Insights
Q3 2007 State of the Industry Report
EXECUTIVE SEARCH INDUSTRY REVENUES CONTINUE TO RISE DESPITE THE DROP IN FINANCIAL MARKETS
Non-Profit Searches Experience Vast Annual Growth of 27%
Despite the recent credit crisis in the U.S. and the knock on effect on European financial markets, the latest State of the Executive Search Industry Report by the AESC revealed that executive search industry revenues continue to grow. Net revenues experienced an annual rise of 20% in Q3 2007, with no quarterly change from Q2 2007. Interestingly, instead of declining in line with the drop in financial markets, financial services searches witnessed a minor yearly increase in Q3 2007.
AESC President, Peter Felix, remarked, "This is encouraging news, particularly in light of the recent credit crisis. Although the shakeup in financial markets will inevitably impact hiring in certain parts of the financial services industry, we have not yet seen any major impact in other sectors and our members around the world remain cautiously optimistic. Underlying trends in the global economy remain very favorable for executive search - these include the severe shortage of executive talent in markets such as China, India and Russia, and the growing shortage in western economies due to the major demographic shifts as the baby boomers retire."
Industry Trends
The annual trend in the number of searches started revealed increases in all industry sectors from Q3 2006 to Q3 2007, with Non-Profit searches experiencing the greatest rise of 27%, followed by Professional Services (+18%), Consumer (+11.4%), Industrial (+8.3%), Technology (+8%), Life Sciences/Healthcare (+3%), and Financial services (+1%).
Heidrick & Struggles Partner, Wendy Pangburn, commented on the stark increase in non-profit searches, stating, "There are several factors occurring simultaneously in the non-profit sector that account for the increase in searches. There are a significant number of senior people retiring right now from non-profits. The days of the 20 year CEO tenure are over, with the average tenure now closer to five years. Executive burnout often occurs in the sector as senior roles carry a heavy burden and heavy social responsibility, meaning there is movement. Non-profit organizations have grown up and realize they need to engage retained search firms to get the very best candidates. They recognize that search takes time and is not their area of expertise. In addition to all of this, salaries are rising and there is more at stake, meaning more incentive for people to move around. In the past five years there has been a lot of switching from for-profit, as senior executives reevaluate their career paths and find non-profit an attractive option."
Kathleen Yazbak, Managing Director - National Relationships, at Bridgestar, further explained, "We are seeing an increase in the number of requests for non-profit leadership searches. Reasons cited for the exit of so many leaders from their senior roles are demographics, e.g. baby boomers retiring - the for-profit world is obviously seeing this too; and increased recognition that non-profit leadership roles are tough and burnout exists due to higher stakes and scarcer resources than for-profit organizations. Non-profit positions require resourceful, entrepreneurial people who can 'do more with less.'
Ms. Yazbak continued, "We've also seen an increase in non-profit organizations’ awareness of search firms; we often hear that the committee wants to run a more organized, structured and objective process and that they wish to expand their networks. Inherent in this is a belief that as the jobs become more complex, they need to invest more in the process required to find the right people. Another phenomenon we're seeing is increased competition with the for-profit world, especially for CFOs, it's a hot CFO market right now for consultative, business partner types. As such, proactively targeting - with a robust search approach - the skill set required is something for-profits and non-profits really share."
The Q3 2007 market breakdown by industry remained consistent with previous quarterly and yearly results, showing only minor changes. In Q3 2007 the Financial sector maintained the largest market share with 23.8%, the Industrial sector followed with 23%, then came Consumer Products (17.7%), Technology (14.6%), Life Sciences/Healthcare (11.9%), Non-Profit (4.9%), and Professional Services (3.3%).
Regional Trends
In the third quarter of 2007, North America represented 41.3% of the global retained executive search market, followed by Europe with 35.3%, Asia/Pacific with 16.4%, and Central/South America with a 7% market share.
The number of executive searches started in Q3 2007 increased 6.5% year-over-year from Q3 2006 to Q3 2007. Europe accounted for the greatest annual increase in searches with an 11.2% rise, followed by Asia Pacific (+8%), and North America (+5.3%). Central/South America decreased 12% from Q3 2006 to Q3 2007.
The data was collected from a sample of AESC member search firms representing the activity of over 1,200 executive search consultants in 42 countries worldwide. AESC access to job search data positions this Report as a leading indicator of the future worldwide job market and a barometer of hiring trends in key market sectors.