First Quarter 2011 Executive Search Market Update

March 2011

Three Steps Forward, One Step Back?

It's been a number of months since we've provided our thoughts on the executive employment market.  After a great start to 2010, we enjoyed a brief respite last summer, followed by an unprecedented increase in projects that has continued unabated since late August.

While we'd be overjoyed if this current level of demand continued into 2011, we wouldn't feel comfortable making our prediction based on it.  "One Step Forward, Two Steps Back" seems unnecessarily pessimistic. As such, our tagline for this update is "Three Steps Forward, One Step Back".

Activity in Financial Services, Real Estate & Natural Resources Sectors

  • Much of our activity this year has been in sectors which include real estate, financial services, natural resources and industrial manufacturing.  Activity in pharmaceuticals, consumer and retail sectors has not grown to the same degree.
  •  There appear to be fewer large restructurings occurring, and we hear of few, if any, in the offing.
  •  We're currently completed a number of key searches: 
    • CEO and 4 Board Members, Privately-Held Real Estate Investment Firm 
    • Chief Risk Officer, Financial Institution
    • Vice President, Finance, Insurance Organization
    • Director, Major Office Tower & Hotel Complex, Real Estate Development Firm  
    • Senior Portfolio Manager, Real Estate, Financial Institution
    • Performance Analysis Lead, Pension Fund
    • Head of Property Management, Real Estate Advisory Firm

Demand for Operating Executives

  •  The demand for those with operating experience (i.e. those roles that directly impact all or a significant part of the income statement) is bouncing back with a vengeance; more so than demand for corporate roles. Demand for Human Resources and Legal professionals at senior levels remains somewhat lower than for other roles.

Demand for Finance Executives

  •  Despite what we note above, demand for those with financial management skills coupled with strong business acumen continues to be high, especially for those with C.A. designations.

Renewed Demand for Board Roles

  •  We've completed a disproportionate amount of board work in the past six months, and have additional projects underway.  Former senior executives of large, reputable companies are in high demand, especially those with proven track records with respect to growing revenue.  Legal and financial expertise are also highly valued.

The Global View

  •  Two large global publicly-traded search firms report that global revenues are climbing. Heidrick & Struggles (HSII) finished off 2010 with revenues up 25% over 2009, just surpassing its 2006 total revenue figure. Growth came by way of a 14.5% increase in search volume and a 4.5% increase in average search fees. Not surprisingly, the largest growth areas were Financial Services and Technology, with annual growth rates of 40% and 26% respectively over 2009.
  •  Korn Ferry International (KFY) reported global growth of 40% in global revenue for the six months ended October 31, 2010 over the same period in 2009. The last reported quarter saw global revenue up 5.7% over the previous quarter.
  •  Both firms had distinct regional differences, however. North America's revenues grew 4.4% last quarter at KFY, while the last few quarters of growth in the America's region of HSII were flat. (The firms' reporting timeframes don't coincide, however, so this is not an apples-to-apples comparison, but does provide some global context).
  •  HSII's Asian revenues grew 47% in 2010 over 2009, though after solid growth in quarterly earnings all year, revenues slipped 22% in the fourth quarter. On the other hand, Europe, which had been experiencing continuing declines in its quarterly revenues throughout 2010, experienced a 25% uptick in the last quarter to end the year up 6.7% in 2010 over 2009.
  •  KFY's third quarter revenues saw growth in North America, Europe, Asia and South America of 4.4%, 3.2%, 14% and 13.2% respectively over the previous period.
  •  HSII has provided guidance that its global revenues will grow 5-10% in 2011 over 2010. KFY suggested that its third quarter ended January 31, 2011 would see fee growth of 0 to 9%.

Canada as a 'brand' is highly attractive

  •  In some of our recent engagements that have taken us outside of Canada in search of candidates, we have found that for the right opportunity, American candidates (including those currently employed) are more willing than ever before to consider a relocation to the Great White North.
  •  In other sectors, there is continued investment being made in Canada - Target's entry being one of the most visible.

And yet, uncertainty abounds 

  •  The impact of more (or less) quantitative easing is a question mark.
  •  It appears oil prices will remain high for the foreseeable future.
  •  The high Canadian dollar/low interest rates - will this change?
  •  What will the impact of the earthquake in Japan and nuclear issues be?
  •  What will be the impact of ongoing issues in Libya?
  •  Will our upcoming federal election have any impact?
  •  The bottom line: while demand for executives appears to have grown exponentially over recent months, a decision to hire is still taken very seriously, given the uncertainties that abound.

As we launch the second quarter of 2011, we wish you continued success for the balance of the year.