Large Headhunters' Business Under Pressure

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The worldwide financial crisis is set to take a major toll on the business of large U.S. executive search firms, according to analysts who follow the sector.

In the latest reported quarter, the financial services sector accounted for about 19 percent of revenue for Korn/Ferry International Inc. and 27 percent of revenue for Heidrick & Struggles International Inc., Reuters reports. Korn/Ferry and Heidrick are publicly traded, unlike most U.S.-based search firms .

Korn/Ferry's Chief Executive Gary Burnison told Reuters the financial industry is the most challenging sector for the company now. Burnison said Wall Street hiring is shifting toward risk management, operations and infrastructure, adding that Korn/Ferry had just placed a high-profile chief risk officer for one major bank.

Burnison also mentioned clients transferring executives to new geographic locations, as well as "pressure on the compensation level."

According to Reuters, Heidrick has undertaken searches for Citigroup, Washington Mutual and Friends Provident. Korn/Ferry's clients include Freddie Mac and Barclays.

Whitney Group Implodes Amid Lawsuits

A privately held search firm well known on Wall Street already has become a casualty. Twenty-year-old Whitney Group LLC is winding up operations under New York's Debtor and Creditor law, according to a legal document cited by Bloomberg News on Friday.

Whitney Group and its former chief financial officer are suing one another, with the firm alleging that the executive had misappropriated some $7 million to an outside contractor, causing Whitney's collapse. In a countersuit against his former employer, ex-CFO Jeffrey Sussman said his actions were authorized and alleged that Whitney fired him to cover up its loss of major clients. "Sussman also alleged that executive search firm Korn/Ferry International considered buying Whitney Group in August and that he helped prepare financial information to give to them," Bloomberg News said.

The story said Whitney Group has offices in New York, London, Boston and Hong Kong and generated revenue of $30 million last year.

Last month the outplacement firm Challenger, Gray & Christmas predicted that financial job cuts this year could surpass the 2007 record total of 153,105. Through August, the sector had shed 103,000 jobs, based on layoff announcements that Challenger compiles each month.

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