Navigating the Business Landscape
Candidate Selection in an Uncertain, Ever-changing Market
Written by Maurice Ellett, Managing Partner of
Signium Executive Search International (New Zealand)
At no time in my 35 years as an executive search consultant have I found organisations in greater need of executive search services than in the current economic environment. While the Northern Hemisphere is still firmly in the grip of the recession, countries like Australia and New Zealand and some others in the Asia Pacific region are experiencing revenue growth, even though margins are not recovering to 2007 levels. New Zealand and Australia are starting to experience business growth following the deepest recession since the Great Depression of the 1930s.
Companies will take some time to recover the margins that over the past 12 months have been eroded to preserve cash flow and stock turns. Revenue growth will be slow but, barring influence from any aberrations in the recovery in the United States, will be continuous and steady.
Restrictions on spending for marketing and promotions remain, as margins and revenue still do not support more liberal spending. Fixed remuneration levels remain static and short term incentives do not produce offsetting income because budgetary hurdles are not being met.
As organisations experience growth again, many hiring managers and CEOs wrongly believe they can readily pick up top quality executive talent that has been released into the market because the recession has necessitated retrenchment and labour cost reduction.
Companies advertise executive positions themselves and others negotiate discount rates with advertising and selection service firms to trawl the market hoping to find an ideal person from the unemployed who are looking for work. Unfortunately, they find that top talent is rarely unemployed.
When the key requirement is just labour this methodology has advantages, one being that it is cost effective. Through this severe recession leaders have seen, some for the first time in their careers, the true value of having highly talented executives leading their companies. Believing that the recession will disappear, albeit it at a much slower rate than its onset, these astute C-level leaders are prepared to hold out for exactly the skill sets, experience and performance record they know are necessary to ensure they are a leading company in the future. Yes, highly talented executives can be found. CEOs who have had experience in identifying and then measuring the outputs of an executive, who has been appointed through the executive search process, will continue to hire using an external executive search firm.
Why an external executive search firm? As a generalisation, independent executive search consultants are less encumbered by the subjectivity and internal politics of an organisation and can bring wider current experience, intuition and access to market intelligence, especially as it applies to competitors, than internal recruiters. The contractual relationship enables companies to push to get the very best appointment without compromise, something which is not easy to do with an internal, collegial relationship.
In this market where few companies are hiring, what is the value of the executive search consultant? The breadth of experience in business, knowledge of the organisational structures of businesses, and of the competencies conducive for success, all position the Consultant as an objective, astute, knowledgeable business advisor to the head of Human Resources and to C-level executives.
Executive search consultants are guilty of underselling themselves and what they have to offer. As one Chairman of a US corporation said at a Signium International conference, “If you charged for the advice you provided in undertaking a search and not for the recruitment you guys would make a heap more money.” Too often the focus is on the search and hiring process and not enough on the consulting and the support provided to the hiring executive partner and the needs that he or she has for advice, especially from a Consultant with a lifetime of experience, knowledge and intuition.
In today’s market how do senior executives react to the compensation constraints placed on them? Executives must either change their position or wait until the economy enables their organisation to lift its financial performance, a factor which enhances the compensation directly or indirectly. Although wary of changing positions, executives are now showing an inclination to compromise their income and benefits for a position that will lead to greater, long-term career opportunities, if necessary relocating to another city. Longer term thinking is being applied more and more.
The initial reaction of executives to an approach by an executive search consultant is curiosity with a cautious, if not negative, mindset. Security of employment is still a primary driver for candidates so hiring managers or their agents must address and understand the level of security of a position and represent it accurately and honestly to the candidate.
What are the other challenges in moving executives in this uncertain, but potentially stimulating market? At no time in the past has the employment brand and the efforts of companies to work hard in the hiring process been more critical in the hiring of top talent. Companies know how essential hiring the very best is and they will know, or soon realise, that the smart players in the market are pulling the “A talent” into their organisations.
Executive Search consultants, astute in discerning executives and knowledgeable of the drivers and ingredients of successful businesses contribute very successfully to the value and performance of organisations. ■