Suzanne Kendrick is an experienced HR and talent management executive with two young children and no interest in full-time position. Instead, she has accepted four-month contract with technology firm Fronde – it’s her job to develop talent management centre for the company, and then move on.
“The lifestyle benefit of contracting appeals, as does the ability to work in short burst then stop. I suit full-on project type work where I can work really hard, focus, and get results for organisations,” says Kendrick.
According to recruitment specialists, Kendrick is in good company. Marc Burrage, executive general manager for Hudson New Zealand, says Hudson’s business is presently 50/50 mix of permanent and contract placements, and executive contracting (also called executive leasing) accounts for around third of all business.
“Accounting executive contracting is up; so are sales and marketing, supply chain, and procurement positions. There is steady demand in the ICT sector for executive contracting and thriving public sector demand for it,” says Burrage.
Executive leasing can be an affordable option, particularly for small and medium sized businesses that can ‘project block’ work and budget the cost of the executive into customer contract. Executive leasing also delivers the flexibility to respond to sudden customer demands when an employer may not have 100 percent security or confidence in where the business will go over the next six to 12 months, says Burrage.
Vicki Kelly, executive consultant for Drake Contracting, says executive leasing is also growing area for Drake, currently generating around 30 percent of business. She says leased executives are “fresh set of eyes” for employers who may be looking for new perspective and proactive response from an employer with specific need, opposed to the reactive response of hiring non-executive contractor to simply fill gap.
“Executive contractors can take on roles with responsibility; for example they may be the sole company accountant for time. It is part of the market that is coming to its fore and that has huge amount of potential for companies and customers,” says Kelly.
Ian Taylor, executive director for Sheffield, says executive leasing appeals to employers because they can hire specific skills to address specific projects or challenges, which is often more cost effective than training up an internal placement to deliver the same outcomes.
“Executive leasing has grown enormously in other markets including the US and the UK and in countries where smaller businesses are on the rise and have need to be nimble around business delivery and direction,” he says.
However Taylor says widespread talent shortage is also driving executive leasing in New Zealand with some organisations using executive leasing as ‘stop gap’ measure until the right person for permanent position is identified. He says the challenge is to achieve the right balance of permanent and leased staff to address the needs of business at the right time and price.
Meagan Alexander, division director for finance sector recruiter Robert Half, says about one fifth of Robert Half contractors are leased executives, commonly CFOs and project and change managers, and most want the variety and challenge of consecutive roles rather than the daily grind of permanent employment.
“[Executive] contracting is being accepted whereas before employers used to ask ‘why are these people contracting; what’s wrong with them?’ Leased executives can seem expensive, but the value they add often has long-term effects; they set pathway so that the business can then bring in more junior permanent employee to take over,” says Alexander.
Elizabeth Amery, general manager for executive leasing specialist Emergent, says Emergent and sister company QuickSearch source leased executives at the $100 per hour-plus end of the market, equating to salary levels of $200,000 or more. This includes interim leadership roles at the GM and CEO level. Amery agrees executive leasing is more accepted overseas, but says there has been huge increase in the use of leased executives by New Zealand employers in the past five years, with many elevating permanent staff into senior positions and backfilling resulting vacancies with leased executive.
“It’s also difficult to [remove] permanent staff these days. leased executive will do the job and also scope out what is needed,” says Amery.
Executives in the driving seat
The recruiters also say senior executives are demanding higher salaries in response to the tight labour market and employers are consequently unable to sustain them as permanent employees at market value. Compounding this, Burrage says because executive candidates are typically well educated and confident, they usually have no qualms about calling the shots on the terms of their employment and the security and longevity of permanent role becomes less desirable.
Alexander says employers need to be careful to not offend executive candidates by not offering them market value. It also pays not to overlook the chance to grab quality executive candidate coming to New Zealand for the first time, or an ex-pat looking for contract role that will allow them to ease back into the local workforce, she says.
“People with quite stellar backgrounds come to New Zealand but employers feel their skill sets are not quite aligned for the local marketplace so executive leasing is easier for them to get and they may be willing to take slight step backwards to ‘prove themselves’ on the New Zealand market,” says Alexander.
Burrage says 10 to 15 percent of Hudson’s leased executives are sourced internationally and this is increasing due to local redundancies.
“Salary and wage pressures here are leading employers to [revisit] their permanent head count,” he says.
Bell says about 30 percent of QuickSearch sourced executives are ex-pats or immigrants, with around half wanting to stay on contract and half looking for permanent position. She says employers are not specific about the age of leased executive; it’s the skill set and experience they’re after.
So executive leasing is win-win? If carefully managed and considered then the answer is probably yes. However, there can be pitfalls. These include disputes between the leased executive and the employer over performance and expectations, and misunderstandings around expected outcomes or assigned tasks. Occasionally, there may be personality clash between leased executive and any permanent staff assigned to them (internal education regarding the role of leased executive can be helpful here).
Another concern is the executive who makes radical improvements to business then leaves without passing on that knowledge. This is less likely to occur with leased executive covering for permanent employee on leave, but can happen if the leased executive has been used to specifically improve part of the business or manage major project.
Contracts can also go awry for reasons beyond the control of either executive or the employer. Recruiters tend to downplay some risks, but they are real enough to have prompted the State Services Commission to post ‘check list’ to its website for the benefit of government departments and anyone else considering hiring leased executive.
“The reasons for obtaining leased executive may be well founded. However the situation can result in leased executives increasing their knowledge base with little or no knowledge retention, in people capability terms, to the host organisation,” warns the Commission.
The Commission also says contracts that lack clarity regarding who is accountable for what can lead to “untenable relationships between the host organisation and the agency, the agency and the leased executive, and the host organisation and the leased executive.
“In particular, the usefulness of the leased executive option is diminished when the host organisation cannot terminate the arrangement