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Executive Headhunters Squeezed by In-House Recruiters

Search firms feel the profit squeeze as big companies handle more talent quests in-house
Executive Headhunters Squeezed by In-House Recruiters
Illustration by Kyle Platts

Heidrick & Struggles Chief Executive Officer Kevin Kelly made his name raiding corporate America’s ranks on behalf of his clients. These days a lot of them are turning the tables and hiring his employees to do the work themselves. Companies such as General Electric, Coca-Cola, Pfizer, Microsoft, and Nike are increasingly using their own executives—many lured from outfits like Heidrick—to recruit talent and avoid fees that can run as high as 40 percent of a new hire’s first-year compensation. Heidrick is “seeing a trend of individuals going to work at clients” to do in-house recruiting, Kelly told analysts on a July 31 conference call. “That’s something new that we’ve seen over the last 12 to 18 months.” Three months later he told the same analysts that the talent drain to clients was continuing.

Heidrick, Korn/Ferry International, Spencer Stuart, and other executive search firms still dominate the work of replacing CEOs and board members. Yet they face increasing competition for searches in the lower senior- and middle-management ranks, where candidates are plentiful and technology and social networking sites make it easier to find talent. “Clients are looking at executive search, just like legal and other services, and saying they want it faster, cheaper, and better,” says Bob Benson, a former Spencer Stuart partner who now heads RL Benson & Associates, a New Canaan (Conn.)-based consultant to search firms. “There’s a dramatic shift in who’s doing the work, with a lot of recruiting moving in-house, especially at levels below top C-suite jobs. That’s the work that keeps the lights and heat on.”