Hire Wire May 01 2012

New Data Show Gloomy Outlook for Executive Search Firms

By saabira chaudhuri

Growth is slowing among executive search firms in the U.S. and overseas, according to data compiled by market research firm, HSZ Media.

"Overall, the industry was growing by a little over 9% last year," says Christopher W. Hunt, publisher of Executive Search Review, HSZ Media's search-firm rankings based on revenue. "This year, we'd be lucky to see the industry grow by half of that rate. It could be a really flat year."

The pressure on search firms, says Hunt, "is being driven by uncertainty in global markets, which is forcing companies to stall their hiring plans."

The interconnectedness of markets is a crucial issue for search firms, international or otherwise, says Scott A. Scanlon, editor in chief of Executive Search Review. Search firms began hiring recruiters in the last 18 months on the assumption that Europe was on the mend, he says. However, given the continuing crisis in the euro zone and that the U.K. has entered a double-dip recession, the 2012 global outlook for search firms is poor.

HSZ's data show that recruitment is shifting toward New York, London and Beijing, and that growth in the Middle East has slowed as business moved from former hubs like Dubai to the Asia-Pacific region.

Scanlon says that recruiting trends naturally tend to mimic the health of a sector. Recruiting in global financial services remains hardest hit, while manufacturing struggled as well. In contrast, health care and the life sciences registered increased growth.

First published in 1990, the Executive Search Review is now a compilation of the top 25 firms in the U.S. and the Americas, as well as internationally, by revenue. Figures are collected from public filings or requested from the firms themselves.

HSZ last compiled the rankings in 2008 based on 2007 revenue figures. This is the first year that the company has ranked search firms in the U.S. and the Americas together; previously, firms were ranked separately in the U.S., but not in the rest of the Americas.

Korn/Ferry International remains the world's No. 1 executive search firm by revenue, raking in $680 million last year, up 7% from 2010. About $417 million of this was from the U.S. and Americas, a 6% increase from 2010. In 2007, worldwide revenue was $637.5 million, a 23% increase from the previous year. These numbers do not include 2011 revenue from Korn/Ferry's recruitment process outsourcing arm, Futurestep, which stood at $46 million for the U.S. and Americas and $110 million worldwide.

Egon Zehnder International stood second on the international search firm list and fifth in the U.S. and the Americas. The firm showed worldwide revenue growth of 43% from 2007, at $644 million.

EZI Chief Executive Damien O'Brien says his firm has managed to avoid the slowdown that many other search firms are seeing due to its focus on filling positions at the most senior levels. The firm is also focused on helping companies develop internal talent, rather than recruiting from outside.

"Historically companies have relatively little sense of succession talent. There was an abundance of talent 20 years ago but these days there is a scarcity," says O'Brien. "Companies have realized over the last eight to 10 years that they need to identify their own talent, to develop it and defend it."

Spencer Stuart ranked third internationally with revenue of about $604 million, and second in the U.S. and the Americas with about $331 million. Heidrick & Struggles featured fourth on the list, with about $528 million in worldwide revenue, up just 10% from 2007. In the U.S., the firm has clearly struggled: In 2007 U.S. revenue was $254 million, while in 2011 revenue for U.S. and the Americas was $286.5 million.

2012 Executive Search Firm Rankings: Top Five Worldwide

1. Korn/Ferry International - $680 (as of 1/31/12; Futurestep revenue of $110 million not included)

2. Egon Zehnder International - $644.1

3. Spencer Stuart - $603.8 (as of 9/30/11)

4. Heidrick & Struggles - $527.8

5. Russell Reynolds Associates - $464

Rankings by revenue, in millions of dollars.

2012 Executive Search Firm Rankings: Top 25 U.S. and Americas

1. Korn/Ferry International - $417 (as of 1/31/12; Futurestep revenue of $46 million not included)

2. Spencer Stuart - $330.6 (as of 9/30/11)

3. Heidrick & Struggles - $286.5

4. Russell Reynolds Associates - $227.5

5. Egon Zehnder International - $170.9

6. DHR International - $128

7. CT Partners - $78.8

8. Witt/Kieffer- $37.1

9. Caldwell Partners - $34.8 (as of 8/31/11)

10. Diversified Search - $25

11. MLA Global - $18

12. Isaacson, Miller - $16.8

13. Herbert Mines Associates - $14.9

14. Morgan Samuels - $11.3 (As of 11/30/11)

15. Kaye/Bassman - $10.8 (Does not reflect acquisition of Sanford Rose Associates)

16. Cook Associates - $10.2

17. Crist/Kolder - $10

18. Battalia Winston - $8.6

18. Solomon Page Healthcare Grp - $8.6

20. Slayton Search - $8.1

21. Bench International - $8

22. The McCormick Group - $7.2

23. Howard Fischer Associates - $6.8

24. Kensington International - $5.6

25. Charles Aris - $4.7

Rankings by revenue, in millions of dollars.

Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com

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