Plan for a relatively flat year.
That’s the sentiment from the executive search market, whether you’re asking VC/PE talent partners or asking executive recruiting firms. The vast majority of executive search and talent leaders surveyed by Thrive said they expect their budgets to remain “about the same” in 2023 with the expectation that market activity will also remain “about the same” in the first half of the year.
Though that’s the consensus, there are some dissenting opinions on whether the “flatness” will be a key challenge: Of executive recruiting leaders surveyed, 75% cited market conditions as a top obstacle this year—yet less than 40% of VC/PE talent partners said the same.
Why the difference?
Perhaps that has something to do with the spaces in which the survey respondents play. As we noted in our recap of our Executive Search Benchmarks Report, the macro view of the executive search market tells you one thing, but the micro view—asset class, roles, etc—tell you another:
“Across nearly all the asset classes we track, CEO and CFO functions saw either YoY or QoQ growth in Q4 2022: a sign that companies are searching for different types of skill sets at a critical juncture. In PE, particularly, Q4 seemed to mark strong growth in opened searches across a variety of additional roles.”
So, there will be pockets of activity.
But even where there isn’t—yet—a growing demand, that doesn’t mean talent partners and executive recruiters are sitting idle. A common theme in recent discussions has been a shift from tactical execution to strategic planning. And our survey respondents hit on this, as well.
Three executive search trends for 2023, according to talent partners and executive search leaders:
- Proactive pipelining to prepare for strategic shifts
- Enriching data to catch trends
- Operational efficiency to build competitive advantage
(Re)building Networks to Stay Ahead
The prevailing theme among survey respondents was rebuilding networks by proactively building fresh talent pipelines.
The focus seemed to be centered on delivering value in three ways:
- Turning around candidate short lists faster
- Meeting Diversity, Equity and Inclusion initiatives
- Advising on organizational design and hiring needs
For search firms, deeper relationships and increasing operational efficiency were the top priorities listed this year; the qualitative feedback was they’re necessary to produce those slates faster.
Talent partners, too, listed stronger pipelines and networks as their top priority—even stating that a key area of investment for them is understanding connection paths and relationship strength.
While these answers seem to be truisms (the best thing to do in a slow market is prepare for a business one), one leader suggested there’s a practical, near-term reason for pipelining:
“Leadership, quality thereof, will be under pressure due to earnings/supply chain. Few leaders that excel during good times do well during downtimes. Change agents and those who can turn a business around or lead strong will be in great demand. Many will retire or be fired in leadership in 2023. Search firms need to find a pool of ‘difference makers’ for 2023’s needs.”
The difference between the peace-time leader and the war-time leader is real, of course, and if a business makes the change at the top, there will likely be more changes as that person begins to assess the team.
Enriching Data to Catch Trends
Synthesizing these changes is a challenge, though.
If a “good time” leader gets replaced with a “downtime” leader, there are likely downstream effects from that. But what archetype of candidate might be the best fit for that new leader and the business? Do you, as a talent partner or executive recruiter, already have connections to that archetype? How do you get there fastest? How do you ensure that any pipeline you build there meets DEI initiatives? And—coming out of a super hot market—what’s the comp range for that role now, anyway?
Among VC/PE talent partners, solving this problem is such a priority that half are exploring technology solutions to tackle this. The answer to why may lie in the fact that the above questions show how slate requirements are niching down, but speed is still holding steady.
As we noted earlier this quarter, aside from the COVID-boom where searches moved at a blistering pace, the time it takes to identify a placed candidate has normalized and now sits in a similar position to where it did pre-COVID.
Operational efficiency to build competitive advantage
That development, it seems, is also finding its way into trends.
In survey responses, more than half of search leaders surveyed said operational efficiency was a focus for 2023 and our roundtable discussions have added color to that answer: While search volume may be down, the market remains competitive.
We heard bidding war stories you’d swear were from 2021, processes being rolled out to speed up offers, and surprise counter offers that went well outside comp bands. And those stories came from in-house and VC/PE talent partners.
Pace is pace, and—despite changing demands—it’s finding a way to persist.
Closing top candidates faster will always be a theme, but what appears to be changing is the approach to it. Efficiency now appears to be viewed as being as much about tightening processes as it is about leveraging the aforementioned trends—proactive pipelining, data enrichment and compensation benchmarking—to ensure that candidates who are identified for searches have a greater likelihood of moving and moving faster.
With Q1 wrapped, we’ll soon have a clearer picture on where the market is headed and which pockets are driving activity. Regardless, the picture seems clear: most are focused on proactive work and, even if activity picks up, they will be for a while.