May Dashboard: COVID-19’s Impact on Executive Search

KEY TAKEAWAYS:

• New executive searches are up 22% MoM (-23% vs 12-month average)
• Completed executive searches are up 20% MoM (-17% vs 12-month average)
• Executive search industry could see new and completed searches rebound to monthly average by June
• Not all functional roles have been impacted equally during the crisis

Not back but forward: Signs of light on a bumpy road to rebound

In April, Thrive’s analysis revealed that COVID-19’s impact on executive search may have hit a floor after a devastating month in March. More and more regions across the globe have started lifting social distancing restrictions and many are optimistic about the next normal.

Since the start of the crisis in March, Thrive has conducted regular conversations with its customers and hosted regular peer roundtable discussions for leaders in the industry. Qualitative feedback coupled with Thrive’s real-time executive search data revealed that executive search firms made quick adjustments to their businesses while settling into their new normal. They adopted a wartime mindset, employing tactical strategies and leaning on technology to steer their teams over what appears to be a peak in devastation.

Thrive’s executive search dashboard shows promise after volatile, but overall positive, trends in May. While we certainly are not back to normal, we are seeing signs of normalcy on a bumpy road to rebound. Key performance indicators still hover below average but are trending in the right direction. Further, data shows that not all functional roles have been affected equally.

Below we’ll analyze trends and provide feedback from leaders across the executive search industry to show how the month of May shaped out, and where June might be headed.

A glimpse of hope for bottom lines

From January through April, the executive search industry experienced a 4-month consecutive dip to start the year. New searches fell 48% to their low point the week of March 23, and completed searches trailed behind by 2 weeks, falling 55% the week of April 13.

These metrics land at the top of the priority list for retained executive search firms since new and completed searches are closely tied to financial performance. So as these metrics plummeted, financial fall out was felt most over the month of April—new and completed searches dropped 36% and 26% month-over-month (MoM), respectively.

May’s strong MoM growth provided the industry with signs of hope. New searches were up 22%, and completed searches improved 20% from April to May.

However, new and completed searches still performed 23% and 17% below the trailing 12-month average, respectively.

During our peer roundtable sessions, talks of new business seem to be following similar upward trends, though work overall is still down. Completed searches remain a challenge, as clients and candidates alike are still largely hesitant to make decisions amongst lingering uncertainty.

Candidates are being asked to commit to lengthier virtual interview processes, in an attempt to counterbalance the lack of face-to-face interaction. Some clients have gotten more comfortable with completing searches via purely online interviews. For others, even after thorough virtual interactions, hiring teams are still reluctant to extend offers to executives without meeting them in person.

“A few clients didn’t put anything on hold, but got all the way to the finish line and froze. They just can’t get comfortable with completing the search,” says Jim Poe, Co-founder of Radius Partners.

As in-person interviews start to make a comeback, we might soon see an influx of pent up, late-stage searches represented in completed search metrics.

And though we certainly aren’t in the clear just yet, we could land at or near 12-month averages for new and completed searches by the end of June with similar MoM growth

Thrive’s projections indicate that with repeated 22% MoM lift, new searches would be just 7% below the current trailing 12-month average in June. For completed searches, a repeated 20% increase would land right at average performance.

Held and canceled searches felt the brunt of COVID early on, but have since fallen below pre-COVID levels. With fewer new searches to actually put on hold or cancel, it is certainly not an indication that things are back to normal.

Volatility should instill cautious optimism

There’s no doubt that executive search fared far better in May than earlier on in the COVID-19 crisis. However, volatility in weekly performance leaves us on our toes, as we cautiously approach the coming months.

Between the weeks of 3/30–4/20, new searches saw an average weekly change of 11% in either direction. Between the weeks of 4/27–5/25, that average was 39%—a significant increase in volatility for newly opened searches.

Thrive warned executive search firms to approach the next normal of this crisis with cautious optimism, and May data further validates that claim. And with summer traditionally being a slow season even under normal circumstances, executive search firms should yearn for more stability before claiming a full recovery.

Certain functions have been more pandemic-resilient

The unique nature of the current economic crisis had leaders in executive search wondering if certain functions would be more or less in demand. With new and completed searches down 23% and 17%, respectively, compared to the trailing 12-month average, some roles fell on extreme ends of the spectrum.

New searches for product, board, and finance roles seem to be hardly impacted, sitting well above the trailing 12-month average.

For operations, R&D, and IT roles, their fate was much worse off—falling upwards of 40% below the average.

Completed searches also yielded varying results across functions. Investment professionals and board positions saw completed searches 61% and 35% higher, respectively, in May compared to the trailing 12-month average. Firms are successfully placing candidates for these roles, regardless of ability to interview in person—which has been a prominent challenge during this crisis.

Finance, R&D, and sales roles seem to have been hardly impacted. Completed searches within these functions outperformed other roles by at least 50% compared to the trailing 12-month average.

On the other end of the spectrum, CEO, HR, and operations roles were completed two to three times less than other roles in May compared to average. 

The variation between function performance in new and completed searches shows that certain roles have persisted. Executive search firms continue to win new business and complete searches for board and finance positions, which inclines us to possibly label them as pandemic-resilient.

Overall, the next normal holds promise for executive search

The COVID-19 crisis has challenged the executive search industry, forcing firms to navigate challenges it hadn’t faced before. But with setbacks comes opportunity. The talent pool is all but bursting at the seams, as many top candidates were victims of aggressive company cutbacks. And a time of crisis has led many clients to evaluate their existing talent and acknowledge gaps in leadership.

Further, our latest roundtable discussion highlighted another sweet spot of opportunity on the horizon. Anecdotal evidence suggests many baby boomers near retirement might be using COVID as an opportunity to step down early, forcing unexpected succession planning conversations.

“A lot of executives, particularly those with travel-heavy jobs and a ton of responsibility, have seen this as an opportunity to walk away and retire,” shared Tom Lovett, President at Lovett and Lovett.

Executive search firms that can leverage the booming talent pool, manage the influx of unexpected vacancies in leadership, and prioritize pandemic-resilient functions may see quicker growth than those that remain stagnant.

Thrive will continue sharing its executive search dashboard analysis on a regular basis to provide the executive search industry with actionable insights. If you’d like to join our peer roundtable discussions with leaders in executive search, please email leadercommunity@thrivetrm.com.

For more information on how Thrive TRM is equipping executive search teams to tackle the fall out of COVID-19 and run more effective and efficient searches, click here.