Two top business school professors teamed last fall to examine data from a leading executive search firm on how senior-level executives in financial services respond when approached by a recruiter to explore the outside job market. Peter Capelli—a professor of management at Wharton and director of its Center for Human Resources—reported (to his surprise) that 52% of those contacted said “Yes.”
Based on my work coaching C-Suite executives, this did not surprise me at all. Anecdotally, there is a general acceptance of job-market volatility shaped by economic headwinds, M&A activity, activist shareholders and board director politics and performance. As a coach, I hear clients express free agent values to protect individual careers. Anyone—from the C-Suite down to lower levels of management—would think and act as a self-actuated stakeholder. This does not mean that a CEO is not committed fully to the company mission.
The surprise from the Knowledge@Wharton newsletter article is that these executives expressed high interest in outside opportunities without knowing the basic parameters of the positions. According to this piece, “The two researchers’ data focused on executives in the financial services sector, including CEOs, chairpersons and executive vice presidents as well as directors, partners and principals, among others. The executives did not initiate the search process, and they had to agree to be a candidate before they learned much, if anything, about the job in question.”
Capelli notes that the higher-level executives are less loyal to their organizations than those lower down the ladder. Both he and Monika Hamori of the IE Business School found that most of the companies surveyed are seen as treating their top executives as “disposable.” In other words, the corporate impulse is to recruit talent from the outside rather than a priority placed on a talent management system that develops leadership opportunities from within. In fact, executive education programs are cited as potentially contributing to lack of loyalty. This makes sense: the more wide-ranging your knowledge and exposure to other skill sets, the hungrier you are for a different experience. From my own professional experience working in management development for two Wall Street banks, the data are aligned perfectly with personal observation. The findings correctly point out as well that internal management training and development programs are no longer widely available to executives, if they exist at all.
As an executive coach, I will always advocate that all leaders manage their own careers well, and continuously seek opportunities to diversify knowledge, experience and expertise across industry verticals and, if need be, across regional and international markets. If a business leader cannot mentor himself, and if he finds that his older networks have no pipeline to the future, then he may find as a candidate true advantage in working with a coach rather than a recruiter alone—as a coach is the executive’s advocate. Headhunters have a direct client relationship with the company for which they are seeking talent—not the individual executive.
Two aspects of the executive search process that were not mentioned in the article are CEOs’ longer-term view from the boardroom. Based on my client pool, many executives feel that they want to test the external market because of lack of personal challenge, i.e., they are bored. Or, often convincingly, they feel that it is “mission accomplished” at their current organization, meaning they have achieved the results that they were recruited to secure, and it is naturally time to move on. Why not, then, say “yes” to a recruiter?
More compelling statistics from Wharton and my business and career takeaways:
>> The best-compensated senior executives are less likely to explore external market opportunities.
ExecutiveBrandCoach takeaway: This makes the case for board directors who award what are seen as overly generous pay packages to CEOs and others. More pay, greater likelihood to stay.
>> Executives with greater international experience are more likely to entertain a job search.
ExecutiveBrandCoach takeaway: There is a large community of American ex-pats who work in finance around the world. Greater mobility equals less loyalty, and therefore bigger impetus to leave.
>> Roughly, $10.4 billion was paid out in 2011 by companies to search firms. Also, nearly 2,500 executives polled in another study said that the primary reason for a job search was being tapped by a recruiter.
ExecutiveBrandCoach takeaway: Hasn’t this always been true? The business model for recruitment firms is a percentage fee based on the executive’s compensation. Hence, the more senior the executive candidate, the greater potential fee earned by the search firm. Demographics equal destiny.
>> The two researchers used data from New York-area financial services firms, including asset management firms, banks, consumer finance institutions and investment banks. The largest slice in the surveyed pie—48%—was made up of senior managers, e.g., directors; managing directors; vice presidents; partners; and principals. But they were less likely to give a headhunter the nod. The most agreeable were CEOs, executive vice presidents and senior vice presidents, with EVPs taking the lead.
ExecutiveBrandCoach takeaway: There are fewer opportunities at the top, of course. Competition is fiercer, and the entire job-search lifecycle from the executive’s perspective can be grueling and challenging—riddled with complexities, lack of transparency and a lengthy process with the board. Chief executives must exude a brand of leadership today that meets the litmus test of multiple constituencies. They already have experience navigating these choppy waters, and perhaps that contributes to their bias to test them more often than others, as well as tough-minded acceptance of corporate realities.