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The Evolution of Executive Search
Executive search, once a function of management consulting, has evolved to earn its independent consultancy model across the globe. This evolution, which began in the 1960s, was driven by the overwhelming demand for experienced executives that surpassed in-house capabilities of companies, leading to the outsourcing of talent expertise. Fast forward to 2021, and the global executive search industry is booming, with annual revenues of around £24 billion - more than double that of 2015. This remarkable growth parallels significant technological advances and a shift in global markets, leading to a dynamic change in talent demands.
The Private Equity (PE) industry faced its own set of challenges in 2023 such as heightened investor demands and economic uncertainties, which emphasised the need for differentiated talent acquisition strategies. According to Hunt Scanlon Media's PE Survey, a staggering 92% of deal makers believe that top talent is crucial for achieving growth targets, highlighting the pivotal role of evolved executive search in aligning with the changing landscape of the PE industry.
From Generalist to Specialist
Karen Greenbaum, CEO of AESC, and Mathew Cuthbertson, Partner of LCap Group, reflect on how the executive search industry, traditionally more generalist, has become increasingly specialised over the past 20 years. Assessments for PE roles previously centred around functional and industry expertise, currently demand a more advanced selection process, especially for senior roles. Modern executive search firms set themselves apart through specialised knowledge, experience, and proprietary tools, moving away from the 20th-century model of relying on word-of-mouth and recommendations. Today, these firms provide comprehensive services, including structured interviews to avoid bias, inclusive recruitment processes,and industry validated leadership training. This strategic approach helps clients meet growth objectives and improve employee retention rates, through a risk measured recruitment and selection process.
The Changing Dynamics in Private Equity Talent Acquisition
The emergence of new technologies has encouraged forward-thinking executive search firms to integrate innovative tools like personality-focused assessments into their processes. These tools, favoured by giants like McKinsey, Deloitte, and J.P. Morgan, offer a deeper understanding of a candidate's aptitude, interests, and personality, providing insights beyond what is discernible from traditional interviews and case studies.While many of these tools are designed to be widely applicable, they lack industry-specificity when discerning traits related to PE investment professionals. The adoption of these generalist tools in meeting the nuanced requirements of the PE industry is questionable, especially given the lack of significant evolution in PE hiring strategies over the past five years. The PE industry's hiring approach needs to be not only sophisticated but also agile, recognising the critical role of talent in driving growth and adapting to the unique demands of the current market. These conditions call for a change: a highly sophisticated executive hiring strategy which is tailored to the current PE industry, and acknowledges right talent is the most important factor in driving growth.
A New Paradigm in Talent Evaluation
The conventional search methodology often falls short in pinpointing traits linked to value creation in PE contexts. Altus Partners CEO Ed Chamberlain advocates for a shift in focus away from generalist personality assessments to rather the assessment of investor behaviours as the industry continues to evolve. Using their bespoke PACE assessment tool, Altus Partners has pioneered an approach centred on business behaviours crucial to value creation in PE executives. Grounded in comprehensive empirical research, this method evaluates candidates on various dimensions, including perception, behaviours, thinking styles, and execution principles. This approach not only assesses the suitability of a candidate but also ensures their alignment with a firm's unique culture and strategic objectives. Such precision in evaluation aids in effective onboarding, team development, and ultimately leads to higher employee engagement and lower turnover rates.
Aligning The Candidate and The Firm
In the current landscape, executive search extends well beyond the realm of recruitment. Firms are now equipped to provide strategic insights into clients' team dynamics, succession planning, and leadership evaluation. This enhanced function of executive search transcends traditional interviewing techniques, requiring firms to evolve in tandem with the changing talent needs of the PE market. By marrying deep industry expertise with the latest technology and human insights, executive search firms are now positioned to offer enduring, well-suited, and high-performing talent solutions. This comprehensive approach aligns not only with the immediate hiring needs but also with the strategic long-term objectives of clients, setting new benchmarks in the executive search industry and ensuring success in an increasingly competitive talent market.
Bibliography
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