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As the business climate experiences dramatic changes in our new normal economy, one industry will face dramatic upheaval:  executive search.

The record of the executive search industry is mediocre even under the best of economic conditions. The time has come for fundamental change and those firms who understand this trend will thrive.  Those who do not, like the vast majority of Fortune 50 companies over the past 50 years, will disappear.

Here is the problem: the search firm business model is more than 50 years old and, unlike most other industries, little has changed from its inception. There are few other business sectors in the world today that have not undergone at least several transformations over their lifetime, but executive search has not changed because there has been no reason: their business grew and recruiters prospered.  Yes, technology like computerized databases, the fax machine, internet connectivity, and video conferencing have facilitated the timeliness of the process, but overall the model is the same: you hire a firm, pay them a retainer and a professional fee based on the successful candidate’s first year base salary or the first year total cash compensation.  When it came to accountability for the quality of a firm’s work, there was either no guarantee that the candidate would be successful and remain with the client, or the recruiter offered a limited one-year guarantee.

There are today some star performers both in the large and regional search firms, but the real creative work that is transforming how the executive search process works, and how you should hold a recruiter accountable for tenure and performance, is occurring in smaller companies  that have greater flexibility to innovate.

Today, the search industry is beginning to see some long overdue transformation. Some of the more introspective firms, including global giant Heidrick & Struggles, realized the changing business climate was upsetting the industry’s long-held and highly profitable business model.  Heidrick & Struggles examined 20,000 of their searches and found that 40 percent of the candidates they placed across all sectors on a global basis quit, were forced out or were fired within 18 months.  Other studies show that 50 percent of the candidates recruited from outside an organization are gone within 24 months. Anecdotally, a large east coast health system which had paid a major global traditional search firm nearly $1 million in professional fees plus expenses in less than 18 months, saw their new executives, save one, leave the organization because of performance or poor match within three years.

Businesses, particularly health systems and hospitals, cannot afford this level of value. 

 There are strategies and processes to dramatically improve the rate of success in recruiting from outside the organization.  Friday, I will share with you how to improve the process and enhance the value — from search firms and your internal recruiters.

© 2011 John Gregory Self

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