Nearly fifty years ago, the executive search industry was born, and today the largest and most well known players in the industry are experiencing one of their toughest years in history.  Granted the industry will certainly continue to evolve, but it's also likely that the current crisis will change the industry forever.  When the CEO of the Heidrick & Struggles throws in the towel on their model, it's apparent that the big search firm model is broken.

As an executive recruiter and adviser, I am a product of the "Big-5" which today consists of Heidrick & Struggles, Spencer Stuart, Korn/Ferry, Egon Zehnder and my alma mater, Russell Reynolds.  While each firm grew in it's own way, driving growth in an increasingly global industry where executives changed jobs more frequently and the demand for talent outstripped the supply, resulted in tremendous success for everyone and general acceptance of the industry.  It also resulted in highly attractive compensation for the leading partners, and with it the almost insatiable desire for more search fee revenue. 

We all know the story and the Big-5 have become household names for most executives.  Nearly every leader has experience with someone at each of these big firms, and nearly everyone expresses the same frustrations - namely that the experienced partners don't seem to do the work and that the impersonal and transaction orientation of the experience is disappointing.  As a young associate in one of these firms, I did the work, and as a partner in my own boutique firm I continue to do so, but most of the senior partners in the big firms spend the vast majority of their time chasing revenue while leaving the search work for junior associates.  Clients know this is the case, but the incentives for the partners and the temptations of leverage have been too great.

As you would expect, I've been discussing these issues for years, but just recently I've seen the awareness, both within the big firms and within the companies who hire them, of the fact the model is truly broken.  When the CEO of Heidrick suggests that dependence on executive search revenue is the problem and that "leadership advisory services" need to grow from just 5% of the business to 40% in five years, it highlights the dysfunction.  I would suggest it's not a revenue problem, it's an execution and quality problem when just over 60% of the searches actually get done.  Interestingly, I also met with one of the leading talent development professionals in the world who is currently setting the standard.  He stated, "I work with all of the Big-5 and they just can't deliver what I need.  The search partners are hooked on the margins related to search and they just don't have the skills to deliver integrated search and advisory services".

The stage has been set for change as recruiters will exit the business and the Big-5 will attempt to evolve into consulting firms.  Due to the financial constraints in the firms, the critical resources necessary to conduct the search work will be cut, and the partners who have increasingly failed to meet client expectations will be asked to do more with less.  This is a recipe for failure and while I am not predicting the demise of the Big-5, I do expect turmoil and M&A activity in the human capital space reflecting the evolution of the industry.

Let me know your thoughts.  Are you skeptical of the Big-5's ability to compete in the broader consulting environment?  Do you see the inherent conflicts between search and consulting as a severe limitation for the Big-5?    

As more and more people find themselves looking for a new opportunity, networking rises to the top of nearly every discussion.  While networking is certainly an important activity for anyone seeking to expand their relationships, the term has become synonymous with email blasts and busy work that I think misses the point. 

Think about how we communicate and get information; many times sitting in front of a computer by ourselves.  How many of us send emails and look things up on the internet rather than talk with someone; or better yet, meet someone?  More often than not, executives who find themselves out of work are trying to network and going about it the wrong way.  With the proliferation of on-line tools like linkedin and facebook, people certainly have better access to more impactful networks, but many have set the wrong goals for themselves.  Believing that the quantity of emails sent and received or how many contacts someone has on linkedin is "the networking fallacy".

At it's best, networking is an ongoing, long-term activity aimed at building and serving high impact relationships.  While developing new relationships and building a substantial number of relationships is important, networking is best measured by the quality, focus and follow through of your activities.  And the very best way to build and serve relationships is to spend time with people who care about your success, and in turn with those whom you genuinely care about. 

As an executive recruiter and adviser, you'd expect that I'd have a perspective and know how to network, but all of us need a little reminder from time to time.  Just the other day, a friend and client asked me, "How bad do you think the year will be for you?"  He was asking as a friend and knowing that this recession is taking it's toll on everyone, but the comments that followed were so true that I thought I'd pass them along.  He said, "You know, Rob people want you to succeed and they want to see you.  Now is the time when people are listening, and they want to know your perspective."

After the call, I was reminded of that TV commercial where the President hands out airline tickets to his sales team to go out and meet with their clients.  It's a good reminder for all us.  Take it from someone whose business and livelihood depends on it, networking isn't the goal it's just an activity.  Don't let "the networkig fallacy" take your eye off the real goal - building and serving high impact relationships.

While the previous recession and stock market correction is now almost a distant memory, technology and the internet were the story as "irrational exuberance" drove stocks through the roof.  What followed was a massive sell off of internet, telecom and technology stocks while other sectors of the market performed much better on a relative basis.  2001 and 2002 were tough, but the manufacturing, consumer and service industries pulled us out of the mud.

Today, the recession is global and cuts across all sectors with no one left untouched.  Unlike the previous downturn, this recession is not isolated to a few industries and the stock market has sold off across the board.  But what may be lost in all of the gloom and doom is the story of productivity gains and how far we still have to go.  Just ask the executives at HP, IBM, Oracle, SAP, Cisco and EMC and you'll hear about the story that is very much in process.  During the past few years, companies have invested heavily in ERP solutions as CIOs, systems integrators, and offshore developers have been working flat out.  While virtualization and on-demand solutions improve the CIO's ROI, lasting productivity gains stem from the business integration and change that ERP enables.

This is the good news as CIOs were in the middle of large scale IT transformations driven by CEO expectations of improved productivity.  Today, these productivity gains are showing up in the results of companies across many industries, but the spending on IT and team building was shut down due to the severity of the recession.  Just as the CEOs of technology companies selling to CIOs suggest little visibility into when CIOs will start buying again, CIOs tell us they don't know when their CEOs and CFOs will release the purse strings.  But importantly, both tell us that when it comes back it will likely come back with a vengence.

As executive recruiters and advisers with deep expertise in technology, we see it.  The supply of business-oriented IT leaders hasn't magically increased in spite of the impression that we are in a buyers market for talent.  The translators who are the key to engaging with business leaders and driving the adoption of new technology enabled processes are in short supply.  Nearly every CIO in the country doesn't have the expertise they need in this area, and when CEOs and CFOs feel comfortable spending again they'll aim their investments where they can improve productivity.  As a result, technology will lead us out of this recession and companies well positioned for the spend will benefit first.

What is your view on how technology drives productivity?  Do you see technology spending returning in 2009 or 2010?

After experiencing another challenging week with seemingly no end in sight, I asked myself, "What can we learn from all this?"  As an executive recruiter and adviser to leaders, I'm expected to have a perspective gained from exposure to so many people asking themselves this very same question.  Aside from the big picture related to the financial system and the political environment, everyone is being impacted by this recession in meaningful ways and there is much to be learned from how leaders are reacting to this crisis.

First of all, I'm struck by how consistent the issues are from one company and one leader to another.  In previous recessions and downturns, the impact was felt much more significantly in one industry versus another and some seemed untouched and strangely detached from the challenges others were facing.  Not this time - to a person everyone is directly impacted by this reset.  Secondly, the reaction is the same - tighten the belt and spend money on only those things that are absolutely necessary.  Regardless of how strong one company may appear on a relative basis, leaders feel a responsibility to reign in unnecessary spending.  As you would expect, this means that almost everything is "on hold" waiting for some time in the future.

So, what can we learn?  Interestingly, it is during times like these when we learn the most.  In these inflection points where change is occuring very rapidly we see businesses as they are.  As unnecessary spending is eliminated, we see what is absolutely necessary.  We see those products and services that each business can't live without.  As going concerns, these are the basic elements that will never go away, and the related business opportunities bring clarity to the key value that each of us bring to the party.  In my business for example, the three things that never go away are: 1) executive coaching; 2) C-level searches for leaders who absolutely must be replaced; and 3) due diligence on behalf of a company attempting to hire a leader on their own. 

Think about your own experience and the demands on your business.  While you are likely involved in a multitude of activities, the key indicators of how you can best add value as a leader or a business are best seen in times like these.  What is your value proposition and how can you improve your career or business by focusing on the necessary things that will never go away?