Rarely does a single article so devastatingly lay out how an entire industry’s fortunes have quickly gone from plush to mush, but this brilliant piece by Carol Hymowitz and Jeff Green in Bloomberg BusinessWeek convincingly makes the case that headhunting firms are screwed.
Why? Their clients, Corporate America – the pieces uses as examples Coca-Cola (KO), General Electric (GE) and others – simply grew tired of paying big fees to headhunting firms for finding talent, and so brought the work in-house. GE has 500 recruiters and saved $100 million last year by not paying search fees, an official tells the BusinessWeek writers. LinkedIn (LNKD) helps make the task easier. And in a delicious irony, the big employers are hiring away headhunters to do the internal searches -- from the headhunting firms.
Bad news for Heidrick & Struggles (HSII), Korn/Ferry International (KFY) and their privately-held competitors Spencer Stuart and Russell Reynolds. Notice the revenue seeming to crest recently, instead of accelerating as the economic recovery continues?
The profit picture isn't so good, either.
The industry’s not going away. But it could become smaller and less profitable. Ugh. Boutiques that only handle high-end searches could keep growing, even. The big search firms are trying to diversify, getting into consulting. Maybe they’ll succeed. But finding people is a lot different than telling companies how to run their business.
Jeff Bailey, The Editor of YCharts, is a former reporter, editor and columnist at the Wall Street Journal and New York Times. He can be reached at email@example.com.
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