Global search firms' revenues plummet
Eight of the firms saw declines of more than 35% from the year before. The industry sectors that suffered the steepest falls were the same that produced stellar growth rates over the previous five years, including financial services and venture capital, according to the report by Hunt-Scanlon Advisors, a US recruitment market research firm.
Of the six largest global search firms, revenue in 2001 was down 38.7% at TMP Worldwide, 29.6% at Korn/Ferry International and 23.8% at Spencer Stuart. Heidrick & Struggles' revenue was down 23.4% and Russell Reynolds down 19.8%.
Egon Zehnder saw revenue fall just 7%, though 83% of its 2001 revenue was generated outside the US, said Hunt-Scanlon.
With financial services typically the largest or second largest industry practice at many global firms, the year-long slump in this arena translated into minimal hiring activity for recruiters.
The report said: 'One of the side effects of the search industry downturn has been a sharp rise in the number of executive recruiters who voluntarily left their existing firms for better opportunities at either competing firms or newly formed search entities.'
In terms of what headhunters make for their employers, Russell Reynolds recorded the highest average revenue per US consultant and per office for the third consecutive year - $1.3m per consultant and $11m per office.
Compared to 2000, when eight of the 10 largest US search firms reported average revenue per consultant above $1m, in 2001 fees per consultant were about 20% lower, said the report. Only four firms beat the $1m benchmark.
Hunt-Scanlon said staff cuts were inevitable in such an environment. It said that in 2001 headcount fell 40% at Christian & Timbers, 35% at Ray & Berndtson (which subsequently filed for bankruptcy under Chapter 11), 25% each at Heidrick & Struggles and Korn/Ferry International and an estimated 20% at AT Kearney Executive Search.
Compensation and benefits expenses represented about two-thirds of revenues at both Heidrick & Struggles and Korn/Ferry in 2001. 'Based on current market conditions, both of these firms will be challenged to change their existing pay structures, while also preventing the defection of senior consultants to privately owned search firms' the report said.
Executive Search 2002: State of the Industry Report,
Hunt-Scanlon Advisors www.hunt-scanlon.com
