COMPANIES are shaking things up, and many top-level managers, presidents, and chief executive officers are finding themselves out of a job. This might not be good news for them, but it is very good news for executive search firms.
Executive search consultants, sometimes referred to as "headhunters," reported a booming business last year. Industry revenues were up 20 percent in 1992 and are expected to rise another 30 percent this year, according to an informal poll of 180 firms.
"Search firms are optimistic," says Glenn Van Doren, president of the Association of Executive Search Consultants Inc., which conducted the survey at its recent annual meeting. "This could taper off, but most consultants say it will not. If revenues drop in the second quarter, [search] firms predict they will be back up in the third and fourth quarters." Pressure to change
Giants like IBM and Westinghouse are not the only ones changing upper-management ranks. Companies large and small are feeling pressure to replace unsatisfactory senior managers, and many are turning to executive search firms for help.
When John Akers left his post as CEO of IBM Corporation, the company's board hired Gerry Roche, chairman of Heidrick & Struggles Inc., to work with rival consultant Tom Neff of Spencer Stuart, to find a replacement. The fruits of their work came a brief two months later when Louis Gerstner, former head of RJR Nabisco, took over at IBM.
Often, the stakes are not as high and the searches not so well publicized, but the executive search industry has nonetheless enjoyed a boost in prestige.
"Because of publicity in the past two or three years, corporations have come to realize the value of search firms," Mr. Van Doren says. "Before they were known as headhunters, a rather pejorative term. Now they are truly considered consultants, broad advisors to management."
"We're not management consultants, ... but we're very good at understanding the kinds of leadership structures that are necessary for a company," says Sam Marks, marketing consultant for Heidrick & Struggles in New York.
Corporations have been replacing senior management for performance-related reasons for a number of years, notes David deWilde, managing director of Chartwell Partners International Inc. in San Francisco. But when companies began to rely less on the volume of workers and focus more on the quality of senior management, they realized it was time for a change in the way they hire senior managers, he says.
"With smaller, more tightly focused management teams the strengths and weaknesses become more obvious," Mr. deWilde says. "There is a greater tendency not to ride with people who are viewed as mediocre."
Companies are increasingly looking outside their own four walls for skillful, motivated executives to turn business around.
"Businesses are looking for the [management] talent and not necessarily the functional background," says Pendleton James, chairman of Pendleton James and Associates Inc. of New York. A good example of that, he says, is Mr. Gerstner - a food and tobacco executive - being tapped to save a struggling computermaker. Specialization grows
Companies are hiring search firms not only to fill management posts, but also to find the best people to sit on their boards. Searches for corporate directors were up 78 percent last year from 1991, the Association of Executive Search Consultants reports.
Because of the special nature of board searches, Heidrick & Struggles trains certain employees in each of its offices to specialize in that work.
In fact, the firm has become oriented toward numerous practice specialties. The firm now trains its employees in specific areas such as technology, entertainment, and financial services.
"Before, companies set out to hire one person," Marks says. "Now we're beginning to see a quantum leap where firms are saying, `Help us think through what we truly need at the top of our firm to help it grow.' "