The Globalization of the Executive Search Industry in Europe Research Briefing 4: Mapping the European expansion of Executive Search markets Project Team: Prof. Jonathan Beaverstock Dr. Sarah Hall Dr. James Faulconbridge Dr. Andrew Hewitson
Aims and Objectives of the Research The aim of the project is to investigate the globalization and regionalization of the contemporary executive search industry in Europe and map its new organizational forms and geographies. The supporting objects of the research are to explore: - The development of the headhunting industry within Europe. The role of the headhunting firm within the context of globalization. The implications of developments in executive search and selection for the recruitment practices used by leading firms. Globalization opening new markets and facilitating the cross-border executive search process Executive Search is now an omnipresent force in the world of elite executive search and selection. The success of the industry is built upon leading firms ability to harness the expertise of knowledgerich consultants who, working alongside clients, develop vital trust-based relations with candidates suitable for key strategic positions within leading corporations. This project, which began in January 2006, has spent a year studying leading global firms and consultants in the European executive search industry. 1
Outline of research completed Box 1 In addition to extensive analysis of quantitative data sets relating to the industry, this project used in-depth interviews with executive search practitioners. In total 48 interviews have been completed with consultants and researchers working for 21 different global firms in Amsterdam, Brussels, Frankfurt, London and Paris. In addition, interviews have been conducted with representatives of the Association of Executive Search consultants and the Executive Researchers Association. Further to this a member of the research team was present at both the AESC annual European conference and their researchers summit (in 2006). From this extensive data-set that provides over 40 hours of interview material, a number of important findings have emerged that help us understand the success of the contemporary executive search industry in Europe. Mapping geographical expansion One of the most important recent trends has been the globalisation of Executive Search firms and the expansion of office networks into more and more markets. This has taken place in the context of not only growing demand in the home markets of firms, something which in itself has led to a rapid rise in consultant numbers, but also increasing demand for the services of Executive Search firms outside of the dominant firms indigenous homelands of the USA and UK. We can see the impact of this in purely quantitative terms. In 1980 it was only possible to identify seven major international firms (Boyden; Egon Zehnder; Heidrick & Struggles; Korn Ferry; Ray & Berhdtson; Spencer Stuart; Ward Howell), these having a combined total of 49 offices in Europe. By 2006 it was possible to identify at least 50 such firms with a combined total of over 870 offices in Europe. Figure 1 tracks this development at 5 year intervals between 1980 and 2006. This growth in office numbers deserves attention not only because of the way it demonstrates the proliferation of Executive Search firms but also because of the way it reveals the chronology of the emergence of markets for search services. This project has been solely focussed upon the European context and through our data we are now able to map the emergence of Executive search in different European countries. This is significant for two reasons. First, it shows when demand for Executive Search began to mature in these markets, as evidenced by the entry of leading search 2
Total no. offices (50 biggest international firms) 900 800 700 600 500 400 300 200 100 Fig. 1 0 1980 1985 1990 1994 2000 2005 2006 Year Growth in offices of 50 leading Executive Search firms in Europe 1980-2006. Source: Executive Grapevine (various editions). 1 Defined as retained Executive Search firms with at least one office outside the home-country. Data was extracted from various editions of the Executive Grapevine between 1980 and 2006. 2 Data was not available for 1995 so 1994 was used instead. firms. Second, it shows how demand diffused over time, normally away from the leading business centre in each country, as Executive Search services became popular across a range of industries (from agriculture to textiles) located in the regions. Our data suggests this in an important process in the maturation of the search industry, but something that only occurs once a critical mass of demand has been developed in the main business centres of a country. Below we examine the trends uncovered in more detail through a case study example of geographical expansion. Our dataset covers the fifty largest firms operating in Europe between 1980 3
and 2006, far too much to be presented in its entirety here. We, therefore, focus on the case of Korn Ferry and its geographical expansion in Europe to track some of the major trends and to help us understand when and why Executive Search emerged and matured in different markets. 3 Globalization of Executive Search, 1980 present day: the case of Korn Ferry Within this broad picture of globalization, the case study of Korn Ferry allows us to identify three different phases of office expansion within the executive search industry in the last 25 years. Phase 1 pioneer offices, c.1980 1990 This period was marked by rapid office expansion into the capital cities of western European countries. Comparing Maps 1 and 2 we can see that Korn Ferry increased its number of European offices from 4 to 11 in this period, having first entered the European market in 1972. However, they remained concentrated in capital cities. This reflects the fact that, at this time, executive search was predominately confined to a smaller number of professional service sectors, notably finance. As such, these offices can be seen as pioneer offices, introducing executive search to national economies beyond the US and UK that had relatively little experience of the industry. Phase 2 Geographical dispersion, c.1990 2000 This period was also marked by rapid office growth (see map 3). Korn Ferry more than doubled its number of European offices over this period to 23 by 2000. However, in contrast to the previous period, the location of offices became much more dispersed. On the one hand, in more mature markets such as Germany and France, offices were opened outside capital cities, reflecting the increasing use of executive search in a broader range of economic sectors. On the other hand, new pioneer offices were opened in the emerging markets of Eastern Europe. For example, Korn Ferry opened offices in Poland, the Czech Republic and Hungary in this period. 3 Anyone interested in the full dataset should contact the research team to discuss opportunities for gaining full access and to further analyses. 4
Phase 3 Mature market consolidation and emerging market expansion, c. 2000 today This period is marked by a more complicated pattern of office locations. In mature markets such as Germany, the example of Korn Ferry points to office consolidation rather than growth. This reflects the ways in which executive search was affected by the more general retrenchment in producer services following the bursting of the dot.com bubble and the scandals hitting corporate America in the early 2000s. However, this has been accompanied by continued expansion of the industry into the emerging markets of Eastern Europe. For example, through an alliance with Rosexpert, Korn Ferry opened its first Russian office in Moscow in 2005. Map 1 European office locations of Korn Ferry, 1980. Source: project dataset 5
Map 2 European office locations of Korn Ferry, 1990. Source: project dataset Map 3 European office locations of Korn Ferry, 2000. Source: project dataset 6
Map 4 European office locations of Korn Ferry, 2005. Source: project dataset Discussion and future research This bulletin has shown that although it is undoubtedly true that the European Executive Search industry has grown rapidly in the last 25 years, the picture is rather more complicated than a straightforward linear growth trajectory. There are three distinct phases in the expansion of the industry that reflect both the demands of clients and the desires of the industry to make new emerging markets for executive search. The drivers for this growth are varied, although early analysis suggests that emblematic brands such as Korn Ferry and leading individuals within the industry are disproportionately important in shaping the growth strategies of executive search. Further research is needed to explore the role of such brand leaders and key individuals in shaping the industry going forward as it expands into 7
8 the emerging markets of India, China and Asia more generally. In addition it seems important to examine in more detail the market making strategies of firms as they enter new markets and attempt to proliferate their version of professionalised Executive Search. All of these issues are the subject of related User Briefings and need further exploration through the interview material collected as part of the project.
Appendix: Publications Summary Beaverstock JV, Hall SJE, Faulconbridge JR (2007) The globalization of executive search in Europe: Executive Report. Available from the authors. Beaverstock JV, Hall SJE, Faulconbridge JR (2007) Research Briefing 1: Globalization opening new markets and facilitating the cross-border executive search process. Available from the authors. Beaverstock JV, Hall SJE, Faulconbridge JR (2007) Research Briefing 2: Globalization opening new markets and facilitating the cross-border executive search process. Available from the authors. Beaverstock JV, Hall SJE, Faulconbridge JR (2007) Research Briefing 3: The contemporary consultant managing flows of elite labour. Available from the authors. Beaverstock JV, Hall SJE, Faulconbridge JR (2007) User Briefing 4: Mapping the European expansion of Executive Search markets. Available from the authors. Beaverstock JV, Hall SJE, Faulconbridge JR (2006) The Internationalization of Europe s Contemporary Transnational Executive Search Industry. In Harrington JW (Ed) Knowledge-Based Services: Internationalisation and Regional Development, 125-152. Ashgate, Aldershot. ISBN 0-7546-4897-4. Faulconbridge JR, Hall SJE and Beaverstock, JV (2006) The globalization of executive search. Invited paper at Institute for Advanced Studies corporations in the knowledge economy workshop, Lancaster University, 23-24th January. Faulconbridge JR, Hall SJE and Beaverstock JV (2008) New insights into the internationalization of producer services: Organizational strategies and spatial economies for global headhunting firms Environment and Planning A 40 Hall SJE, Hewitson A, Beaverstock JV and Faulconbridge JR (2007) New insights into the internationalization of producer services: exploring the role of iconic individuals and brand leaders in global headhunting firms. International conference in Geography: the globalization in services the second global shift. University of Bergen 15th 17th June 2007. 9
Contact Details For further information please contact any member of the Research Team: Prof. Jonathan Beaverstock Department of Geography Loughborough University Loughborough LE11 3TU j.v.beaverstock@lboro.ac.uk +44(0)1509 223093 Dr. Sarah Hall School of Geography University of Nottingham University Park Nottingham NG7 2RD Sarah.hall@nottingham.ac.uk +44(0)115 8468404 Dr. James Faulconbridge Department of Geography Lancaster University Lancaster LA1 4YQ j.faulconbridge@lancaster.ac.uk +44(0)1524 510265 Dr. Andrew Hewitson Department of Geography Loughborough University Loughborough LE11 3TU a.hewitson@lboro.ac.uk Acknowledgements Cover Photograph: Gerd Waloszek (city at night), vispix.com. This work was funded by the UK s Economic and Social Research Council (Award Number: RES-000-22-1498). We would like to thank all of those who assisted this project, in particular those who agreed to be interviewed and took time to discuss the nature of the contemporary industry with us. We are also grateful to Simon Chew of Lancaster University for assistance in producing this report. 10