Baby boomers are moving on to retirement, a trend that brought increased opportunities to replace top-level executives, and helped push local search firms’ overall revenue up more than 10 percent last year.
Retained executive search firms focus on recruiting corporate officers or senior executives. The top 20 firms in Los Angeles County on this week’s Business Journal’s list, which is ranked by local revenue, collectively saw a 10.4 percent increase in revenue to $153 million in 2017 compared to 2016.
Nine firms – about half the list – reported revenue increases. Four said revenue declined while revenue for seven remained flat, according to Business Journal estimates.
No. 1 on the list, Century City-based Korn Ferry, reported a $4.8 million increase in revenue to $29.4 million, or 19.5 percent.
“There are several factors for revenue increase including the great economy we’re in, and our firm’s relationship with our clients and talent matches,” said Chris Von Der Ahe, managing partner for the last two and a half years at Korn Ferry. Von Der Ahe has been with the company for more than 20 years in various roles.
Other companies on the list that reported revenue gains include No. 4 Egon Zehnder International Inc., up 25 percent to $15 million, and No. 6 JSA Search Inc., up 49 percent to $12 million.
Santa Monica-based Signal Partners, No. 12 on the list, reported the highest year-over-year revenue increase on list of 67 percent to $2.5 million.
Firms refer to the demographic trend that has baby boomers retiring in waves as an impending “talent cliff.” Search firm executives and experts said it’s critically important for companies big and small to have succession plans.
“Common thinking is that there is not enough Gen X or millennial talent prepared to lead and occupy all those looming vacancies in the C-suite, leading to a massive executive talent shortage,” wrote authors of a report by New York-based Association of Executive Search and Leadership Consultants. “But is it true? Is senior management headed straight off a cliff or about to set sail on the crest of a new wave?”
The lack of leadership preparation has partly to do with companies eliminating training programs, said Michele Gil, chief executive at downtown-based Chrisman & Co., No. 11 on the list, and which focusses on the financial services sector.
“The banking industry needs to think about bringing back training programs. The talent pool is there, but it needs to be developed,” she said.
Yet the shortage hasn’t negatively affected executive search firms, nationally or globally. A survey of nearly 800 companies around the world by AESC last year found that many search firms cited 2017 as their best in the past five years. Global revenue for the profession increased by 8.3 percent to $14 billion compared to 2016. The U.S. firms saw a 3.4 percent hike to $7.4 billion, according to Ibis World, a market research firm, and the country is expected to lead market growth in 2018.
Succession planning was the top concern for businesses in both reports.
“If you take a sample population – look at the millennial generation – they’ve had 15 jobs in five years,” Gil said. “The question I ask the banking industry, and it’s a very traditional industry, is to take a hard look at how they do business. If you study some of the movements the millennial generation is making, they’re looking to satisfy a skillset that they’re not getting. They have a hunger to learn.”
Other elements that have changed C-suite level leadership – such as a shifting work culture and an increased importance of including gender and diversity – come with certain challenges that find L.A. better suited than many markets to meet.
“L.A. in particular fares better in gender and diversity because the region is diverse, and we have top schools that produce great talent,” said Mitch Rufca, principal at El Segundo-based Rufca Recruiting Services and program director at Loyola Marymount University’s Talent Management Center.
However, only two women appeared on the Business Journal’s recent list of the top highest paid chief executives of public companies in 2017 based in Los Angeles County, and neither are currently in those posts.
Rufca said that C-suite candidates he works with often look for more balanced flexibility, the ability to work from home and better benefits while having plenty of perks to choose from.
Denise DeMan, chief executive at Brentwood-based Bench International agrees.
“Up and coming leaders these days need to embody a ‘servant-leader’ attitude because that is what’s wanted,” she said.
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