History will remember 2020 as the year of the COVID-19 pandemic and major economic disruptions. It’ll be a black mark on the record of many businesses; however, this year comes with a silver lining for the executive search industry. Executive search is one of the few sectors bolstered by the pandemic, thanks in large part to a spike in demand for leadership, talent and executive experience.
Executive staffing is dependable
Historically speaking, executive search thrives in times of economic turbulence. Prior to the Great Recession in 2008, market revenues for executive search firms rose to $11B, before climbing to $15B in 2018. During this same period, U.S. unemployment peaked at 10%.
We’re seeing this diverging trend again today. In 2020, unemployment due to COVID-19 spiked at 14.7%, yet the executive search industry is projected to remain stable even as general staffing demands fall. Today’s emphasis on talent mobility, candidate experience, and data-driven hiring is a continuation of this trend. It all points to the unwavering need for qualified professionals. In uncertain times, top companies know the best investment they can make is in leadership. Even as they furlough staff or strategically adapt to cash flow problems, they’re making investments in executives who know how to right the ship and create stability.
The skills gap and experience are factors
Executive skills are always in demand. According to a 2019 survey of more than 220 companies seeking executive leadership, 64% of respondents chose to work with an executive search company because of their access to qualified professionals. Moreover, only 4% of these companies cited cost as a concern, proving that it’s hard to put a price on the numerous benefits that come with qualified leadership.
The skills gap and talent shortage in the executive pool are real headwinds for companies seeking qualified leaders. In a survey of executive search companies, 48% cited a talent shortage as the industry’s biggest headwind in 2020 and beyond. There’s simply not enough high-level leadership available. Companies jockeying for viable candidates choose to work with executive search companies to quickly narrow their search. They want qualified candidates, and they need to reach them faster than the competition.
Companies are willing to pay for talent
In unstable economic climates, companies are ready to invest heavily in leaders who will restore stability and set the stage for eventual growth. But they want to make sure they’re making the right investment.
In 2019, approximately 55% of companies utilizing an executive search firm did so to fill a position with an annual salary of $300,000 or more. 22% of companies relied on executive search to fill positions paying between $100,000 and $199,999 annually. The investment on an executive staffing company is a nominal price to pay when considering the ultimate cost of salary, benefits, incentive packages and any additional executive hire costs. Putting the right person in an executive position will net the company multiples beyond what it costs to find and employ them.
Talent evaluators are in high demand
2023 has brought demand for leadership. But who evaluates and hires those leaders? Companies can’t reasonably expect a director to interview a senior executive to be their boss. Likewise, senior management aren’t automatically good talent evaluators. Further hiring isn’t part of their job focus or what they’re paid to do.
It’s logical to hire an executive search firm to bridge the gap between in-house hiring capabilities and a high-grade talent pool. As many as two-thirds of HR departments and hiring managers prefer to utilize a best-of-breed talent partner when hiring for executive leadership, rather than relying on in-house software and processes to vet candidates. The reason is simple: executive match companies find, evaluate and place professionals where they’re best-equipped to succeed. Speed also plays a role. Post-pandemic, companies need to fill vacant and emerging leadership positions quickly, to begin the rebuilding process. While in-house evaluation and hiring processes for executives can take months to yield results, executive search requires a fraction of the time.
Leadership in 2023 is a top priority
It’s not just blue-chip public companies or Fortune 500 organizations fishing in the executive talent pool in 2023. Venture-backed startups, emerging players, disruptors and pivoting businesses all need steadfast leadership to weather economic turbulence and an uncertain future. Competition for available talent is high and many of the best potential candidates are employed and not actively searching, requiring significant effort and know-how to attract the top talent.
Many companies from start-ups to Fortune 500 companies seeking to fill key leadership roles have chosen to partner with boutique search firms that limit the number of searches per partner, provide a larger amount of senior level leadership on searches, and provide a more customized and aggressive approach that enable them to win the race to the top talent. For example, companies choose M&A Executive Search due to their senior level expertise to attract leadership candidates for functional specialties and industrial experience.
Thanks to runaway inflation, banking crises, supply chain challenges, and even the threat of looming recession, 2023 is fraught with uncertainty. That makes leaning on the stability of good leadership extremely important. For many, that means relying on an executive search company to find that talent—from international companies to up-and-coming players looking to weather adversity.