After four straight quarters of negative economic growth, the great recession is now over.  While we've certainly made it through one of the most difficult economic periods in our history, it doesn't seem like anyone is celebrating; at least not yet.  So what lies ahead and how should we chart the future?

Growth is good and things will surely get better, but the speed or lack thereof of the recovery makes a big difference.  When the Dow was at 6,600 and Goldman predicted it would reach 10,000 by the end of 2009, few believed it.  For those who sold and stayed on the sidelines for fear of losing even more, they're kicking themselves but justifying they really had no choice as they worried about their jobs and the value of their homes.  We all know the story, but it is important to remember that for the vast majority of people the recession really isn't over. 

To gauge the health of the recovery, it would seem to me that you only need to look at four things; unemployment, housing, US equities, and consumer spending.  Clearly the equity markets have improved and it is expected they will continue to do so in 2010.  Remember, we're still down more that 20% from the highs and the markets are essentially flat over the last ten years.  As a result, the near term downside is minimized.  Having said this, the consumer still has no real value in their homes and the piggybank of home equity loans may not come back for years.  This combined with unemployment that is expected to rise even further in 2010 means that a noticeable recovery in consumer spending may not occur for 2-3 years.  I'm not an economist, but it seems unlikely that we'll return to high rates of spending while the consumer continues to deleverage.

As a result, we're likely to see a rebound over the next few quarters followed by an extended period of flat to no growth.  The markets may spike and fall and uncertainty and risk aversion will likely dominate the corporate psyche for sometime.  As a result, leaders are likely to strategically reposition their companies while simultaneously focusing on improving productivity and profitability of core operations.  Non-core operations will be sold and discontinued, and M&A and CEO turnover will rise.  While all of this activity will be good for dealmakers and senior leaders as they reposition themselves, the positive effects of these structural changes may not be felt for several years.  As a result, the labor market at the middle management level will likely lag behind the most senior levels in the market.

So, what does all this mean?  My belief is that the recovery will stall in late 2010 and early 2011.  While this may cause some turbulence, I also believe that most managers and investors are aware of this risk and unlikely to get out in front of themselves.  As a result, we may experience a flat period in 2011 and into 2012, but I also believe that a sustained period of growth will follow.  If we see solid growth in spending, rising home prices, and much lower rates of unemployment at that time, we could be in for several years of upside.  As a result, it would appear wise to manage your expectations over the next couple of years but get positioned for sustained growth beginning in 2012.

As an executive recruiter and adviser focusing on the key roles of CEO, CFO and CIO, our clients consistently express the objective to recruit a leader who has in large part performed in a very similar capacity before.  This desire for "been there done that" executives begs the question, "Why is it that few companies choose to project talented leaders to the next level, and when should someone expect to get their first shot?"

While it is completely understandable to seek leaders who have done it before, at some point someone gave these leaders their first shot.  So why is it that companies continually seek the "been there done that" leader?  First of all, it's simply lower risk to recruit a CFO, for example, who has done it before; one of the most common requirements in nearly all of our public company CFO searches is having previous public company CFO experience.  The risk of assessment is lower and the risks associated with the transition and responsibilities as a corporate officer are mitigated.  Secondly, the short term orientation in most companies requires an immediate impact with limited time to develop a leader.  As a result, the experienced leader can hit the ground running and the new leader can lead with limited oversight from the Board or the CEO.  Finally, these are extremely difficult times and the stakes are high.  In what is arguably a buyer's market for talent in the most trying of times, why would you hire and project a talent over someone who has already proven they can handle the job?

These are the drivers behind the emphasis on "been there done that" executives, but when does it make sense to take a risk and give someone their first shot?  Clearly, the best time is when you have invested the time and energy in developing a talent and you've worked with them for many years.  I would argue that this is the most overlooked answer today.  Companies know the strengths and weaknesses of their existing succession candidates, but they choose to go outside rather than promote from within.  This can be a mistake and a costly one, but companies do it over and over again; sending a signal to the organization that leaders must leave to ascend while the company takes a risk on someone they really don't know.

But clearly the more difficult challenge is recruiting someone from the outside and projecting them to the next level.  In addition to assessing the challenges in your current environment and examing why a candidate has not been given the opportunity to ascend in their previous company, we suggest looking closely for three key attributes.  Aside from the compelling personal qualities and leadership skills that any talent must have to be considered for the next level, the "groundswell effect" must be evident.  Basically, the leader should have a groundswell of support from key mentors and people who have followed or been developed by this key leader.  When other key leaders are consistently supportive and entrust their careers with someone, this is a key indicator of future success.  Secondly, the leader should have led in a fairly autonomous organization, where he or she had direct responsibility for making an impact and can point to the successes and failures associated with the challenge over time.  Finally, the leader should be battle-tested evidenced by taking on very difficult challenges.  These situations are sometimes difficult to assess, but the learning curve is steep and the ability to handle the challenges in a new role at the next level won't be quite so daunting.

While today's environment has placed a renewed emphasis on "been there done that" executives, the cycle will shift and soon we will be back in a market for talent where the supply fails to meet the demand.  This will coincide with the retirement of a generation of leaders, and the companies who understand how to project talents will win.  Let us know your thoughts and experiences and how you assess the ability of key leaders to ascend to the next level. 

Spring is here and along with it some positive news.  The financial markets have made a strong come back and we're beginning to hear of the "green shoots" associated with improving credit markets, reduced anxiety over Obama's economic team and the early signs of a bottom in the real estate market.  As Warren Buffett recently stated, "real estate got us into this mess and I'd watch something like housing starts for the signs of recovery".

Regardless of your metric, the worst seems to be behind us and we're sensing a change in sentiment.  As an executive recruiter and adviser to leaders, my business tends to track with consumer confidence which has improved somewhat over the last 60 days.  Not surprisingly, clients have increased their activity level and are beginning to show the signs of "getting on with it" and making decisions.  Along with the lack of major negative surprises comes spring and all the discussion in the media of "green shoots".  The optimism is encouraging and it feeds on itself.  While I expect to see unemployment rise well into 2010, the senior executive talent market should noticeably improve during the second half of 2009.

During the early summer, look for some correction in the equity markets and with it the return of cautious optimism and discussion of a prolonged recession.  We should then expect to see increased M&A activity as private equity investors and strategic buyers feel the time is right to buy.  This, in turn, should be followed by a mid to late summer rally in the markets and a noticeable increase in CEO turnover by those of us who keep an eye on the talent market.  At that point, the stage will be set and executive recruiters along with senior level job seekers should breathe a sigh of relief.

In the meantime, what should senior level executives do while waiting for the market to turnaround?  My suggestion would be to remain patient and forget about the perceived stigma associated with being unemployed.  Use your time wisely, but don't be in a rush to get repositioned in a market with few opportunities.  Enjoy the summer and be ready for a much improved market in the fall.

Having recently listened to the CEO of one of the leading executive search firms, I was struck by his realization that executive search must change dramatically.  We've all seen and heard the reports of the industry being down by as much as 40% in revenue this year, and clearly businesses don't prepare for such dramatic contractions.  Interestingly, the strategy in response to the collapse doesn't sound all that different from the previous strategy leading me to ask, "Will the executive search business return to basics?"

You know the strategy if you're a senior executive in a large company and a frequent buyer of executive search services.  The big firms have assessment businesses, and they want you to work with them to assess your team and senior leaders.  While these services were thought to be the key to the diversification strategy for the big firms, they have barely moved the needle and for good reason - companies don't want to retain a search firm to assess their team, and the experienced partner they've come to know doesn't do the assessment.  Sure, it's another potential source of revenue for the big search firms, but clients don't really see the value.

So what makes the big search firms think that more aggressive diversification and expanded services offerings will improve their businesses when the previous experiment barely moved the needle?  The answer is they have no choice.  As revenue expectations per partner are increased, the big firms will look to the greatest source of new revenue - their big company clients and the successful candidates they helped hire.  While it makes great sense, there's only one problem - the clients don't want their recruiters to become management consultants.  When they truly need to focus on talent development, retention, compensation and succession planning, they turn to their HR leaders who in turn reach out to specialists in their field.  

As one senior statesman recently told me, "The executive search business will likely go full circle.  With the success and growth of any business comes the diversification away from the core value proposition and with it the dilution of it's strength.  Eventually, great recruiters will figure this out and the big search firms will see an exodus of talent.  After all, this is a personal service business and recruiters can't serve the client if they spend all their time selling products off the shelf."

Let me know what you think.  Are you likely to turn to one of the Big-5 search firms for additional leadership advisory services?