In my last post, I described how the mighty trees that toppled in a recent storm reminded me of how the mighty have fallen. In the wake of our financial crisis, retained search firms have had a comeuppance for charging too much and delivering too little. Score one for the good guys.
Take the two felled trees on my property as a for instance. Let’s call one “Egon” and the other “Spencer”. Each weighed several tons. They were so heavy, in fact, we had to bring in a massive crane to remove them. But now that they’re gone, we have sun where there once was shadow. Quite literally, we have seen the light. And so too have a growing number of employers.
To be honest, trees are a sore subject in my household. My husband Crispin belongs to the just say “no” school of forestry. A year ago, I made the mistake of cutting down a couple of sickly, deformed trees in our backyard and he could barely stand to look at me and did not speak to me for a full three days. (Seriously. I am not making this up.) This year, I wanted cut down the the two trees along our driveway because the third had been “topped” — effectively ruined — by an electrical crew, breaking the “plant in threes” rule. I’d rather cut down the trees so that I could invite in the sunshine and more attractive plantings requiring full sun along with it. But I did want to risk another 72-hour-long silent treatment from His Husbandness. Then Mother Nature stepped in and did what I lacked the courage to do. She did a little landscaping of her own. (Thanks, Mom.)
The same thing has happened in search. While employers were growing increasingly frustrated by the high cost and high failure rate (40%) of traditional retained search firms, questioning their market dominance by using lesser known firms was risky business. In an unspoken quid pro quo, top executives often mandated using the very retained firms that placed them. Consequently, no one ever got fired for putting a search out to Korn Ferry or Spencer Stuart or Heidrick because that’s what everyone did. There was safety in numbers. So decade after decade, few questioned the enormous fees of retained search firms of up to 33% of first year total cash compensation plus expenses. Few objected to apparent industry-wide price fixing. Few objected when almost every other search came up short.
But necessity is the mother of invention. The recent financial storm has forced the change that so many secretly desired. Suddenly, employers can no longer afford to waste vast sums of money on retained search. So, at long last, they have found the courage to start asking tough questions of their retained search partners and to walk away when they don’t like the answers — shedding light where there once was only darkness. While it frightens retained firms and vampires, sunshine is always a good thing for the good guys. It helps the more innovative firms grow.