KEY POINTS:
Headhunters - sorry, "executive search consultants" - are the people that senior managers love to hate. They tempt your best people away with promises of an elevated position, a better career track and probably more money too. Often, there's not a damn thing you can do to keep them once they've decided to go.
And when they do leave, you turn to those same well-connected corporate matchmakers to find a replacement, so that makes you part of the system too.
If you are a mover and a shaker in your industry, chances are that you have received the occasional call from a headhunter. It can be unsettling, unwanted or welcome, depending on how you are feeling at the time.
Generally, the call won't come out of the blue; they will have already cultivated you in some way.
The top headhunters for New Zealand companies are the best networkers in the business world, says Grainne Troute, managing director of employment consultancy Right Management. "They know everybody," she says.
And they know that the people they want to interest are usually happy and fulfilled in their current jobs. So, they keep in touch with these perceived key players, have coffee with them every now and then, and establish a relationship so that when a position comes up, they know just who to call.
"They keep a cadre of people in the background for CEOs and senior roles," says Troute, who herself receives regular approaches from headhunters.
So who are these cunning strategists moving the pieces around the New Zealand corporate chessboard? Three main headhunters drive the top searches for New Zealand companies: Korn/Ferry and Heidrick & Struggles, both based in New Zealand, and SpencerStuart, which has its headquarters in Sydney. All three have global networks. They handle our very best people - the Ralph Norrises and Tim Miles (Vodafone) - not that they will ever tell you who they have acted for; that information has to come from other sources.
Heidrick & Struggles is said to be on the hunt for Vector's new CEO, while Korn/Ferry was responsible for placing former Reserve Bank deputy governor Adrian Orr in his new job as chief executive at the NZ Superannuation Fund.
SpencerStuart, meanwhile, orchestrated Paul Reynolds' appointment at Telecom and was also hired to find Ralph Norris' replacement at Air New Zealand, a job won by internal candidate Rob Fyfe.
There are other search firms but the top three insist they're a cut above the rest.
As one puts it, "there is an air gap" between the dominant trio and the others.
Setting themselves apart as the top-notch players could be a wise move. These are interesting times for our most powerful headhunters. As the global talent pool dwindles, they are under pressure to find talent solutions more quickly because the chances are that the person they are trying to woo is of interest to other executive search firms too.
One thing they're not losing any sleep over, though, is the internet, once seen as a threat to their business. "About seven years ago, there was a view that the internet would dispense with the international search sector," says a senior executive at a search company. "People think that you put a role up on a website, all these people look at it and respond to it, but they don't."
Executive search companies are providing high-level research and consultancy services, and nothing replaces face-to-face audits, he says.
"The websites have not worked simply because chief executives will not enter their personal details and career information. It's career-limiting if their chairman goes into the site and can identify their CEO sitting in the portal," says the consultant.
The personalised approach doesn't come cheap. In return for their services, the recruitment consultants that the top headhunters tend to distance themselves from take a percentage of a position's salary, often about one third - which would mean a payday well into the hundreds of thousands for placing a candidate in the top ranks of New Zealand chief executives. For the top-rung headhunters, there are no hard and fast rules about payment; Heidrick & Struggles' Gary Dick says it is not a simple formula.
There is a complex fee structure which depends on the geographical spread of the search.
The amount that they would charge for a small, Auckland-based search would be different from a search conducted in many parts of the world. "We tend to calculate fees based on the resources and spread of services required," he says. "There is no rule of thumb."
One thing many headhunters agree on is the shortage of management talent and the problems it causes when trying to find the right person for a top job.
Ian MacRae, managing director of management consultancy Hay Group, warns that the scarcity of talent is going to get worse as more babyboomers retire. "The normal pool of people is not going to produce the result. From my perspective, executive firms get used to identify people who are not looking for a job. They are not out there looking, they are not necessarily observing opportunities that would be good for them, so you have to tap them on the shoulder.
"Let's hope you tap the right one on the shoulder."
In future, the emphasis is going to be on "home-grown talent". By that, MacRae means good in-house leadership development programmes which will help companies retain their best people.
"It means investing early on, investing with a view to that person being a senior leader in 10 or 15 years' time. Some companies barely have a succession plan of more than a year."
Rather than railing against headhunters and their power to spoil carefully laid succession plans, says Troute, companies should be making it unattractive for their staff to leave.
"Leaders of organisations need to be constantly aware that their best people are being approached with some regularity by executive search consultants.
"They can't change or influence that ... it's simply a fact. What they can influence are the factors within the organisation that make employees less likely to be receptive to these approaches."
For New Zealand companies, says Troute, "the biggest constraint is their size". Larger organisations do a much better job than smaller ones because they are able to keep people in positions that stimulate them on the way up.
"In smaller New Zealand organisations, if an opportunity does not come up, they leave," she says.
SpencerStuart's chairman in Australia, John Mumm, says the firm is involved in succession planning for key jobs on its clients' behalf.
Australian companies are increasingly looking at planning for new leaders.
As far as he is concerned, there is no point in waiting until a client initiates a search; his firm will have already identified the best candidates in case a vacancy comes up.
"In New Zealand and Australia, we have one or two or three key players ... then it's about knowing what talent is available beyond New Zealand and Australia, maintaining a currency of what is available," says Mumm.
"We have got to know where the good people are, people ready to be CEOs and who are not already."
According to Mumm, "there's one global talent market, one Australasian executive talent market and increasingly one Australasian board talent market.
"It's well established in executive ranks that New Zealanders are of interest for Australian positions and Australians are of interest for New Zealand positions." In Australia, the proportion of Kiwis in senior financial services jobs is "eye opening".
"Meanwhile, there will be a free flow increase of board talent between the two countries," Mumm says, giving Air New Zealand chairman John Palmer as an example.
Being based in Sydney does not hold SpencerStuart back from doing business in New Zealand. "As we don't have offices in New Zealand, we require of our Australian-based practice leaders that they are meeting with New Zealand companies in the same way as they do in Queensland and South Australia where we also don't have offices."
Their job is to know New Zealand companies and people - just the same way as they know them in Sydney and Melbourne.
As for the job. "I love it," says Mumm, who came to SpencerStuart in 1990. He previously worked in HR consulting, then headed the Hay Group in Australia and New Zealand from Sydney, and has also worked in Australian corporations on organisational structure.
At the time he joined SpencerStuart, "I had a view that Australian and New Zealand corporates were coming up to an interesting point where they would need a new generation of talent".
His concern then was that Australian and New Zealand companies were taking a lot of cost out of their operations.
"We were losing the muscle in the thighs of corporate athletes," says Mumm.
At the time, executive search was done by contacts and networks but he could see it was going to become more sophisticated. Talent search was going to be solutions-oriented and responding to business challenges. "That was the attraction," says Mumm.
Gary Dick, a partner at Heidrick & Struggles NZ, with Simon Monks, is another with a long tenure as a headhunter. The mathematician/physicist has been in the business for 17 years and wouldn't do anything else.
"Executive search can have a significant impact on the life cycle of a company," he says. And on an individual's life. Finding a good new CEO can improve a company's performance and it's a rewarding job that can sometimes have an effect on thousands of lives.
With 64 offices around the world, Heidrick & Struggles is one of the few executive search companies in New Zealand to offer a fully global business and that's vital in the current market, says Dick.
"Eighty per cent of the work we do now has an international component because of the candidate-scarce market."
Going overseas for candidates can be a complicated process which headhunters have to make work.
"We have to pay significant credence to spouses' situations and whether they have careers and whether their careers are transferable to the New Zealand environment; that can impact on the decision," he says.
It may seem contrary to an executive search firm's interests, but Dick is positive about companies making internal promotions as organisations build capability through training and development, and via internal leadership-development programmes.
Looking at some of the big hires in the last couple of years, there have been some successful internal promotions, as in the case of Jonathan Ling at Fletcher Building and Rob Fyfe at Air New Zealand. The multinationals typically go to the market and the internal candidates compete with external ones, says Dick.
More organisations now understand the need to build succession planning and they use executive search as part of that process. "In instances where there are other internal candidates, yes we are delighted when an internal managing director is appointed," he says. That's good for the company, says Dick, because it is proof that its people stood up to an international benchmark.
In the past few years, research firms have come under of a lot of pressure to speed up the search process - taking it from a four-month process to a two-and-a-half month one. To help speed things up, Heidrick & Struggles has invested in IT infrastructure, says Dick.
"For our international searches, it's enabled our teams in all 64 offices to transfer data and given research teams sophisticated search engines," he says.
The level of intelligence that can be gathered on an individual is hugely enhanced, and executive search teams get far greater depth on companies that they are researching and identifying.
Consultants and their teams can now do a full analysis on certain businesses around the world, look for those at appropriate levels with similar complexity and then identify who could be the people of significant potential who would be worth considering.
Dick dispels any illusions about headhunting being a cloak and dagger business. "In the first instance, there is a telephone discussion, which is usually followed up by a series of discussions, then we take a conference call in an offshore office, then I'll get on a plane. Once we feel that they are comfortable to make a life in New Zealand and we have formed a view that they would make the shortlist, then they might come [to New Zealand to meet the company]," he says.
When the offer goes to the candidate, there is not a lot of to-ing and fro-ing over pay, says Dick. New Zealand companies can't compete on price. For international players, the overseas market is more indexed to performance; people have a base salary package, then short- and long-term incentives indexed to share growth and other performance issues.
"It's happening here too but the overseas component of long-term incentives is often significant compared with this part of the world," says Dick.
Korn/Ferry senior client partner Annika Streefland finds people willing to listen to her proposition if she presents it in the right way.
"The search style of myself and the team, we don't have a hard sell," she says.
"We talk about the business proposition. If we believe something's right, it would be quite rare ... for a person not to give it thought."
Her aim is to make sure they understand the business case.
"It has to be a win-win, so it's often motivated by the individual's situation. Would it make a sensible move for that person? It does cut both ways," she says.
One of the things she tells overseas candidates is that as a senior leader here, they can make a major economic impact.
Streefland is all too aware of the distraction a call from a headhunter can cause. "It pays to be thoughtful about who you approach; you start a chain of events that is time consuming and emotionally life-changing; you have to be responsible."
Streefland is recently back from Shanghai, where she saw a fast-forward example of the future of her business - red-hot demand for skilled workers. She says a growing challenge for all countries is going to be finding human capital.
Sometimes it's best to find a local person, she says. In one current CEO search, she has decided that empathy with the stakeholders is important and, for this, a local person works better.
Like any executive search consultant, Streefland is happy to reach into the expat pool when she can, and Korn/Ferry has put a major effort into reaching the Kiwi diaspora. "We have a strong network, which is well tapped around the world," says Streefland.
It's not all about finding executives for the country's biggest corporations; there are some interesting opportunities in smaller well-funded start-ups as well.
In New Zealand, private equity has played an important role in making the small to medium-sized sector attractive, says Streefland. "Roles at these incubator companies can be amazing, some of the entrepreneurial opportunities that come out of them," she says. Entrepreneurial firms backed by private equity will often come to Korn/ Ferry looking for a board level appointment.
Headhunters have to have good business experience, says Streefland, herself a former management consultant. Around half of Korn/Ferry partners have experience in a specific industry.
"Something really captures you," she says. "It's not just me, I work with a team in New Zealand and Australia, it's a collective think tank."
Every project involves fresh research, she says, and every candidate they see is assessed using the Korn/Ferry system.
It is a good tool for an international company which wants validation of their hiring methods all around the world and doesn't want to be accused of taking an ad hoc approach, she says.
While StuartSpencer, Heidrick & Struggles and Korn/Ferry dominate their sphere, there is room for smaller fry.
Kerridge & Partners is a relatively young executive search company - two-and-a-half years old. It offers experienced executive coach Chris Johnson as part of its service and recently found a CEO for Standards NZ.
"Our job is to be ambassadors for our companies, the matchmaker between the two parties," says Peter Kerridge.
"We are trying to find common ground between what the company wants to achieve and what the client is looking for in their life."
The more seasoned Dick Parnell, CEO of Robert Walters Australasia, says: "Key problems when headhunting is the fact that because you are approaching the individual, there is no obligation or need for them to accept."
He is not afraid to talk about some of the mishaps that must occur in the executive search market as resources are stretched. "I am staggered by the misfits that happen," says Parnell. Someone is plucked out of an oil company to run a bank because the board thinks it needs a fresh pair of eyes. "It's the shortage of talent; people sometimes draw parallels between industries," he says.
In this market people generally think they are better than they are, he says. But companies are asking harder questions about candidates' true achievements.
NZ: It's not the end of the world
As well as convincing a candidate that it's time to move on, headhunters trying to fill New Zealand positions often face the challenge of trying to sell the country itself.
And one of the biggest challenges of all is pay. Ian MacRae, managing director of management consultancy Hay Group, says the pay offered in New Zealand is 15 to 20 per cent behind Australia and 40 to 50 per cent behind Britain and Europe. And candidates working in the United States might be earning 50 to 100 per cent more than they could expect here. Because of the lower salaries, companies here have to take on slightly less experienced people.
Local companies also do what they have long been doing: emphasise quality of life.
For New Zealand companies with overseas offices, a tactic that can work for the not-so-senior positions is to offer secondments in New Zealand. "We have been advertising secondment placements for people and been inundated by North Americans and Europeans," MacRae says.
Another tactic is to go hunting among the expat community. "There's always a population of Kiwis ... who have decided that they might be receptive to coming home," says John Mumm, chairman of SpencerStuart in Australia. "[New Zealand and Australia] have to be aware of the fact that we will be net exporters of talent between the ages of 28 and 42 and then net importers of talent over 43." Mumm has seen plenty of examples of New Zealanders in their 40s living overseas who suddenly make the decision that they want their children to go to a New Zealand university, to ride a surfboard at their favourite beach or to see their grandparents in their later years.
The big three recruitment players have active networks in the places overseas where Kiwis like to work. And they are often approached by executives wanting to come home if the right job comes up. In the case of SpencerStuart, their details go into a global database.
As for foreigners moving here, "those executives that do make the decision to come to New Zealand find it rewarding", Mumm says. "There are numerous examples of executives from offshore who came to New Zealand for work for whom it was demonstrably career-enhancing.
"The challenge is getting the person to come to New Zealand in the first place."
Mumm sometimes has to reassure overseas executives that they will not lose profile in the global business scene if they come here.
And good headhunting firms will not allow people to get off that global radar. "Most New Zealand corporates have some sort of international reach and many people start to see reasons why this is a step up for them."
In terms of nationality, Mumm says there is a good cultural fit from countries such as Britain, Australia, South Africa and Canada. Local companies seeking new talent should spread the net as wide as anyone else and New Zealand corporates want to do what any company in the world should do - appoint the best person for the job.
"New Zealand companies compete internationally," he says. "That's what's happening, if you are a New Zealand or Australian search firm, you've got to service clients and the way that's done is by global search practices.
"Most firms will have experts who bring a knowledge of a sector, for instance in industry, energy, finance or HR."
At Heidrick & Struggles, Gary Dick is realistic about the prospects of tapping the expat community. "It's a misconception that people are coming back - there are quite a large number of Kiwis offshore.
"Those in very senior positions, the frequency with which they come back is not high." And those who do come back often return to take up a new career, rather than move into another corporate position.
"They come back because they've bought a vineyard in Queenstown or bought a private business."
But high-flyers do continue to accept jobs here. "There are a number of examples of people who are prepared to relinquish [higher pay] for the opportunity to live in New Zealand and work for a New Zealand business."
