. We have been in the space for nearly 20 years now.

Kaye, what else do you think has led to some of this success that Tim describes? 

Johnson: Certainly, a few very specific things led to our success last year. A few years ago, we instituted a true split desk model (separate business development and client delivery teams) which allows us to focus on core strengths and not deviate. That approach for some reason truly worked in 2023 and resonated well with our clients. Our client delivery teams spend 100% of their time sourcing and interviewing candidates for our clients in the space they know, and this is identically the same for our business development team.

Why does that structure work?

Johnson: This structure allows our teams to perform at a much higher level. We are also truly niched – we know what we are good at, and we know what might not be in our core wheelhouse and so we stick to what we know and what we do best. There are a lot of options when it comes to partnering with executive search firms. Where we succeed is where we add value. As Tim said, we are knowledge-based partners for our clients. We understand their business and our team is in the market daily talking to candidates for present or future assignments. Our network is active and completely vetted. And that allows us to shorten the time it takes to move candidates through our system and into the roles our clients need them for.

“In our view, search firms that are market masters in their niche, invest in their people, develop innovative delivery tools, and use data effectively will be the ones who win the battle.”

Your firm focuses on healthcare, but also on accounting and finance – are there certain industries or sectors where you enjoyed growth this past year?

Johnson: Because of the industry that we serve and the positions that we place we very often are a leading indicator of what is going on in not only our niche industry but also for the market overall. For example, when we were in the middle of Covid-19, requests for human resources leaders accelerated. This past year, finance became a leading functional role request due to the extreme shortage of finance executives during a time of economic turbulence. CFOs continue to be one of the most requested roles at our firm among our healthcare clientele. I honestly don’t think we have had a time in the last two to three years where we weren’t actively engaged in multiple CFO searches.

How is 2024 shaping up six or seven weeks in?

Johnson: 2024 will be another seriously good growth year for us and, so far, we are ahead of budget and ahead of plan. We continue to grow our team to support our PE and portfolio company partners so that we can continue to be their search firm partner of choice as we help them fill their most critical hires. The metric I am most proud of is that 90% of our clients return to us for additional searches – consistently, year in and year out. That says everything about the value proposition that we bring to bear on client partnerships.

How are your clients defining success?

Johnson: We understand that we can’t be successful unless our placements are successful. In turn, our clients measure their success from the talent we hire for them and how well they succeed. For private equity firms, talent is the key lever now. We’ve known that for 20 years. They are now fully on that bandwagon. And that is making every client journey that we take deeper and more fascinating. Our plan is to use 2024 as a time to continue to invest in our platform, to focus on our people and introduce new people into our platform, and most importantly to focus on data. There is a reason why we have a 98% completion rate and fill most of our roles in eight to 10 weeks. It all comes down to team, focus, and energy.

As the search industry evolves, is there anything else we can expect from The Tolan Group?

Tolan: We have always evolved from the time I founded the firm in 2005. Since then, we have added behavioral health, healthcare services and last year introduced our newest service line placing finance and accounting executives on an interim basis. We talked earlier about the demand we’ve seen for CFOs and other finance executives, and we don’t see that slowing down. But where we see big growth is in the interim talent solutions space. That business is red hot and getting hotter. We officially launched TTG Interim last fall, and it has taken off a lot faster than we forecasted. The U.S. now has 12,000 baby boomers retiring every day – think about that. For us, we see a perfect storm brewing.

You seem more bullish, Tim, than many other founders.

Tolan: We are very bullish on the human capital business. We think it has an enormous growth runway ahead. In our view, search firms that are market masters in their niche, invest in their people, develop innovative delivery tools, and use data effectively will be the ones who win the battle. The candidate market is contracting and demand for high quality talent is at an all-time high. Looking back over 20 years, I believe too many firms have tried to become everything to everybody. But make no mistake: PE sponsors and their portfolio leaders want to work with search firms that understand their business and have a track record placing proven leaders. And if I may be so bold to say, these clients are also tired of paying full placement fees to search firms without having the leader on board. Our clients never pay our entire fee until our candidate starts in their new role. That’s the way it should be.

Related: Candidate-Driven Market Continues to Complicate Hiring Top Talent

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Executive Editor; Lily Fauver, Senior Editor – Hunt Scanlon Media

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