The little black book no longer rules as executive search agencies are becoming more thorough. Douglas Friedli tracked down a few – and some of their clients – to find out what’s new in the world of the headhunter.
What would you do if an executive search agent called with details of a plum job? Whisper your mobile phone number, or politely end the conversation? Perhaps, but a more common reaction these days is that of Welsh Rugby Union chief executive Roger Lewis, who has landed four senior jobs with the help of headhunters.
“An employee talking to search consultants can be misconstrued by employers,” he admits. “But an enlightened employer will understand that senior employees should have relationships with search consultants because everyone should be sharpening the saw.”
Lewis, who was placed at the union by search firm Odgers Ray & Berndtson, recently asked the same firm to find a head of rugby development. “It is a senior role, and we need someone with a range of skills. We said, ‘let’s see who is doing this around the world and benchmark them, regardless of who is available.’”
There is still an air of mystery around the headhunters – the well-connected characters who put the top people into the top jobs. Discretion has always been an important part of the job.
But other aspects are changing, says Jemma Terry, head of Odgers’ Cardiff practice: “The old-style headhunter had a black book and would wine and dine contacts. Now it is more sophisticated. We identify companies, map out relevant individuals and approach them. We also produce a briefing document about the company and the job.”
Candidates are then narrowed down to a few who go forward for competency based interviews, looking for the right mix of skills and personality. Those that get through that stage will have references checked, either officially, or if they would prefer not to, through an unofficial network of contacts. “Someone who is good will know whether someone else is good,” says Terry “In a market such as Wales, everyone knows everyone. It’s about checking your information – you don’t want any horror stories.”
Agencies can help by locating candidates who may work in other sectors and would not otherwise have seen the job on offer. Adrian Wheale, chairman and managing director of agency Wheale Thomas Hodgins, says: “We think more laterally to get experienced candidates. For example, a food company selling to supermarkets could recruit somebody from an unrelated company selling to supermarkets. They are in different sectors, but there are similar key drivers and business knowledge.”
Principality Building Society has used firms such as Wheale Thomas for executive roles, including a marketing director and sales director, and used Odgers for non-executive directors.
Sue Lane, Principality’s human resources director, says: “At director level, it tends to be the norm to use agencies. Because they do it every day they are better able to spot ability than we are. We have a tight human resources team, and bringing in help makes it easier.
But right now, she would rather avoid cold-calling candidates: “The market is quite sticky. It is flattering to get a call from headhunters – but do people want to move? People who are already in jobs may be cautious about relocating, particularly as the housing market is tough.”
But she adds: “There are more people at a senior level on the market, and there is more downsizing going on, so we have had a bigger volume of applications. But we want people who will live in and around south Wales. ”
Odgers’ Terry has noticed more caution in the market, but the firm is busy with a client list that includes S4C, Finance Wales and Cardiff University. “When people are more cautious, they want to go with blue-chip businesses with established brands. Companies are coming to us saying ‘We need help’. If you have the right team, you can weather the storm.”
The search market is at a “tipping point”, according to Wheale. “Executive search and selection is often impacted a little after its customers begin to feel the effects of a downturn,” he says.
“We are seeing a change. Companies are changing the chess set from attack to defence – replacing financial directors who can grow a business with hard-nosed cost and cash management experts.”
Wheale has noticed an increase in work from clients in sectors that are not affected by the economic clouds, but the tricky bit is getting people to move. “People in good jobs with mortgages are staying put on the basis that if they move somewhere else, it will be last in, first out.”
He adds: “In some ways, this climate makes search harder. Unemployed candidates drop off your radar after a while, and others in jobs will hang on there for longer. But well-crafted adverts are providing good returns.”
Wales has always been a distinct market, with the Severn Bridge a physical and psychological barrier to movement. But Wheale says: “One advantage Wales has is the phenomenon of the returning Welsh person. That helps because there is a finite number of qualified people in south Wales, and organisations do have problems getting people to move.”
It is easier now to persuade people working in the South East to come to Wales, says Terry: “I tell candidates how Cardiff is a vibrant city, about the regeneration in Wales and about the quality of life you can have here. That is harder for an agency working in London to do.”
One accusation occasionally aimed at search agencies is that they are expensive. Compared with the cost of a job advert, they are – but it is worthwhile, says Jonathan Smith, business development director at homebuilder Castleoak, which recently recruited a group finance director: “You have an almost intuitive sense of where value exists. It is a necessary investment, and the biggest cost would have been getting it wrong.”
The best consultants understand the candidate and the job they do, says Lewis. “I have moved between sectors. There is a skill set that is transferable, and what is important is having a consultant who recognises which skills are transferable.”
He adds: “I have always enjoyed the process because you build up a rapport with the consultant. The relationship has always been honest and open, and search consultants can often give great advice.”
As well as offering an interesting job, companies must also make it worth the candidate’s while, says Bethan Darwin, partner at Cardiff law firm Darwin Gray: “For senior people remuneration is not the most significant part. They are looking for share options, which are likely to make them a life-changing sum, rather than just pay for their living expenses.”
Some companies prefer to work without headhunters – such as Welsh Water, which recently took on Bob Ayling as a non-executive director. The utility group says it located the former British Airways boss through its own network of contacts.
But Lewis believes the agencies can act as go-betweens, placing themselves between employer and employee. “They will have that discrete and confidential, but hopefully balanced, dialogue between the two parties,” he says.
Once the dialogue looks like it is going in the right direction, there are other issues to look at. Not least is the question of restrictive covenants, which many executives have in their contracts.
Jenny Jones, partner at Morgan Denton Jones, says: “These clauses continue to operate after termination of employment and are designed to prevent the executive from competing with the former employer, approaching its clients or customers or from poaching its key staff.
“If the executive is also a shareholder, he or she is also likely to be bound by restrictions within the shareholder agreement. Restrictions may apply within a certain geographical territory, and typically for six months to a year depending on the seniority of the executive.”
There are also likely to be restrictions on confidential information obtained by the executive during their employment from being divulged. In a recent case the High Court found against two directors who had set up in competition with their ex-employer, and awarded significant costs against them. The nature of these covenants is changing, according to Darwin: “The common restriction used to be that you could not go to work for the competition. But that has fallen out of favour and is seen as unenforceable.”
But Jones believes things are getting tighter: “Recent cases suggest the courts are willing to uphold more onerous restrictions giving comfort to employers anxious about protecting their businesses.
“But most employers anticipate some form of restrictions and are prepared to wait until the expiry of the restricted period rather than engage in a legal battle.”
Legally, there are no barriers to approaching a senior employee to see if they are interested in moving jobs, and there is nothing to prevent an employee from discussing a job, either directly or through a headhunter. But the employee does have duties of confidentiality and good faith to their existing employer.
Jones says: “Often, senior executives looking to leave a company will enter into candid talks with their employer and agree terms. Clients may even inform the employer that they intend to move their business with a departing employee.
“Employers then have to balance the wishes of the client against the protection of the business. There are few employers who will willingly fall out with a client determined to leave with a departing employee, particularly if there is any chance to win them back later.”