Fast growth for corporate `headhunters' slows. Less recruiting for middle-managers, but companies still looking for CEOs
The cold winds blowing through Wall Street have put a chill of uncertainty on another business: corporate recruiters, or ``headhunters.'' While many headhunters also hunt big fees by finding and placing chief executive officers and presidents for major corporations, their bread and butter is the middle manager, the very person who has been most vulnerable to Wall Street's layoffs and dismissals. Instead of hiring more of these people - and hiring headhunters to find them - many financial and industrial companies have been laying them off by the thousands, says Linda Meagher, executive director at the National Association of Corporate and Professional Recruiters.
At Digital Equipment Corp., in Maynard, Mass., for example, officials say they've cut back severely on hiring since October, and are only engaging a few new sales and service people, positions that don't need headhunters.
A few others, including some major investment companies, say they are still hiring.
So far, it seems ``employer clients have not abandoned their hiring plans,'' says Alan Schonberg, president and co-founder of Management Recruiters International, Inc. In fact, he points to a survey of his companies' clients indicating that national hiring projections for 1988 are up an average of 30 percent.
``The market has not had any impact,'' says Jacques Lapointe, president of Retail Recruiters International, Inc., a middle-management search franchise concentrated in New England. ``October was the best month we ever had, November was even better, and December looks like it's going to hold again.''
``But more people are coming to us directly now,'' instead of through a recruiter, says James Wall, director of human resources at Touche Ross & Co.
Many executives of this $2 billion to $4 billion industry say non-Wall Street companies will continue to pay the search firms' retainers or contingency fees.
Mr. Wall says Touche Ross normally pays 30 percent per $1,000 of salary, which can go up to $25,000 or $50,000 for a senior executive.
Recruiters say it's the little executive search companies, the ``mom-and-pop'' organizations, that go under during times like this. They don't have a stable or wide client base, explains James Kennedy, a 30-year observer of the executive search business, and editor of the newsletter, Executive Recruiter News.
Headhunting has grown into a $2 billion industry in the past 15 years, Mr. Kennedy says. There are some 1,500 firms employing about 12,000 professionals, and filling around 15 percent of companies' management and executive jobs, he says. Over half those hired are in the $100,000 to $500,000 salary category.
But these numbers are disputed by headhunters, themselves.
Because the industry is fairly new, unregulated, and easy to jump into, Kennedy says, statistics from government agencies are unreliable. Most search companies are privately held, notes Janet Jones-Parker, executive director at the Association of Executive Search Consultants.
Many headhunters say there are 10,000 to 22,000 companies, filling about 25 percent of upper and middle-management jobs.
``When I started in this business in 1970, it was only three percent,'' Mr. Lapointe says.
Personnel supply firms - which include employment agencies and companies placing temporary workers - make up the fourth fastest-growing service industry, according to the United States Commerce Department.
``About 85 percent of these are one- to six-man operations,'' Ms. Jones-Parker says.
Some of the more successful recruiters specialize in a particular type of industry or business.
``We have specialists in a given area, and they network and know who the top producers are ... those people who are too busy achieving to read the want ads,'' Mr. Schonberg adds.
One of those specialists is Steven Garrison, managing partner in Ward International's Dallas office. Ward International is one of the largest and most expensive search firms in the world, Mr. Garrison says. The company may charge as much as $175,000 to recruit a corporate president or chief executive.
That's the cost of creativity, Mr. Garrison says. ``When you're asking that person to run a billion-dollar operation, 30 percent of their annual salary is not a lot.''
The higher the position, Garrison says, the longer the search takes. Ward International estimates it spends five or six months to complete a search where the fee is $50,000 or more, and can take a year to find the right CEO.
``We are not interested in simply going out and finding people to match the client's specifications. We want to challenge them not to find a mirror image of themselves,'' Garrison says.
But that time and networking can pay off.
``We had one guy who's salary was paid back ten to twelve times in his first 90 days [on the job],'' Lapointe says, because of how he turned the company around.
In the future, Kennedy expects growth to continue, but at a slower pace. Lapointe and others, however, say the industry will be filling 40 percent of management jobs in the 1990s.
Then, as now, many of those managers will already have jobs; they'll be recruited from other, often competing, companies.
But for a firm to go directly to its competition and ask for a list of executives and managers would be ridiculous, Ms. Meagher says. A search firm has to ``develop a relationship inside that company, and that takes quite a while.''
The idea of recruiting already-employed workers from another company may sound unethical, but as long as ``you only take one or two people out of a 30-man department,'' says Ms. Jones-Parker at the Association of Executive Search Consultants, ``you're not putting the other company at a disadvantage.''
``We're out to get the best talent that exists for our client ... and whether they're employed or unemployed doesn't really matter,'' Garrison says.