Global Strategies of Executive Search Firms

1. The globalisation of executive search firms: cultural and institutional strategies for cross-border knowledge mobility James Faulconbridge Lancaster University Jonathan Beaverstock & Sarah Hall Nottingham University Acknowledgement This paper is based on work completed as part of the ESRC project RES-000- 22-1498 ``The globalization of the executive search industry in Europe''.

2. Outline • Context: the globalisation of executive search and the diffusion of knowledge and practice • Institutional (political-economic) strategies of professionalization • Alongside/substituted for by cultural-economic strategies • Conclusions: theorising the impacts of global KIBS on business environments

3. Methodology • 18 month project; 53 interviews in London, Amsterdam, Brussels, Frankfurt & Paris • 41 consultants; 9 researchers; 3 professional association representatives • 21 out of 30 largest global firms in Europe • Secondary data – the media; the Executive Grapevine

4. Context: the globalisation of executive search and the diffusion of knowledge and practice • US origins: ‘Americanization’ in elite labour recruitment (Finlay and Coverdill, 2000) • The end of the ‘job for life’ and the value of ‘mobile talent’ (Sennett, 1998) • Circumvent ‘old boy network’ (Jones, 1989) • ‘The war for talent’ - labour ‘churn’ in the Knowledge economy (Leadbeater, 1999) • Knowledge Intensive Services • High-value; Bespoke; Personal; Global-local • ‘Scientific’ managerial approach; I.T.systems and software • ‘Match-makers’ of the labour market (Finlay and Coverdill, 2002)

5. “Headhunters are third-party agents who are paid a fee by employers for finding job candidates for them. Their clients are organizations, not job candidates. In some cases a headhunter receives a fee even if none of the candidates he or she produces is hired; more commonly, however, a headhunter earns the fee only if his or her candidate is the hired one” (Finlay and Coverdill, 2002, 2) • “[T]he function of … an executive search firm (ESF) in a CEO search is to match the supply of executive talent with the demand for it. The search firm … possess critical information about candidates, such as which are willing to leave their current positions … [and have] … the advantage of scale that they derive from maintaining up-to-date databases about candidates … today’s large search firms … are extensively computerised and professionally managed. Their research staffs use sophisticated computer directories to map the latest changes in large company organizational charts” (Khuruna, 2002, 119 & 122)

6. Firm Fee HQ World Structure World income offices rank Korn/Ferry (1969) 402 Los Angeles 73 Owned 1 Heidrick &Struggles (1953) 375 Chicago 59 Owned 2 Spencer Stuart (1956) 362 Chicago 49 Owned 3 EgonZehnder (1964) 336 Zurich 59 Owned 4 Russell Reynolds (1969) 268 New York 33 Owned 5 Ray & Berndtson(1965) 147 New York 48 Hybrid 6 Amrop-Hever (2000) 135 Brussels 78 Hybrid 7 Globe Group (1997) 76 London 15 Network 8 IIC Partners (1986) 75 Alberta 53 Hybrid 9 Transearch (1982) 70 Paris 67 Hybrid 10 Source: Jenn, 2005; Faulconbridge, Hall and Beaverstock, 2007.

7. Source: Beaverstock et al (2006)

8. Source: Beaverstock et al (2006)

9. Number of top 50 global headhunting firm offices in Europe by city, 1980

10. Number of top 50 global headhunting firm offices in Europe by city, 2005

11. Search and Selection – Worldwide Assignments (Estimated data) • 28 global firms → employing 9,960 consultants → 125,498 searches (Estimated from The Executive Grapevine, 2008) • Sector % • Financial Services 21 • Industrial, manuf., auto., energy, oil 20 • Consumer goods, retail 17 • Technology, telecoms 17 • Life Sciences, health care, phar., biotech. 11 • Professional services 5 • Not of profit, education, public servs. 3 • Based on available data from 14 of the 20 leading global firms, 2004 & Jenn (2005; adapted from table 5.2)

12. Search and Selection – % of global revenue by function Function % • CFO, COO, senior executive 27 • Marketing, sales 18 • Other (public sector, general management) 18 • CEO, board-level, director 14 • Finance & control 9 • Human Resources & admin. 7 • I.T., technological 5 • Manufacturing, R&D, scientific 4 Based on available data from 8 of the leading 20 global firms & Jenn (2005)

13. Conceptualising globalization • Supply & demand globalization • The off-limits rule • Market-making: the globalization of executive search involved diffusing knowledge about the practice to generate new markets

14. Institutional (political-economic) strategies of professionalization See Fincham, 2006; Hodgson, 2007; McKenna, 2006 A codified knowledge base A complex knowledge base Ethics & trust ‘Technical’ business challenges Risk reduction Competency qualifications

15. Association of Executive Search Consultants (AESC) founded in 1959: a transnational organisation • AESC mission “is to promote the highest professional standards in retained executive search consulting, broaden public understanding of the executive search process, and serve as an advocate for the interests of its member firms”

16. 1. Professional registration • Member firm accept AESC ‘code of ethics’ and ‘professional practice guidelines’ • Client and candidate ‘bills of rights’ • Ethical rather than knowledge base form of closure

17. 2. Closure through training and formalized knowledge-base • From relying on work experience to the AESC Certified Researcher/Associate Program

18. Market-making and ‘educating’ the client • Selling an ‘accepted’ form of labour market intermediation • No longer ‘poachers’, but ‘objective’ actors and ‘scientifically’ rigorous • Formalised search techniques: databases, client profiling & professional service • Diffusing knowledge about the ‘professional’ practice of global executive search firms

19. “… in Holland professional services are much more appreciated and paid for than in Belgium because it is smaller here it is not as professional here but in order to compete you have to become in your management processes more and more professional therefore the choices of people have to be made in a more professional way and you have to justify it to your board how you got this person, so it is all part of detaching from the local market and professionalizing your management processes” (Brussels, consultant 4)

20. Cultural-economic strategies • Reputation of the firm is central to many accounts (e.g. Dunning and Norman, 1983 &1987; Bryson et al 2004) • Role of reputation most fully developed by management theorists (e.g. Sturdy 1997; Clark 1993 & 1995) • Public reputation, experience-based trust and networked reputation (Gluckler and Armbruster, 2003) “if a trusted party cannot provide the resources that are needed, their relations can be used in order to obtain trustworthy information about parties one is not connected to” (Gluckler and Armbruster 2003:280)

21. Corporate brand used to leverage advantage by firms That’s why blue chips use blue chips right? Heidrick and Struggles is a name that has been established for 53 years, we are the number 1 in search, we started search, just the power of the brand opens doors (Brussells 2) When we go into let’s say the Czech Republic again, it is not yet a sophisticated executive search market yet, the market, the region is struggling to get on its feet to meet European standards – they grab on any straw they can, therefore sometimes it is a bit of a cowboy attitude. Then in comes KornFerry who come in and follow very strict rules and ethics so we have to educate the market (London 9)

22. Geography of internationalization shaped by small number of ‘iconic’ individuals There were a few icons like Jurgen Moulder and his team who was originally a Spencer Stuart guy, who moved in to Heidricks, he sold his firm to Heidricks because he realised he was too domestic and needed an international angle, so there are quite a few icons. (Frankfurt 1) Because it is a huge market in Europe, Eric Salmon himself had been responsible for the Mediterranean countries with Egon Zehnder, so it was mainly countries like France, Italy, Spain, Portugal and than was the reason he started immediately in Paris and Milan. (Frankfurt 3)

23. Conclusions: theorising the impacts of global KIBS on business environments • Executive search firms (KIBS), their associations and ‘icons’ as vectors of knowledge and practice • Institutionalising business practices (through or with reference to political economies) • Cultural economies that generate markets • The Americanization of elite labour recruitment practice?