November 14, 2016 – In a Harvard Business Review article, Korn Ferry’s chief executive Gary D. Burnison once compared a search firm to a hospital emergency room, writing that people only go to the ER – and an executive recruitment firm – in an emergency.
“In medicine, big businesses are built around wellness and prevention,” he wrote. “I wanted to diversify Korn Ferry in the same way – to enable us to help clients with all their talent needs, so they wouldn’t think of us only in moments of crisis.” His mission since: getting Korn Ferry to do more than fill jobs.
To that end, Mr. Burnison orchestrated the largest acquisition the search industry had ever seen last December, purchasing HR consulting firm Hay Group for just under a half billion dollars. It was a prescient move by Korn Ferry. Today, while searching for people provides increasing revenues for the publicly-traded leadership solutions provider, non-search service revenues are expanding its overall revenue mix.
But pivoting left or right and guiding some 7,000 employees over unfamiliar terrain, as he tells us in the following sweeping interview, has not been easy, straightforward, or without its challenges. Mr. Burnison was installed as CEO in 2007 at the height of the Great Recession and several years from when Korn Ferry, according to Mr. Burnison, “came close” to filing for bankruptcy, but didn’t. “We were concerned mostly with surviving,” he said. How he pulled the company out of its financial troubles and dramatically shifted its focus to put the company on a different strategic path is a case study in leadership, risk management and ingenuity – three skill sets that remain absolutely vital today as Mr. Burnison, 55, pushes forward a plan of reinvention at the world’s largest talent company.
Here are some extracts from a recent conversation between the Korn Ferry chief and Hunt Scanlon Media’s editorial board, taken from Hunt Scanlon’s search industry report, ‘Adapting to Change.’
Gary, you’ve often spoken about the transformation Korn Ferry has undergone since you took the helm in 2007. Is the company where you want it to be in the transformation process? And how does your acquisition of Hay Group fit into your overall game plan?
The term transformation is too often overused in today’s business environment. But when you look at the definition – it’s a thorough or dramatic change. We’re not spiking the football here by any stretch, but we’re well on our way to a ‘transformation’ as it’s described. Since 2008 our company has experienced a four-fold increase in revenue and today we generate more than $800 million in annual revenue from our advisory-related businesses alone. Our search business has never been stronger, in terms of size or the level at which we compete. We’re increasingly extending our brand and focus to assist clients in implementing strategy. All of this said we also know that Korn Ferry is not the only game in town. There are a lot of great companies that operate in the same playing field – whether it’s other search firms, strategy & consulting firms or HR consulting firms. And, like any of those companies, unless we continue to innovate, create impact for clients and expand our focus to meet their needs and the markets in which they operate – we’re no longer relevant. I honestly think there is a lot of runway in this market for broader talent offerings – a multi-billion dollar opportunity.
A Reason to Change
How difficult has it been to lead Korn Ferry through such a massive overhaul?
Generally organizations don’t change, unless there’s a reason to change. I think Korn Ferry, and others operating in the search environment, have a phenomenal opportunity to fundamentally take the business of search, and our brands that are so synonymous with search – and substantially differentiate and alter the direction of our industry. This industry gives us incredible permission and access to executives at the top of the house. But, like any industry, we too must evolve. Look at Amazon. Once upon a time they only sold books. But based on the strength of their brand and the trust it engenders, Amazon has been able to create greater value for its customers and yet books are still an incredibly important piece of their business. Our Korn Ferry partners now have the opportunity to have conversations that have evolved from finding great talent, to focusing on a company’s broader needs. How can we help in designing your organization and implementing your strategy? Are your people motivated? Are you developing your employees? Are your compensation and business strategies aligned? How do you go about picking the right team? It’s a natural progression, and the shift is not always easy. But our partners are increasingly finding success in differentiation through a broader lens.
Gary, there’s been some concern that your acquisition of Hay Group has signaled a shift in focus away from search. Your thoughts?
Quite the opposite. In fact, the whole point of the combination is to give our firm more reasons to engage with clients. Hay Group has incredible compensation data, culture data and the entirety of their intellectual property, when combined with Korn Ferry’s intellectual property, presents enormous potential opportunities to enhance and differentiate our expertise even further with search clients.
What part will global markets play in the changes being wrought at Korn Ferry? Hay Group obviously is a part of the plan for international markets I would assume.
Our global business is extremely important and, like you say, the Hay Group acquisition helps us expand our footprint immensely. Eighty-five percent of Hay Group’s business is outside of the United States. With the acquisition we had nearly 3,000 people join us who are located abroad. A decade ago, 55 percent of our business was in the United States and that has shifted to about 45 percent. With Hay Group, we now have about 150 offices in more than 70 countries across the globe. We’re not done. Global reach will continue to be an anchor of our growth.
Where Rivals Lurk
Are your search sector rivals adapting to the changes in the industry as quickly as they should be?
I feel strongly that for any CEO, there are really two constituencies – your colleagues and your clients – and everything else takes care of itself. That’s where you need to spend your time. I’m much more focused on ourselves. How we can grow? How can we impact clients? We need to focus on our own game. Having said that, when I do think of competitors I not only think of the search world but I also think more broadly – strategy firms and HR consulting organizations. Also, you have to always be mindful of innovation and what two people in a garage in Silicon Valley or Bangalore are doing.
You’re right. By expanding your company into additional leadership consulting service areas you’ve actually opened up Korn Ferry to new competition. What sort of battles loom ahead now?
The world is extremely competitive today – there is a real fight for growth and relevancy. I don’t think the competition is any more heightened in the advisory area than in search. As our firm expands our focus, it’s certainly a larger market and there are many more players, for sure. But, I wouldn’t say the competitive landscape is any different than any organization, in any industry around the world today. It’s intense wherever you go. In this environment, for any CEO, growth isn’t easily attained. First and foremost, CEOs are looking to drive performance and growth by harnessing the energy of their people, anchored around a common purpose.
What about competition coming from within the search industry itself. We have written extensively on the rise of search boutiques and their entry into C-suite recruiting. They don’t have the off-limits challenges of their larger rivals, some argue they’re more agile and provide better niche talent management services. What changes has Korn Ferry made to meet this challenge?
Unless you are nimble and agile, you are extinct. You have to have a startup mentality, constantly reinventing. You need to have a mindset of how you put yourself out of business – meaning how do you rejuvenate the forest on a continual basis. The search industry today is no longer about just finding an executive, but finding out who they are and what makes them tick and how they fit into an organization. This shift impacts larger search firms and boutique firms alike. As a result, search firms need to be able to invest in intellectual property, data and analytics – and that’s a competitive advantage for us. We have substantial data and we’ve made large investments in this area. We have management data covering 114 countries, reward data on 20 million professionals, engagement data on six million professionals and assessment data on millions of leaders around the world. This IP is woven into everything we do – for instance, we’re taking pay data and best-in-class job profile data from Hay Group and infusing it into our search solution. At the same time, we’re taking pay data on millions of people from our search database to bolster the strength of our Hay Group reward offerings. This approach is taking hold with clients. Do you know that every 3.5 minutes, we place a professional in a new job? Ninety-four percent of new clients choose to work with us again. Related to boutique firms specifically – the search industry is global. It spans a lot of companies and a lot of needs. There’s plenty of room for a diversity of firms, including boutiques and specialists – and that’s healthy for our industry.
Discuss the Korn Ferry brand, Gary. As an outside observer, I see the KF brand as your most powerful asset. Is leveraging that brand your full focus now?
All of us in the search industry have incredible access and permission with clients that no one else has. This industry has something special that I think sometimes we don’t appreciate as much as we should. We all need to be more expansive in our thinking. Every day, search firms are speaking with companies and offering counsel – often at the highest levels. We can’t take that for granted. Finding the right talent is one of the most important decisions a company makes and they entrust us with this absolutely critical decision. We change lives. All of our brands are absolutely powerful assets in this process. At Korn Ferry, I do believe that we have a household brand. In fact, to illustrate this, the other day one of our colleagues told me how he walked into the retail outlet of a Fortune 50 company (one of the top brands in the world), which is a client. Upon checking out, the store employee recognized our firm’s name when he asked for the email to send the receipt. The store employee then called over the manager and they all started talking about the leadership development programs that our firm offers for this global retailer. They then introduced our colleagues to others in the store who went through the program. Later that day, he received an email: “Jim, it was fun sharing with you how much you are part of our daily lives and how you’ve impacted so many careers here.” While we’ve doubled the size of our firm in the last year, we still need to have the mind of a startup within a big brand. We need to relentlessly think about our clients – always thinking about the executives we place, their employees who thirst for career development, who want to become better and more impactful leaders and help their companies grow. I also know that in professional services, the brand is only as good as the people you have. At Korn Ferry, like with our clients, we place a high premium on ensuring this is an environment where they can have a lifelong career.
Give us a sense for the challenges ahead. If another recession like the one in 2008 were to hit, would Korn Ferry be better or less prepared to weather the storm?
No question, we would be better prepared. As a CEO, one of the things you have to do is anticipate. Consulting, in general, is a cyclical business and search is definitely cyclical. This also creates tremendous opportunity to change and to invest. I look back at the last recession, where we made three acquisitions, including Whitehead Mann in London, which has changed the trajectory of our business in EMEA. This was a game changer for us. The reality is, if you look around today, amid today’s conflicting economic signals, the outlook is becoming increasingly unclear. In less-than-optimal global conditions, you need to plant seeds for the harvest. The moves we have made, like our Hay Group acquisition, combined with our brand and more diversified solutions, definitely make us better prepared to weather economic storms.
What will the Korn Ferry of the future look like?
First, I want to say that I think the future is bright for the search industry. Search is the ultimate competitive differentiator. It’s a business that changes the destination of companies. I’m very bullish about this industry as a career. It’s a great profession. I’m proud of how all of us in this industry have grown, adapted and reinvented. If you look back just five years, there has been an enormous amount of transformation that has taken place. The future is also bright for Korn Ferry. I see a firm that sits at the intersection of strategy and an organization and its people … a firm that has real impact and a recognized point of view for all things people. Looking out into the distance, I see a Korn Ferry that is agile, entrepreneurial, meritocratic and insatiably curious, with an ability to not just adopt and adapt, but reimagine and reinvent.
Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media