The whole executive search industry must be reinvented,” says Auckland-based Kerridge & Partners founder Peter Kerridge. “And we can show the way by doing it from New Zealand.”
What’s wrong with the search industry? For start, says Kerridge, it is totally unregulated. “Just about anyone can set up with laptop, mobile phone and perhaps an office, and enter the world of executive search. There’s no accountability or transparency in the traditional 20th century model of this business.”
And that professional reality is, in his opinion, not good enough for clients who part with money, often quite large dollops of it, with little assurance of results. “When, for whatever reason, the executive doesn’t work out, the placement company invariably washes its hands of the failure.”
So Kerridge and his team decided to “create new standard”, first for themselves and then, hopefully, for the industry world wide. They took the first step on their crusading journey by asking global accounting firm Deloitte to independently review their key performance outcomes.
Kerridge is council member of the Association of Executive Search Consultants (AESC). But he concedes that the topic of industry standards is contentious. Some Association members are concerned that membership will drop if they impose conditions that are too onerous. “But,” says Kerridge, “you also have to ask yourself, how many membership groups reinvent themselves from within. Change usually comes as response to challenger or some other [external] pressure.”
AESC is, he thinks, warming to his ideas and he is writing “yet another paper” on the need for change and higher industry standards. He’s not, however, optimistic that the world’s large international firms will soon change their ways. “They argue that the model they have historically used has served them well.”
Nevertheless, the AESC’s own client surveys reveal that more than 50 percent of clients want more transparency in the industry. “The reality is, very small number of executive search firms are really trusted,” says Kerridge.
Surveys of the search fraternity reveal that only one in five, 22 percent, of clients believe they have trusted search partner. “If you went to law firm or an accountant, I think you would find lot more trust,” he adds.
He believes organisations should be able to compare search companies and make informed choices about those they employ on the basis of performance data, rather than only on the basis of relationships. “But for us, this is more about the reinvention of an industry,” he adds.
Kerridge has been evaluating international search firms looking for suitable best practice benchmark partners to emulate. His concern with the state of the industry turned to action in March this year when he and his partners read British Financial Times interview with Kevin Kelly, chief executive of Heidrick & Struggles, one of the world’s best known search firms.
An internal survey of 20,000 Heidrick searches found that 40 percent of executives hired at the senior level were fired, failed or quit within 18 months, according to Kelly.
“We looked at that and thought there really is need for the industry to sharpen up its act,” says Kerridge.
So his company decided to initiate an audit similar to one conducted by CTPartners, global, United States-based search firm.
“But rather than do sample survey, we asked Deloitte to audit the outcome of 100 percent of our placements,” he explains.
Kerridge was optimistic that his company’s performance would stand up to the intensive internal scrutiny because it had diligently recorded its performance outcomes from almost the outset of its establishment in 2005.
And so it was. Its reviewed candidate stick rate was 89 percent for all placements made in 2008. Its placement rate was 69 percent and the average number of days to placement was 97. And even more impressive, its stick rate for both CEOs and chief financial officers since July 2005 is 100 percent. Its placement rate for CEOs is also 100 percent as is its stick rate for bringing offshore talent into New Zealand.
“We are the first firm in the world to have engaged global chartered accountancy firm to review our performance and confirm statistics based on an assessment of every assignment completed and not just sample,” said Kerridge, in releasing the audit results. “And we believe it is entirely possible to influence our sector globally from our base in Australasia.”
And why is he so optimistic that the industry can be reinvented from New Zealand? “Because, alongside clean and green, we enjoy very high levels of trust as nation,” he says. “We might naturally be the source of new, more ethical and trustworthy standard.”
Trust, says Kerridge, is at the heart of any attempt to reinvent his industry. “The sad fact is, very few search firms are trusted. That is big issue for the whole profession – if you can call it that.”
The irony of the reality that only 22 percent of clients trust their search firm doesn’t escape Kerridge. “That is quite bizarre,” he says. “The [search] firm by its very nature is being trusted with some critically important work – finding key, senior people for some very large organisations.” It is an action that can prove massively expensive if the search firm gets the process and selection wrong, particularly in New Zealand where employment laws are such that it can take long time and good deal of money to dislodge the wrong incumbent from key position.
Given the tenuous nature of the relationship, there seems to be little loyalty between search firms and clients. “On the other hand, companies are reluctant to change their accountants or their legal advisers,” says Kerridge. “Transparency and accountability are the two key determinants in changing both the reality and the perception of the service executive search provides.”
He thinks independent, external rating and ranking of search company performance is also required. “We would like to be the architects of global standard for executive search. The trusted merchant approach is where we are leading to. suitable adaptation of the eBay or TradeMe trusted trader concept.”
Kerridge thinks organisations see using search firms as “a bit of one-way bet”. In other words, search firms gain regardless of whether or not they deliver satisfactory outcome.
And while he is still unsure of just what better business model for his industry might be, that lack of clear and compelling alternative is “certainly not” going to stop him searching for it, he adds resolutely.
One explanation for what Kerridge believes is less than satisfactory industry performance is prevailing, low client expectation. “I don’t think, historically, that clients have been sufficiently demanding of [service] quality,” he offers.
And are they now? “We want them to. The decision to use search firm should be as much data-driven decision as any other decision directors or management make,” he adds. “Relationship is important, but decisions should not be based on relationship with total absence of any performance data. I would love boards to be more demanding of their search firms.
“Our dream for the future is that clients demand quality. That they build quality into their procurement processes. Rather than simply asking, who do we know – the decision to use particular executive search firm is driven by real, measured and recorded performance outcomes,” says Kerridge.
Statistics Defined
The days-to-placement statistic is defined as: The measure of the average number of days it takes, from the start of search project, to the date of acceptance by the placed candidate hired for the specific role.
The stick rate is defined as: The percentage of candidates placed at company that are still employed by t
