Chicago-based executive recruiter Heidrick & Struggles International Inc. posted a second-quarter loss of $15.8 million on a 45 percent drop in revenue and 37.1 percent drop in search confirmations compared with a year ago. Hudson Highland’s revenue fell 43 percent in the second quarter, and MPS Group’s dropped 29 percent in the same period.
Despite the bleak financials, recruiters are noting the slightest of upturns as they help companies find turnaround talent to work their way out of trouble. In the hard-hit financial services sector, headhunters are working with banks bailed out by federal Troubled Asset Relief Program funds as well as companies recovering by selling assets or shifting focus. Recruiters are working with companies in retail, manufacturing and other industries as well.
“We’re no longer in the death-and-despair environment of February and March. Firms are making money,” says Paul Heller, president of Cromwell Partners Inc., a New York executive headhunter that specializes in financial industry searches. “It’s become competitive to hire people again. The tide has turned.”
Heller and other recruiters say requests are picking up from clients and turnaround consultants who work with them. They’re being asked to recalibrate upper-management teams and find leaders with skills and strengths drastically different from the CEOs who manned the helm during the economic expansion of the past decade. What those companies want: no-risk turnaround specialists with corner-office experience and impeccable professional and personal records.
Running a company that is downsizing or is controlled by government regulators might not sound enticing to some. But there’s a crop of specialists who thrive on the work. They do it for many reasons, including the acclaim that comes with being known as a financial Mr. Fixit, says Dale Winston, CEO of Battalia Winston in New York, another leading executive search firm.
One of those Mr. Fixit types is longtime turnaround specialist and former Putnam Investments chairman and CEO Charles “Ed” Haldeman Jr. In late July, Haldeman signed on as the new CEO of Freddie Mac, the mortgage buyer U.S. regulators took over in September during the financial system’s meltdown. His success righting Putnam after trading scandals forced his predecessor out brought Haldeman to the attention of executive recruiters working with Freddie Mac’s board, company spokeswoman Sharon McHale says. She declined to reveal which headhunter Freddie Mac used, or other details of Haldeman’s hiring.
In similar situations, Winston may talk to 150 people before selecting a handful to bring to a company’s board. Winston and other longtime recruiters say they rely on their insider knowledge of clients’ corporate culture and relationships with prospective hires to find good matches.
“When you go to work for one of these companies you better like it because you’ll be under incredible pressure,” says Jeanne Branthover, managing director at Boyden Global Executive Search in New York. “There’s a time pressure to succeed. You’re going to be working long hours. You better make sure it’s not only the right role, company and career move for you, but that it’s the right feeling for you as well.”
Branthover, a 30-year recruiting veteran, is pulling out her tried-and-true tactics as well as incorporating social media for a company that downsized significantly after being pummeled by the recession. In addition to other layoffs, her client used the opportunity to cut the lowest-performing 10 percent of its workforce, Branthover says. Now they’re evaluating where they should staff up and what talent, skill sets and leadership abilities are needed in those roles, she says.
Circumstances surrounding searches are often far from ideal. In one case, Chicago-based executive recruiter Spencer Stuart was retained by the board of a health care company to replace a CEO who had been fired after a government investigation turned up accounting fraud.
Though a number of candidates were interested, some were scared off by the ongoing investigation, according to a case study on Spencer Stuart’s Web site. A company spokesman declined to provide additional details. The recruiter eventually found and recommended the president of a national hospital system division who had been successful in high-growth and turnaround situations. He agreed to take the job and in a short time was able to stabilize the business, according to the report.
Today, even non-turnaround specialists are willing to take a flier on a position with a company in dire straits because their current situation may be even more tenuous, Heller says. For example, Heller recently placed a candidate with a TARP bank even though it wasn’t clear what the compensation would be.
“They were taking a risk, but they weren’t coming from a position of strength anyway,” Heller says.
Though demand is high, recruiters say CEOs, COOs and other top-level executives who specialize in turnarounds won’t get the same eye-popping salaries that banks, brokerage firms and private equity firms paid as recently as last year. With regulators and shareholders scrutinizing executive pay, compensation packages for incoming CEOs and other executives includes more modest—though hardly meager—salaries and bonuses tied to performance and specific company milestones.
“In the past you got a bonus if you did your job; that’s not going to happen anymore,” Branthover says.