Companies are facing a myriad of challenges today. Strong economic headwinds stifling demand for their products and services leading to layoffs in sectors that are especially sensitive to demand shocks. Geo-political events have increased raw material costs and caused uncertainty throughout various markets delaying investments and weaking growth. Shifts in employee attitudes towards remote work, as a lingering effect from COVID, have also put tremendous pressures on companies. These challenges have not affected all industries or firms evenly and, as an executive search professional, I have clients that are aggressively hiring while others are holding off on plans to recruit until market conditions improve and uncertainly decreases.
This uneven impact sets up a dynamic where the firms that are being negatively affected need to take extra care to retain their top talent. With layoffs, uncertainty, belt-tightening, and potentially fewer opportunities for carer growth in the short-run, top employees may begin to look at external opportunities. In difficult times, candidates become more enticed to look at new opportunities. Companies use executive search firms to pull candidates out, candidates who are currently “buried in excellence,” not actively looking for a job and wake them up to new external opportunities.
For companies that are still growing, their challenge is figuring out which of the talent available in the market are best suited for their needs. Candidates that are the easiest to attract might not be the best talent. Conversely, they could be exactly the types of top talent that their competitors would hate to lose. It can be hard to know which case is which. Executive search firms typically have a deep understanding of the industries they serve, with good networks, and are experts at identifying the skills, experience, and cultural fit required for success in leadership roles. In this way, executive search firms can help differentiate between candidates who are “low hanging fruit” and those that are truly exceptional.
In addition to benefits in finding and selecting good candidates, executives placed through executive search firms tends to have longer tenures than executives who were promoted from within or recruited through other means. According to a study by the Association of Executive Search and Leadership Consultants (AESC), executives placed by executive search firms had an average tenure of 7.7 years, compared to 5.7 years for those who were promoted from within and 4.3 years for those who were recruited through other means.
This longer tenure can have a significant impact on the success of organizations. Executives who stay in their roles for longer periods of time are more likely to have a deeper understanding of their organization’s goals and culture, as well as its strengths and weaknesses. They are also more likely to have established relationships with stakeholders and to have developed a strategic vision for the future. Moreover, longer tenure of top leadership means less disruption to the business and a very significant but often hard to calculate reduction in opportunity costs. The more senior the candidate the more people that could potentially be affected and the more magnified these costs can be.
In conclusion, during challenging times, partnering with an executive search firm gives a company an advantage in gaining access to top performing candidates and helps sort out which actively looking candidates are best suited for key leadership roles. Candidates placed through executive search firms have substantially longer tenures than candidates promoted from within and from other external sources. Longer tenures suggest that the candidates are better aligned with the values of the organization and higher performing. The less frequent turnover in key roles reduces disruptions to the business and lowers opportunity costs throughout the organization.
Article written by Carl Denny, CFR Global Executive Search USA
Photo source: Freepik