Rarely – if ever – can companies sustain long-term success using an industry business model that is essentially more than 50-years-old without experiencing a challenging transformation.
The executive search model certainly has enjoyed a long and profitable run. Yes, there have been some technological advances but by and large the search industry still works as it always has: Identifying talent for client firms and charging fees based on a percentage – usually 30 to 33 percent of the successful candidate’s first-year cash compensation.
At JohnMarch Partners, we believe that the new economy, characterized by fewer people with jobs, reduced consumer spending, a clouded business outlook due to continuing concerns over the size and role of government, and a spiraling national debt is going to play a major role in changing how search firms conduct business. There will always be executive search projects that command top fees such as those for public companies offering salaries of more than $500,000. But if 2009 has taught us anything, it is that the search business model is vulnerable.
Across the board, firms are reporting significant drops in revenue. Many smaller firms are barely hanging on, while major firms are laying off and restructuring operations.
While this transformation of executive recruitment will affect many industrial sectors, healthcare will be particularly hard hit simply because many health systems and hospitals, among the largest users of search firm services in the healthcare sector, will face major cutbacks in Medicare and Medicaid funding as part of healthcare reform. Even if reform fails legislatively, the cuts will still come, due in large part to an actuarial hell caused by a flood of new beneficiaries into the Medicare program and not enough people working to fund their claims.
For more than 50 years, search consultants have enjoyed a reasonably consistent, predictable and very profitable way of life. Nothing lasts forever. There is change in the air.
Transformation of the executive search business model is not about the discounting of professional fees but rather a focus on helping clients to identify and recruit top candidates while helping manage their talent acquisition costs with innovative approaches.
At JohnMarch Partners, we anticipated these changes. We have developed and expanded our portfolio of services that will afford health systems, hospitals, physician group practices and other healthcare providers the flexibility to select services that will enable them to achieve this important goal.
John G. Self is Chairman and Senior Client Advisor of JohnMarch Partners. He is a Co-Founder of the Firm.
A former investigative reporter and crime writer with more than 30-years of healthcare leadership experience in public relations, national marketing, business development and as Chief Executive Officer of hospitals and consulting firms, Mr. Self is highly regarded for his keen insight into operations, business culture and for his ability to consistently select the right leaders.
You can contact Mr. Self at 214.220.1234 or JGSelf@johnmarch.com. He is an active member of Linked In and a frequent editorial contributor.
Or, you can follow him on Twitter at Self_JohnMarch.
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