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Jones-Parker/Starr
Strategic Consultants to Human Resources and Executive Search Consulting Firms
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Who We Are What We Do How We Work Our Experience In the News Free Surveys Contact Us Survey of Retained Executive SearchProfessionals 2000
Profile of Participants The survey represents a broad sampling (276) of retained search consultants including professionals in the top 20 firms. As reported last year, respondents' answers were not significantly different from consultants in large or small firms. Please note that all answers will not add up to 100%.
Breakout according to revenues: Over $10 M (29%), $3-10 M (16%), $0-3 M (40%), no indication (15%). JPS Comment: Mergers and acquisitions are rapidly altering the list of "top 40" search firms. When this summary is published, the landscape will have already changed more than once. Selection Criteria The four most important criteria clients use when selecting a search firm remain the same as last year: familiarity with industry (87%), relationships with the consultant (86%), number of searches completed (75%) and knowledge of function (71%). Less important criteria include: years in search (24%), fee structure (20%), internal support resources (15%), firm size (15%) and international reach (14%). JPS Comment: These results reported two years consecutively continue to underscore the need to be a specialist. Given the globalization of US business and the increase of international companies in the US, we were surprised that international reach is not given higher priority. Speed Factors affecting how long it takes to complete a search are the same as last year. Unavailability of client to interview (66%), too many participants in the decision process (66%), indecisive client (61%) and shortage of qualified candidates (43%). JPS Comment: Search consultants and clients can improve the search process by committing to timetables at the start of a search assignment including setting up client interview dates, reducing the number of decision levels/participants and having full agreement in the job specification on most and least important requirements. Success Measurement More firms are measuring their performance this year (79%) than last year (70%). Success measurements include: percent of searches completed (82%), longevity of hired candidate (76%), time to completion (63%), contribution of shareholder value (51%), number of candidates presented (16%). JPS Comment: There was an increase in the percentage of searches completed (82%) compared to last year (75%). Anecdotal discussions indicate that searches are getting harder to complete due to a shortage of candidates. We appreciate the honesty of firms in reporting their statistics. Technology Respondents agree with last year's report that it is useful to capture information in a database to provide candidates and source leads. The value of a database is related to the number of candidates found. Approximately 37% say they find more than 25% of their potential candidates in this manner. Use of the Internet for research increased (61% to 80%) this year. However, the number of candidates found on the Internet is still very low (25%). Videoconferencing is becoming more popular (33% to 43%). JPS Comment: Although Internet use is expanding, there is a common belief that Internet recruiting will not reach the high end level of retained search. Search firms may lag behind their corporate staffing counterparts in using Technology. Firms developing Internet based research tools will gain a competitive edge as the "technology facile" managers (the 30 somethings) move into senior positions over the next decade. IPO's There is a dramatic change of opinion concerning IPO's. A majority (76%) this year compared to (50%) last year, now believe that search firms should not go public. There is an increase in the number of respondents (57%) who say they would not remain in a firm that is going public compared to last year (35%). There was a decrease in the number who say they would stay (34% down from 47%). There is a significant increase in the number of professionals who would not join a company that is going public (64% versus 43% last year). Most (80%) would not invest in a public search firm. A majority (60%) believe that the investment community will be interested in less than 10 search firms. JPS Comment: Any discussion about the public arena for search firms brings out strong opinions. A number of public search firms are losing their senior partners as soon as they can cash out. However, the firms are covering those losses by offering significant stock grants and options as "sign-on" bonuses. When competing for talent, the public firm has an advantage of rich packages. Stock performance of public search firms has been surprisingly strong recently and there is no sign of change in 2000. One partner in a public firm expressed the challenge of this transition. "We are a public company that is still running with partnership tools, but we are not a partnership any longer". Compensation Payout is not the only reason a consultant remains in a firm but it is important. Consultants believe that their income should increase commensurate with the revenues they produce and that reconciliation should be frequent. JPS
Comment: These numbers seem low to us.
Draws, payout percentages and frequency of reconciliation are increasing
rapidly. Fees Search professionals (65%) do not believe fees will remain at one third (compared to 73% last year). There has been a decrease in the number who believe fees will be lower (42% versus 33% last year) and more say they will raise their fees (24% versus 19% last year). JPS Comment: Clients want value and are willing to reward outstanding performance. However, firms will continue to be pressured to deliver faster results, meet performance criteria and be flexible on fees. In addition, several major firms are now taking warrants along with cash for fees as wealth building opportunities for partners. These new economic policies are helping counteract the lucrative packages being offered for public firms. Execution
and Research There has been an increase in the number of respondents who believe the cost of execution and research should be paid (71% compared to 64% last year) and a decrease in the number who feel this should be charged to clients (48% compared to 65% last year). JPS Comment: Many firms charge clients an administration fee plus research and search fee. However, we predict that this will change as search management consultants focus their attention on cost reduction and promulgate an attitude of control by the client. On the other hand, there is such a shortage of consultants to handle searches that fees may rise. Search
Professionals' Motives The most important factors influencing a search professional's choice of employer include reputation (27%), culture (22%), payout (21%), execution (13%) and ownership (12%). JPS Comment: Quality of professional colleagues is one of the main reasons consultants have joined our clients. Other key factors are the firm's vision, business strategy and momentum, i.e., where is it going and how will it get there. Consultants want to be part of a dynamic organization and influence a successful outcome. New
Developments An overwhelming majority acknowledges that specialization (83%) is a permanent factor. A majority (63%) believes affiliations do not work as well as wholly owned offices, and a higher number (86%) believes consolidation of search firms will continue. Most (89%) believe it will be important to understand the changing search landscape. JPS Comment: If a majority of respondents believe specialization is a permanent factor, then we wonder why so many consultants continue to describe themselves as generalists (34%). We believe that there is a trend in the formation of highly concentrated specialist boutiques being created by the experienced rainmakers leaving larger public firms. These boutiques will have a competitive advantage in getting new business. We also predict that some of the affiliate networks will become wholly owned entities, resulting in 6-10 large global "firms". |
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