Getting the Best and the Brightest
By Ruben Ampil

Looking for a chief executive officer?

It used to be that when an executive position was vacant, the old boys’ club network was the main source of recommendations. But globalization and the increasing number of mobile managers—those who hop from one country to the next for better opportunities—have changed that.

Thus, the now-US$-10-billion global executive search industry, casually known as headhunting, has thrived. Headhunters are the middlemen between the recruiting companies and the labor market for elite professionals.

In the Philippines, this is how the industry began. John Clements, an Australian antique collector, while on vacation in the country in 1974, placed an advertisement for antiques in the local dailies. Clements was a psychology consultant with a successful executive search business in Australia. He observed, though, that there were no classifieds for executive placements.

The idea thus popped up: he posted an ad looking for a business partner. Leocadio “Cady” Dominguez, a Harvard-educated executive, responded—and John Clements Consultants was formed in 1974.

This led to a burgeoning industry in the Philippines. More than 30 years later, however, 11 major players interviewed by Newsbreak say their industry remains fragmented and is grappling with a host of market-driven issues, including the proliferation of unprofessional firms and lack of ethical standards.

Mario Biscocho, managing director of the executive search and selection division of John Clements Consultants, estimates that there are about 70 players in the industry but a number are one-man shops. No industry association has been established, similar to the Association of Executive Search Consultants in the US, to establish professional and ethical guidelines. “There are simply too many independents out there who would do anything to bag an account,” says Brendan Whyte, president of Q2 Executive Search, a division of Q2 HR Solutions.

He observes that there are players who merely forward résumés without any screening or analysis.

Biscocho says: “There are those who short-cut the process: they would merely collect résumés without even doing an evaluation and present these to the client. The burden of screening then falls on the client. Worse, some firms even distribute résumés of professionals without [the latter’s] knowledge or any search engagement with a client-organization to begin with.”

Not Cheap
Ideally, headhunters start by familiarizing themselves with their client companies’ culture, peer group, and management infrastructure. Simultaneously, they seek out the cream of the crop in the elite labor market. The approach is strategic: they develop target-company or industry lists and penetrate the companies to identify the top performers. They gather or confirm information about target individuals with their network of well-laced insiders or industry experts.

Headhunters often belong to professional and trade organizations. Their directories are a rich source of who are up and coming. They attend conferences to check out the speakers’ reputation and appeal. They note the press coverage of these targets.

All these translate to comprehensive profiles that the headhunter digs into to get a prospective match. Only then do interviews and negotiations on compensation start. Hopefully, it will reach a successful placement, which, for the search firm, translates to profits and a good reputation.

It’s a time-consuming task. Most target individuals are not in the market for a new job and are often with the recruiting company’s rivals. Headhunters court them secretly and all their dealings are confidential.

A 37-year-old marketing director for a multinational consumer firm is one of the headhunters’ “hot” prospects. He receives at least five unsolicited calls per year. He says headhunters are very discreet and make sure they don’t jeopardize the career of the candidate they are seeking.

With all that work, services of search firms don’t come cheap. Depending on the stature of the search firm, it gets a professional fee equivalent to 18 to 25 percent of the hired candidate’s first-year gross income. Traditionally, the search firm requires payment of one-third of the fee upon engagement, another third when a shortlist of candidates is submitted, and the balance after a successful placement.

Head honchos in blue-chip organizations command salaries of as high as P28 million a year, excluding performance-based bonuses and other perks. Gold mines like these, however, are few and far between. To augment their income, some headhunters lower their standards and conduct searches for a P50,000-a-month position and accept fees equivalent to only a month’s salary of the hired candidate. But this is only practiced by up-and-coming firms wishing to penetrate the market.

Too Many Firms
There are two kinds of executive search firms: retained firms, which require payment regardless of the search’s outcome, and contingency firms, which bill the client only after filling a position.

Worldwide, retained firms account only for US$2 billion out of the entire US$10-billion executive search industry. (In the Philippines, search firms do not release data on their annual billings.) Retained firms serve a niche market—mostly clients who treat search firms as no different from their investment banks that handle acquisitions on their behalf.

Ma. Carmen Guevara, president of HIRE, has seen how the industry has evolved over time. “The trend now is for clients to drop retained arrangements and exclusivity and to open the search to many firms. The exception would be for very sensitive searches, such as for top positions,” she says.

“The approach to the candidate is important. You have to make it known that [his or her interest] would be treated in a confidential manner. It has to be established that not the entire town is into the search and their résumé would not be farmed out to just anybody.”

The low barrier to entry has led to the proliferation of firms. Nerissa Reyes, president of Asia Partnership Philippines, says: “This absence of professionalism will ruin the industry. During the early years, all searches were retained, but now it is mostly success-based due to competition. Services are compromised. Sometimes, even the confidentiality of the search is compromised.”

Bright Prospects
To be successful in executive search, “finding the right candidate is the key,” says Bert Santos, president of MRI Worldwide Philippines. “The higher the position, the more that person holds his CV (curriculum vitae) close to his chest. He will not give his CV to just anybody. After all, his CV is essentially himself.”

Detsy Laurel of Bó Lè Associates notes that more companies place a stronger emphasis on behavioral traits such as leadership and people skills. Technical competence alone is no longer sufficient.

Search firms offer a guarantee period, usually six months, within which candidates are replaced at no additional cost should they leave for whatever reason. And a headhunter cannot tap a candidate for another job offer after placing him in one job for a specified period of time.

Stella Guilatco, managing director of George Garrett Guilford, relates that her search firm has “won some clients” because of the clients’ “horrible experiences” with other headhunters. For example, she says that a search firm that successfully placed an executive called up the placed candidate after three months and offered her another opportunity with another client. “But you just placed me!” the newly placed candidate exclaimed. “Oh, it’s okay. We’ll keep it confidential,” was the reply.

Headhunters decry the practice of some clients and candidates, in which the searcher’s time and resources are wasted on search and placement inquiries that are “not sincere.” The searcher was merely used to gauge the competitiveness of an organization’s talent base and its salary structures, as well as the marketability of candidates.

Still search firms interviewed by Newsbreak see bright prospects ahead. “The search business is not dependent on just one industry. We cater to the whole economy. That’s why the industry is a good barometer of the economy,” Guevara says.

More and more Filipinos land international jobs, and this creates more vacancies in the upper echelons of local businesses. Companies are also reducing their expatriate staff and give more jobs to Filipinos—minus the expatriate benefits.

As some advanced economies face negative population growth rates, the demand for talent will affect the supply of qualified professionals in other countries. Since an executive search is now undertaken globally, this will present an opportunity, and a challenge, for the headhunting industry.

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Originally published in Newsbreak on March 27, 2006. Reprinted with permission.

Interested parties may contact Mr. Biscocho at 845-2045 and 845-2002, or at mabiscocho@johnclements.com.