What The Economist Doesn’t Understand About Recruiting

I recently read with great interest (that’s my politically correct term for dismay and palm-to-forehead confusion) an article in the revered periodical The Economist, about the struggles of my former employer and downward trends in the senior executive recruitment industry. This article was referred to me by my mother-in-law, who read it and then immediately called me in a panic, wondering how I was planning to continue supporting my family.

Time and time again, the internet has proven the best way to get clicks – or to worry mothers-in-law – is to claim that something is dead, over, kaput, defunct and in all other ways gone. In the rush to be the first to the funeral, some authors skip their research and objectivity.

After reading the article, I decided one of two things is true: Either this was a very poorly researched article, or Lantern Partners’ primary competitors (the big four recruiting firms) remain woefully behind the times. To steal Mark Twain’s line, I must say, the reports of recruiting’s demise have been greatly exaggerated.

The author of the article writes at some length about the negative impact LinkedIn is having on our profession. I don’t see it. At Lantern Partners, we view (and promote to our clients) LinkedIn as one of the many subscription-based research tools we use to:

  • Keep in touch with our ever-expanding network.
  • Identify how individuals are connected.
  • Identify prospects for projects.
  • Identify the best references for a particular candidate.

See what isn’t included in this list? Noticeably lacking is “assess and recruit the best senior executive leaders for your organization.”

LinkedIn is great at what it does. What it does, however, is merely take the place of the paper-based industry directories and the CD-ROMs that used to fill the libraries of executive recruitment firms. Yes, I know that LinkedIn is also trying to create a candidate management system that can be used by recruiters (among its many current ventures), but their offering is, so far, quite lame in comparison to what has been available for many, many years. That being said, the fact that they are pouring money into the development of a recruiting platform tells me that LinkedIn does not think that LinkedIn will be the demise of my industry!

They are, however, reinforcing the notion that the most successful senior executive recruiters do not derive their value from the “finding” of candidates, but rather from the combination of superlative recruiting and assessment skills.

The article also speaks of corporations using LinkedIn as a way to “cut out the middleman,” i.e., myself. Again, I don’t see it.

There are also thousands of websites touting the tools that will enable anyone to write his or her own will, ink his or her own real estate contracts and find a future ex-spouse. If these John or Jane Does would like to bet their future on generic and homogenized website content … more power to them. And if a company or an investment firm feels that they can recruit their next CEO via LinkedIn without the expertise of a highly skilled recruiter, I wish them luck.

I also found it interesting that the writer notes that “clients have begun to rebel against the fat fees charged by the largest executive-search firms: a third of the first-year salary for the position, plus a further administrative fee. Both are charged even if a suitable candidate is not found.”

Like the firms mentioned in the article, Lantern Partners is a retained senior executive recruitment firm – our time and expertise are worth paying for and we believe that in order for a project to be successful, both the client and the service provider must have meaningful skin in the game.

Oh, and that “administrative fee” the article mentions? Lantern Partners has never charged it. Not once. Since our founding more than 10 years ago, we have believed that clients should not have to pay if our expertise does not provide the results they expected. That is why we have progress/performance metrics between our retainer fees and why we always allow for some of our fee to be paid on the start date of the successful candidate. Further still, where we are offered the opportunity to take part of our fee in the form of equity – we always take it. We are not only supremely confident in our ability to recruit the best senior leaders, but we are also excited to share in the upside created by their performance.

One of the more head-scratching moments (and there were more than a few) was this gem: “ … some users of headhunters have also taken umbrage at their ‘off-limits’ clauses, in which they promise existing clients that they will not poach staff from them. That keeps many of the best candidates off new clients’ shortlists.”

Of course, Lantern Partners keeps clients off limits to recruiting, and unlike our larger competitors who only place small portions of a company off limits for short periods of time, we do not recruit anyone from a client company for an extended period of time – sometimes for the life of the company.

There are no economies of scale in executive recruitment – and this part of the article merely reinforces that notion. The larger you are, the more clients you have, and the less access you have to the top candidates in the marketplace. This isn’t a problem with the industry; it’s a problem of the size of the large firms. It’s simple math.

Lastly, the author of the piece points to an internal Heidrick & Struggles study from 2009, which discovered 40 percent of the people it placed in jobs left within 18 months.

That is a miserable statistic, but it is hardly representative of the industry as a whole. At Lantern Partners, the average placement has a tenure of more than 4.5 years, which testifies to our ability to recruit the best executive for the job and the company’s culture.

So big corporations aren’t as efficient as their nimbler and more cost-effective counterparts? Big companies are nickel and diming their customers with hidden fees and lack any investment in the success of their clients? No surprise here.

Honestly, I am not sure I see what the panic is all about! The recruitment industry isn’t headed for the junkyard; companies will always need top senior executive leaders with the right mix of competencies and cultural fits to be successful. That won’t change. And the partners at Lantern Partners have all experienced what it was like at some of the big recruitment companies, which is why we are all here now with a focus on customer service and mutual success.

So hopefully my mother-in-law can rest easy now and get back to worrying about what’s really important, like whether I’m working out enough.