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Executive Headhunters recruiters squeezed by facilities

Heidrick & Struggles (HSU) Chief Executive Officer Kevin Kelly made a name U.S. corporate raids rows on behalf of their clients. These days a lot of them are turning the tables and hiring employees to do the work themselves. Companies like General Electric (GE), Coca-Cola (KO), Pfizer (PFE), Microsoft (MSFT) and Nike (NKE) is increasingly used its own executives, many drawn from outfits like Heidrick to recruit talent and avoid fees that can run up to 40 percent off the first year a new employee. Heidrick is “seeing a trend of people who go to work to customers” to do at home-recruitment, Kelly told analysts in a conference call on July 31. “That’s something new that we have seen in the last 12 to 18 months.” Three months later he told the same analysts that the brain drain continues to clients.

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Heidrick, Korn / Ferry International (KFY), Stuart Spencer, and other executive search firms continue to dominate the work of replacing CEOs and board members. However, they face competition for searches in the lower ranks of senior and middle management, where candidates are plentiful and tech sites and social networks make it easier to find talent. “Customers are looking for in the executive search and legal and otherwise, and saying they want to be faster, cheaper and better,” says Bob Benson, a former partner at Spencer Stuart, who now runs RL Benson & Associates, New Canaan (Connecticut.)-based executive search consultant. “There is a dramatic shift in who is doing the work, with lots of moving recruitment within the company, especially at lower levels to higher C-suite jobs. That is the work that keeps the lights and heat on. ”

New Search requests by the search industry $ 9 billion fell 7.6 percent in the third quarter last year, according to the Association of Executive Search Consultants, which records 1430 recruiters senior executives in 46 countries. Third quarter revenues in the industry fell 9.7 percent, following a decline of 6 percent and 7 percent in the second and first quarters respectively, the AESC found.

GE has built an internal headcount of around 500 in the past six years. In 2012 the team, aided by LinkedIn (LNKD) and Branchout, filled with more than 25,000 GE openings, about 10 percent of whom were professional and senior executives. Most searches completed in about 73 days, compared to an average of 170 days it takes out of business. “We still use external recruiters, but only when absolutely necessary to search confidential or highly specialized work,” says Steven Knox, director of recruiting for GE markets outside the U.S. and Europe.

Cost savings for the company have been substantial-about $ 100 million last year in rates only search firm, according to a person familiar with the matter who was not authorized to discuss it publicly. More importantly, says Knox, GE is able to keep on your radar attractive candidates for future searches and find employees who are best suited to their culture. Knox explains: “Our recruiters know what it takes to work here.”

Coca-Cola has about 95 percent of its global executive recruiting home, recent locations, as technology officer primary company, the CEO of its Indian bottling operations and senior vice president of finance of Japan, says John Goldberg, the company’s executive director recruitment. As recently as 2004, trading in the world’s largest soft drink maker was pretty much done by external companies, says Goldberg, whose team includes former executives of Russell Reynolds Associates search, Korn / Ferry, Heidrick and.

Executives at Coke hired by external recruiters are twice as likely to leave, and the diversity of candidates is about twice that candidates hired by the equipment inside, according to the company. The searches also completed in less time approximately one third.

The trend has intensified competition among search firms and triggered price wars. Instead of loading the traditional one-third of the first year salary of a candidate, some external recruiters are taking 25 percent or less, down additional administrative charges that once ordered, or accept fixed payments. “Rates are negotiated in the whole place,” says Caroline McClure, who runs ScoutRock, a consulting firm in Baltimore for internal recruiters. He began his career at Korn / Ferry and later was chief executive recruiting Lockheed Martin (LMT), where rates search firm average of 40 percent of wages for new hires “to build a stimulating recruitment team internal.

“The executive recruitment industry is going to get smaller”, and costs for companies using headhunters will go down, says McClure, whose seminars for companies considering at home attract also recruiting search firm employees they want jobs in these companies. “Search firms is less and only search harder, and that will require more social intervention which means lower margins for the job,” she says.

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