The State of the Recruiting Industry 2021
Erik Frickel, Managing Director at BrainWorks was featured Hunt Scanlon report, State of the Recruiting Industry 2021.
Eric Frickel leads the private equity and portfolio company leadership practice for BrainWorks. BrainWorks focuses on the recruiting needs of upper and middle management speciﬁcally within private equity investment teams and portfolio companies, investment banking, and corporate development & strategy.
In this article Mr. Frickel explains the state of the recruiting industry and the critical importance of working with a specialized executive search firm.
Why is it more important now than ever to work with an executive search firm?
In the last eighteen months, there has been an extraordinary level of recapitalization and capitalization in the marketplace in combination with accelerated hiring and executives who have either permanently left the workforce or greatly reduced their engagement in the workforce. Guy Gomis, SVP, Partner & Practice Leader at BrainWorks believes, “Technology, digital transformation, competition, high demand for and the shortage of top talent, and an accelerated hiring cycle, have all contributed to a perfect storm with unprecedented pressure on companies to find and attract top talent. “These factors have created a sustaining imbalance between the supply of top executives available and the business visions, plans, resources and capital seeking to secure that talent. Further complicating this imbalance is the degree to which passive talent has participated through their companies in an unprecedented level of compensation and success as the “v” shaped recovery provides an accelerant to performance and results. “Having your pulse on top talent and knowing what it will take to attract them is a competitive advantage. The right executive search firm will provide it to their clients”, says Mr. Gomis.
More than ever, companies seeking top tier talent will not be able to rely solely on internal talent acquisition strategies to access and inspire the passive executive talent they need to drive growth and success. Partnering with executive search firms that can deliver quality – in the form of differentiated top talent, speed – in the form of delivering that top talent within 45-days and results -the skill and nuance to negotiate and close identified talent with consistency and success. This will differentiate winners and losers across verticals and categories. That differentiation is a self-fulfilling prophecy that results in continued growth and, in turn, continued demand for top talent.
What are some current trends happening in executive search? Why is this such a high growth industry?
Macroeconomic conditions are among the primary drivers of crosswinds and tailwinds driving trends in executive search. Accelerated capital investment in executive search, consolidation and aggregation, the likelihood of US government infrastructure investment together with workforce conditions including the exit of career executives and partial exit of many executive women during COVID also are driving recent trends.
Industry conditions, particularly in Private Equity are also accelerating this phenomenon. Eric Frickel, the head of BrainWorks’ Private Equity group clarifies “The private equity deal cycle is getting shorter and shorter. While a 5-year turn used to be the average, firms are now modeling transactions to turn in 3 years or less. In high growth sectors like software, we are seeing deals cycling every 1-2 years. With this robust M&A activity, leadership changes are happening quicker and quicker. The fight for top talent has become even more competitive across the C-suite. The key expectation for leadership now is to go FAST. Additionally, PE has now turned its attention to leveraging their hiring model to ensure that talent is being brought in at all levels and not just C-Suite. This has been a real growth driver for BrainWorks in particular. As a boutique and nimble firm, we have the ability to pivot down and drive highly efficient searches at the GM through Director levels with effective search solutions for the sponsor. Bringing key talent to these levels is ultimately another factor in driving the pace of transformation PE sponsors are seeking.”
Further, Private Equity and Venture Capital are increasing focus on executive search itself, accelerating a number of concomitant trends that are creating favorable and even extraordinary business conditions for executive search. The increase in capital, exit of search professionals during COVID and acceleration of hiring out of COVID across verticals and categories has placed pressure on demand within the industry driving up overall compensation and squeezing margin. These however are favorable “problems.” Top line revenue has accelerated and the firms who can provide quality, speed and results in securing differentiated top talent are enjoying a remarkable trailing twelve months with prospects for more of the same.
Should the infrastructure package pass in any meaningful form, when considered together with historically low interest rates, investment in high growth industries will continue to make executive search a high growth industry of its own. With current estimates at a trillion dollars of infrastructure investment, senior executives across a number of verticals will be required to execute and deliver the envisioned outcomes on scale. This will add demand on top of an already hot executive search market.
Finally, there is a modest depletion of expertise in the workplace. COVID induced the early retirement of some senior executives that might have otherwise continued for a few years and also impaired the ability for some executive women to remain fully engaged, particularly in those work environments that could not flex and adapt to their particular needs regarding childcare in those households that lack shared participation in child raising. Executive search firms need to understand these conditions and assist their clients in accounting for these conditions when seeking top talent. Client firms that can creatively reengage and meet with the concerns and unique needs of these two groups, may be able to recapture some of this sidelined talent.
Explain the difference in working with a boutique specialist vs a larger generalist firm.
When hiring an executive search firm, look for one that can offer the best of what a boutique specialist and larger generalist firm can offer. At their best, boutique specialists can provide deep industry networks and extensive industry specific knowledge that differentiates outcomes. Similarly, larger generalist firms can meet the client firm’s needs across verticals and categories and where applicable, within the context of an integrated sourcing and hiring strategy. “If I was choosing a search firm”, states Andy Miller, CEO of BrainWorks, “I would look for a firm with deep subject matter expertise while also being strong enough across multiple functional disciplines, like IT, Finance, Operations, etc.”
Overly narrow boutique specialists may have extraordinary depth in their particular vertical but may be missing opportunities. Executive search firms with a strong culture in collaboration and the benefits that come from those partnerships can offer clients the opportunity to hire across verticals rather that jump to another specialty boutique firm.
Overly generalist larger firms may cover the entirety, or a broader spectrum of a client firm’s needs across verticals and categories, but with size comes a desire to replicate processes with less senior and expert search professionals to drive margin on scale.
Look for mid-size boutique firms that have practices led by and supported by long tenured experts in their respective spaces, with thoughtful collaboration across practices to ensure search quality. These slightly larger boutiques that have targeted expertise in synergistic verticals can deliver based on a command of extensive marketing mapping, executive networks and relationships together with the nimble engagement and senior level engagement that a boutique firm can offer.
Put yourself in your clients shoes, what questions should they be asking when picking a search partner? What should they be looking for?
When selecting a search firm to assist with your hiring, be thorough in your assessment. “If I were selecting a search partner, I would look for a proven track record in the role I was seeking to fill as well as their ability to deliver quality in 45 days or less. I would validate this by getting references and testimonials”, states Andy Miller, CEO of BrainWorks. In order to assess the degree to which executive search firms can deliver quality (differentiated top talent that can deliver or far exceed stated outcomes for a particular executive role), speed (process collaboration and search completion inside of 60 days depending on degree of complexity) and results (excellence at every step of the process resulting in the company meeting and exceeding its targets and objections), exploring some of the following concepts may be helpful in the search process:
- The extent to which a search firm has completed searches within the vertical or category that are substantially similar
- The extent to which the most tenured leaders within the practice will be attending to your search
- The degree to which a search firm has fulfilled roles within the practice your specifications apply to
- The nuance and sophistication of the search firms process and the extent to which a search firm seeks to understand and collaborates on your firm’s hiring process
- For firms with Diversity, Equity and Inclusivity initiatives, the degree to which a search firm can present qualified diverse candidates as part of the talent pool for consideration and the extent to which the search firm can speak to the nuances and requirements of such activities
- The consistency with which your search firm completes search assignments by identifying top talent and seeing that top talent through the offer phase within 60 days.
This of course requires client introspection about the level of resource and commitment they are prepared to engage to meet the best search firms in all three dimensions. Client firms and Executive Search firms that drive quality, speed and results together will get the differentiated outcomes that become self-fulfilling engines of success.
How do search firms work with organizations to promote DE&I?
There are varying levels of depth to which executive search firms work with organizations to either support or promote Diversity, Equity and Inclusivity. This largely depends on the extent to which these firms have integrated a comprehensive diversity, equity and inclusivity strategy and the time elapsed for each firm since comprehensive DE&I strategies have been implemented.
Complicating matters are several factors. DE&I is not a static practice, nor a monolith across organizations. Further, client firms’ internal cultures reflect an extraordinarily broad spectrum of perspective with regard to hiring strategies and techniques and the implementation of DE&I strategies themselves. Entering these conversations with curiosity, willingness and preparation increase the likelihood that successful DE&I hiring collaborations will occur. “A mature search professional needs to demonstrate the poise and comfort and directly ask the question- What are your Diversity objectives? How may we help you as an extension of your team? We approach every search this way and encourage the DE&I conversation early and add it as a primary goal/objective in the search, not an afterthought”, stated Cindy Miceli, BrainWorks Search Practice leader and Certified DI Recruiter.
To effectively partner with firms in promoting their DE&I strategies, executive search firms need to be prepared and able to meet client firms where they are in their own process with respect to DE&I strategy. This includes executive search firm leadership providing opportunities for the internal work necessary to become educated and informed regarding the latest developments in attracting and retaining DE&I talent, building and maintaining deep and meaningful relationship and partnership with diverse talent and asking clients insightful and thorough process questions that include and account for their DE&I initiatives and strategies. Ms. Miceli continues, “BrainWorks has demonstrated its DE&I maturity by supporting us in achieving a 70% diversity placement rate, including 40% female in our Data & IT Search Practice. In addition, the opportunity to participate in the Better Man Conference and earn a DE&I Recruitment certification this year has deepened our teams’ ability to engage in increasingly effective ways. Our team demonstrates value through actual actions and results. Together we really are making a difference to our clients and the greater marketplace to build better, more rounded, and more productive teams.“