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Executive Search: A Leading Indicator
By Anthony J. LoPinto
July 7, 2003
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As we approach the steamy side of summer, attention is turning to the long-awaited vacation, more time with the family and a welcome slowdown in the tempo of business. However, with relief in sight, stress is just ahead as executives, focusing more on what it's going to take to meet budget for the year, begin to marshal their forces for the '04 planning cycle.
Most of us have received the news that the economic indicators are improving; the new tax package is in place to prime the pump; the labor statistics are better; and the stock market is beginning to look like a bull, albeit a bit anemic, but a bull nevertheless. So, a recovery must be in place. We real-estate types are ready. Sam Zell, at Real Estate Media's recent RealShare Conference in Chicago, said that the recovery is moving east! He's seeing renewed signs of life in California and argues that since the West was hit first in this cycle it must mean that the inverse will happen.
All this being said, perhaps the best indicator for the recovery will be the level of recruiting activity experienced by those executive search firms focused on real estate. If so, the news is good. There has been a clear and discernable step-up in search activity since January, and the pace continued into June. We have seen, and I have also heard from our friendly competitors, that there has been an increase in search assignments since the first of the year across all of the major sectors, multifamily, office, industrial, retail and master-planned communities. In addition, the searches also cover all functions: operations and management, finance and accounting, construction and development, asset management and marketing.
However, looks can be deceiving so we better analyze the specific assignments to see if we can rationalize a trend. First and foremost, other than for replacements and turnover, the vast majority of the searches appear to be happening for two reasons. First, companies want to reinforce their team or build a stronger bench to insure that they maximize their competitive performance. Companies want to develop a team to help them succeed in an environment where getting the fundamentals right is critical to success.
Firms cannot rely on broad market trends to save them from mistakes. For example, in the acquisition game there is too much capital chasing too few deals. Experienced professionals with deep market knowledge can really make a difference in this sector. The same forces have been at work in development and portfolio management.
The other reason companies are hiring is to launch new initiatives. We have seen a number of companies implement operating-unit restructures, acquire new companies, begin new projects or add stronger portfolio managers to maximize results. You may ask why this is an indicator of growth. Well, up until now, the hiring has been put on ice while the C-suite got comfortable with the idea of adding overhead. Well, they have gotten comfortable, thanks to the recovering economic environment. A bit of self-fulfilling prophecy you may say, but in fact it's priming the pump.
As a leading indicator, executive search clearly signals a level of renewed confidence and some measure of recovery. We will continue to see a build-up of search activity, but it will not translate into an aggressive recruiting environment until the recovery takes hold. At the moment, the recovery still falls into the anticipation phase, and most executives are waiting for solid evidence until the next growth cycle. This doesn't seem to be too far away. Most now expect that '04 will bring some level of recovery, but alas, it's beginning to look like '05 before we develop a full head of steam.
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