This Research Bulletin has been published in J W Harrington and P Daniels (eds) (2006) Knowledge-Based Services: Internationalization and Regional Development Aldershot: Ashgate, pp. 125-152.
Please refer to the published version when quoting the paper.
There continues to remain a conceptual and empirical ‘lacuna’ in relation to understanding the relatively recent growth of labour-related knowledge-intensive business services (KIBS) in Europe. Although this has been partially addressed by Peck, Theodore and Ward (see for example, Ward, 2004; Peck and Theodore, 2001) in their analysis of the internationalization of temping agencies, in professional and managerial segments of the labour market, there still remains a deficiency of geographical work where transnational executive search firms - headhunters - play pivotal roles in the reproduction of executive recruitment, despite Boyle et. al.’s (1996) and Cuthbertson’s (1996) analyses of the European industry in the early 1990s. Headhunters are the ‘archetypal’ intermediary KIBS which specialises in finding and recruiting the most suitable individual for senior managerial or board level vacancies, which normally means targeting individuals that are not actually in the market for a new job (see for example, Britton et. al., 2000; Finlay and Coverdill, 1999; Jones, 1989). The industry has a relatively short institutional history dating back to the post-war economic boom of the 1940’s in the USA. It was b etween 1950 and 1970 that executive search firms proliferated and the ‘big four’ were established (Heidrick and Struggles , Spencer Stuart , Russell Reynolds  and Korn/Ferry ), who quickly became leaders in the USA, and later Europe (see for example, Britton et. al., 1995; Jenn, 2005). In Europe, at this time, indigenous firms like Egon Zehnder (1964 – Zurich), Alexander Hughes (1965 – London), Goddard Kay Rogers (1970 – London), Whitehead Mann (1976 – London), Norman Broadbent (1983 – London) and Saxton Bampfylde (1986 – London) all entered the market to compete with the US firms who had set the benchmark from the 1970s, and thus the European industry was developed at pace, albeit through London during the halcyon days of the 1980s (see for example, Bryne, 1986; Cuthbertson, 1996; Jenn, 1993; Jones, 1989).
By 2004, Europe had become the most important global market for headhunting. According to Jenn (2005), for the top 20 global headhunting firms, Europe accounted for 49% of total worldwide revenue, compared to 37% for the USA and 11% for Pacific-Asia, and in terms of office distribution accounted for 43% of total worldwide offices (343), as compared to 25% (196) in the USA. In this context, the aim of this chapter, therefore, is to explore the recent internationalization and regionalization of Europe’s transnational headhunting industry. By drawing upon the work of selected headhunting commentators from business and consultancy (see, Britton et. al., 2000; Finlay and Coverdill, 2002; Jenn, 2005) and detailed analyses of headhunting transnational firm-specific data sourced from firm world-wide web sites, we detai l the contemporary strategies that headhunters use to consolidate in Europe and the USA and penetrate new markets, especially in Latin America and the Asia-Pacific. The rest of this chapter is organised into six parts. Following this introduction , we discuss the emergence of the headhunting as a Bona Fida industry from the 1950s and discuss its intrinsic managerial practice which contributes significantly to understanding why internationalization has been mainly through foreign direct investment (FDI). In part three, we briefly revisit the resource-based theoretical writings of commentators like John Dunning (1993; Dunning and Norman 1983, 1987) and Nachum (1999), which inform us as to why KIBS engage in international production through FDI and a direct presence in an international market via the office-network. This is followed in part four by a focused discussion of the internationalization of the leading European transnational headhunters in the world. Part five maps and traces the geographies of the worldwide office networks of Europe’s leading sixteen transnational firms from 1992 to 2005, which is followed in part six by three vignettes of different organised firms in internationalization: wholly-owned (Egon Zehnder); networked (The Globe Search Group); and, hybrid (Amrop Hever Group). Finally, the chapter concludes by discussing how our new research on Europe’s leading headhunting transnational corporations can deepen the understanding of internationalization and regionalization strategies of KIBS in contemporary globalization.
The emergence of headhunting as a European and global industry
The headhunting industry emerged in the USA during the post-war economic boom of the 1940 and 1950’s. Demand for executives to steer expanding and newly emerging organizations grew rapidly and, for the first time, firms were unable to fill management positions through internal labour markets (see Jones, 1989). Consequently, demand for externally recruited talent increased, at rates exceeding the readily available supply of executives seeking new positions. Management consultants and accountants in particular recognised the opportunity this phenomenon offered for a new type of professional service, the executive search function. Headhunting, as a complementary service function, therefore, began to emerge within existing management consultant and accounting firms (for example, Arthur Andersen). This rapidly evolved however as the market for executive search grew. Individuals and teams began to leave their original employers to develop stand alone executive search organizations dedicated solely to serving this newly emerging market. Between 1950 and 1970 leading US executive search firms expanded domestically (for example opening offices in New York, Chicago, Los Angeles for example) and the market soon became dominated by the activities of the ‘big four’ (Heidrick and Struggles , Spencer Stuart , Russell Reynolds  and Korn/Ferry ) (see for example, Bryne, 1986; Jones, 1989; Jenn, 2005).
Within Europe, the ‘Europeanisation’ of the industry of headhunting (see Britton et. al., 1995) emerged principally through the opening of offices in London by the ‘big four’ (Heidrick & Struggles in 1968, Spencer Stuart in 1961, Russell Reynolds in 1971 and Korn/Ferry in 1973), and the mimicking of their functions and practices by indigenous firms in London and beyond (for example, Paris, Brussels, Zurich, Frankfurt). London and Europe’s burgeoning headhunting industry, composed of US firms with large market share and local firms, driven by American practice and management styles, contributed significantly to a sea-change in the mediation of executive recruitment in the labour market. First, they contributed to the decline in the belief that all employees should ‘serve their time’ and be trained to act as a suitable manager for the organization. Acknowledgement grew of the value of ‘mobile talent’: individuals bought in from outside because of their skills and expertise (see Sennett 1998 on the demise of professional jobs for life). Second, they began to circumvent the use of an ‘old-boy network’ to recruit senior executives, something peculiar to London, which was inefficient and unsuitable in the ‘new’ business environment. Instead it was recognised that a more scientific and objective strategy was needed. As Jones (1989, 19) notes, ‘business has become too complicated, and the stakes have become too high, for a board chairman who needs executive talent to rely on his friends or his friends’ recommendations. He wants the best man, not the best man visible’. Combined, these changes created the opportunity for a new mode of executive recruitment in Europe: a mode mediated through executive search firms specialising in seeking out and matching talent to vacancies.
From the 1980’s onwards this growth in Europe’s executive search industry was reflected in companies’ revenue and profit figures. For example, Boyden International saw billings in the UK rise from under £300,000 in 1982 to £1.06m in 1987 (Jones, 1989, 24). This rise of over 250% in five years was spectacular and was reflected by similar levels of growth in other European offices. The emergence of the rhetoric of a ‘knowledge economy’ from the 1990s onwards (see Department for Trade and Industry, 1998; Leadbeater, 1999), only served to reinforce this growth. As Fast Company (2000, 44) noted about the predominant logic in this period, ‘it’s hard to argue with the idea that the company with the best talent wins’.
The Firms and the Service
The newly internationalised executive search industry in Europe has been dominated by sixteen transnational firms (Table 1), these are ‘retained’ organizations: organizations selected by clients who have an executive position to fill and paid a fee (normal practice is for the fee to be 33% of the recruited candidate’s salary) to manage the search and selection of a suitably talented individual (Jenn, 1993). This differs from ‘contingent headhunters’ who have to ‘fight’ to win a clients business based on the quality of the shortlist provided (i.e. they have to do the search to win the business whereas retained headhunters only search after being selected). The latter are normally involved in search and recruitment for non-executive vacancies, typically administrative or customer service staff, whereas retained firms exclusively deal with elite executive search (Jenn, 1993; 2005). In particular, it is important to distinguish between the two dominant forms of retained international headhunting firm. On the one hand there are specialist, ‘born-global’ boutiques that concentrate on one headhunting in sector, such as financial services. For example, Boyden International Ltd, based in London, founded in 1966, employed just eight staff in 1993. The firm concentrates on the retail and consumer goods market only (Jenn 1993). On the other hand, there are fully integrated transnational corporations in the most traditional sense of the word, a category that includes many of the global industry leaders such as Korn/Ferry International and Spencer Stuart. For example, Korn/Ferry has over 400 partners alone in addition to its retained consultants and researchers (Jenn 2005). The retained firms fundamentally offer the same type of service, search and selection, whilst each having their own unique cultures and styles (Jones, 1989) and organizational forms.
The Standard Search and Selection Sequence
A review of the extant business literatures and specific firm world wide websites suggest that the search and selection modus operandi of headhunting has five main stages (see for example: Finlay and Coverdill, 1999; 2000; Gurney, 2000; Jenn, 2005; Jones, 1989; www.kornferry.com ):
Combined, these stages are designed to ensure the client’s need for skilled elite labour is met in the most suitable way. An unsuccessful assignment would be one where the successful candidate leaves the client’s firm within the first year, for whatever reason. After all, the role of the headhunter is to ensure the candidate: (a) has the skills needed to fulfil the role; and (b) will fit in and feel comfortable in the position they are selected for in the client firm.
Service Delivery through Experts with Functional and Practice Specialism
Executive search consultants are a new breed of professional that are both well educated (often to MBA level) and expert in ‘functional’ and ‘industry’ fields. ‘Functional’ expertise refers to they type of search (for example, management executive or board member) whilst ‘industry’ expertise refers to one of five common practice areas (finance and business services; technologies and telecoms; consumer goods/service; industrial; and life sciences/healthcare) (see, The Executive Grapevine, 2004; Jenn, 2005). This means all clients receive a search service that is tailored to identify only the candidates with suitable skills and experience relevant to the client’s industry and current vacancy.
All transnational firms in Europe offer search and selection but, more widely, also various forms of management consultancy. In an ironic twist, headhunting organizations, which emerged from management consultancy firms, are now offering add-on services such as human resource consultancy and ‘leadership’ services (see, Jenn, 2005). The firms claim such services complement the recruitment of talented individuals by allowing the most effective management of human (intellectual) capital through, amongst other things, consultancy in relation to performance benchmarking and measurement, succession planning and the effective integration of teams after mergers. As the home page of Heidreick and Struggles’ website reads, ‘[A]s innovators we are actively redefining top-level search to encompass complementary services that help build strong companies and the leaders of tomorrow. Our comprehensive approach to leadership acquisition, assessment and development enables us to help our clients build high-performance leadership teams’ ( http://www.heidrick.com/default.aspx , accessed 20/01/06). However, whilst this additional, value-adding, professional advice is now central to the offering of such firms, the basic headhunting/executive search element remains the key part of their business.
Of course, in essence the search and recruitment process is one internal human resource departments could, and traditionally have, fulfilled. However, the emergence of an international headhunting marketplace in Europe is the result of a number of overlapping forces from both demand and supply sides that have made it profitable for firms such as the ‘big four’ to operate integrated, transnational, executive search networks.
The Ownership-Location-Internalisation paradigm and the internationalization of KIBS
John Dunning’s (1993; Dunning and Norman, 1983; 1987) resourced-based Ownership-Location-Internalisation (OLI) paradigm has been one major approach used to explain why KIBS firms engage in international production through FDI, and thereby becoming TNCs, and it is widely quoted in economic geography and international business literatures (for example, Daniels et. al. 2004; Dicken, 2003). According to Dunning and Norman (1983) resource-based and import substituting service firms (for example, reinsurance, executive search, accounting, consultancy, investment banking) will only engage in FDI, principally through wholly-owned subsidiaries or partnerships, where they have OLI specific advantages over local firms. Ownership specific advantages are based on the firm’s specialist knowledge, international reputation and accessibility to the market. Location specific advantages are based on the importance of having on the spot contact with clients (face-to-face), skilled labour and the market, as well as local information. Internalisation specific advantages exist, according to John Dunning, in the form of the ability to protect and exploit O and L specific advantages, and to control the quality of the service deliver to the client. If they do not have such advantages over local firms then the penetration of foreign markets is best served through franchises, joint-ventures or international trade in services (Bryson et. al., 2004)
The OLI paradigm is a very important approach to explain the relevant influences on the internationalization of different KIBS firms via FDI (Table 2 ), however, it must be noted that the strategies and modes of internationalization are complex within and between different KIBS sectors. For example, Roberts (1999) notes how producer services firms often take a ‘stages approach’ using different organizational forms at different stages of internationalization. Penetration into international markets is initiated by exports in services through, for example, ‘embodied services’ (for example, report writing), ‘wired services’ (for example, telephone conversation) or ‘transhuman exports’ (for example, personnel travelling to an overseas market to present a report), and then is deepened by FDI and the establishment of an overseas presence (for example, wholly owned subsidiary, joint-venture, franchise), which is further enhanced through intra-firm trade in services (Roberts, 1999, 74 and 76-77). In addition, the complexities of internationalization are readily discussed in many of the recent empirically-rich publications which have focused on examples such as: advertising (Nachum, 1999); computing services (Coe, 1997); investment banking (Beaverstock, 2006); and legal (and general professional) services (Morgan and Quack, 2005a, 2005b).
The internationalization of headhunting
As we have already noted, the internationalization of executive search firms into Europe began in the 1960’s (Britton et. al., 1997; Jenn, 1993). However, recently a new form of transnational integration has emerged in both the executive search marketplace and the executive search firms operating within it. Whereas in the initial phases of internationalization (1960-1980) each office of an international firm, such as Korn/Ferry, served clients through search for executive labour within the national markets they were located within, international executive search firms now increasingly stretch the headhunting process across borders through collaboration between international offices using transnational strategies (the shift from a multinational to a transnational form as described by Bartlett and Ghoshal, 1998). As earlier, the market for executive labour recruitment has changed, most recently, with the growth in importance of the ‘knowledge economy’ in developed nations. This intensification of demand for talented individuals to fill executive and boardroom vacancies has created new international geographies to executive labour search. As Tully (1990, 30) wrote, ‘[T]he hunt for the global manager is on. From Amsterdam to Yokohama, recruiters are looking for a new breed of multilingual, multifaceted executive who can map strategy for the whole world. This actions is especially heavy in Europe’.
Headhunters have both responded to and driven such change through the stretching of all of the facets described above (functional and industry practice groups, the search process itself) across borders through FDI and office networks. Below, explanations for the growth of international executive search in Europe are given with four key drivers of internationalization highlighted: demand factors; technological advances; the need to overcome off-limits ‘market blockages’; and the creation of a new ‘intermediaries’ marketplace in executive labour recruitment.
Organic office growth and merger and acquisition activity spurred the internationalization of executive search firms to Europe, and beyond from the USA, and during the 1980s from London, Zurich and Paris to US cities, and beyond (see Cuthbertson, 1996; Jenn, 2005; Jones, 1989). As discussed earlier, given the bespoke, knowledge intensive and secretive process and practice of headhunting, the most efficient form of serving clients labour market requirements is through office networks. Quite simply, headhunters have internationalised to serve their clients, who are often transnational firms in all sectors of economy. Both the increased demand for externally recruited executive labour, and the subsequent scarcity of such individuals, has created record levels of demand for the services of headhunters (The Economist, 1990). As Khurana (2002) points out, the elite labour market is somewhat ‘imperfect’ and inefficient in an orthodox economics sense where, ‘[B]uyers and sellers in disconnected and sparse networks may not be aware of the full range of trading partners or opportunities for exchange’ (page 30). This reinforces the demand for headhunting services to fill the ‘structural holes’ (Burt, 1992) and create the necessary ‘weak ties’ (Grannovetter, 1973) between firms and candidates for their vacancy. Lubricating this market requires search with international dimensions both because of the inability to recruit the quantity and type of individual needed through intra-national strategies and because of the ‘global outlook’ of key clients, the multinational firm. The internationalization of executive search is a response, then, to this new dynamic and has intensified since the early 1990’s. Specifically in relation to Europe, the creation of a single market and the liberalised flow of goods, services and most importantly people since 1992 have reinforced this trend (see, Britton et. al., 1995; Jenn, 1993). Internationalised executive search has therefore become a much demanded service, something executive search firms have responded to. For example, it was noted in The Independent (2005) that London’s legal and accountancy professional service firms were increasingly looking beyond the UK to recruit the talented individuals it needed. Skill shortage has become a real issue, something headhunters can help them deal with through international search strategies.
Technology has revolutionised the geography of headhunting. The creation of candidate shortlists is a process that both draws on researchers and consultants’ knowledge of suitable candidates but also the complex computer database headhunters now create. Such databases have always existed, previously as card file systems (Jones, 1989). However, the internationalization of executive search has been facilitated by the development of databases that, through Internet connections, complete extensive but also intensive searches for potential candidates through the web-portals of major multinational corporations. Fast Company (2000, 44) describes the techniques of ‘X-raying’ and ‘Flipping’ that use algorithms, run through search engines such as Google, to search a wide range of firms and create lists of candidates for a range of different types of vacancy. These algorithms reveal the contents of non-public WebPages that, although being legal to access, are not normally displayed or directly accessible to the general public. It is possible, for example, to find listings of executives working on a project and their role by accessing various ‘hidden’ parts of a firm’s website. This can then be used to store the personal details, experiences and skills of individuals who could become candidates in the future. This has dramatically improved the ability of headhunters to search across borders. It is now possible to trawl any organization with an Internet fronted website for suitable talent, regardless of the separation of the potential candidates, their firm and the executive search organization (as discussed by Fast Company).
Technology advances have also been important in the internationalization of headhunting because of the integration of offices and the collaboration on global search projects enabled through transnational project architectures (Bartlett and Ghoshal, 1998). The use of telecommunications including videoconferencing, globally accessible databases and project intranet sites, allows consultants in several offices to share knowledge of potential candidates. This has become vital as, ‘[T]he number of offices is not as important as the quality of interaction between the consultants…integrated firms function more efficiently for pan-European cross-border assignments’ (Jenn, 1993).
Self-regulation and the Need to Overcome “Off-limits” Market Blockages
The ‘off-limits rule’ in headhunting notes that for two years no partner/consultant of an executive search firm may either speak to a person recruited for a previous client or any one else who has worked for a firm who has been a previous client (see for example, Britton et. al., 1997; 2000; Konecki, 1999). However, the off-limits rule can create a ‘blockage problem’ as firms find it difficult to seek repeat business with recent successful placed candidates and clients. But, given that the industry is in effect, lightly, self-regulated by the Association of Executive Search Consultants (AESC) (Konecki, 1999), executive search firms have looked for ways to circumvent the ‘blockage’ problems created when executive search firms work for several different clients in one industry. Internationalization has been used as one strategy to avoid this problem. It means firms can draw candidates from a pool of firms spread over a wider geographical area and operate policies that place clients off-limits only to headhunters working in the offices that served the client. The latter is a strategic ploy executive search firms increasingly use because it means that a firm that was a client of one or several offices can be targeted by a number of other offices in the firm’s network whilst remaining off-limits only to those offices that directly served the firm as a client (for example see, Konecki, 1999).
The Creation of a New Intermediary’s Marketplace for Executive Labour
Whilst the disintermediation of many KIBS has been particularly due to the rise of the internet and e-commerce (see for example, Leyshon and Pollard, 2000), the executive search industry like temping (see for example, Peck, Theodore and Ward, 2005) has firmly established its standing as a vital intermediary over recent years. As was noted earlier, the scarcity of talented individuals has led to recognition of the need to recruit individuals from outside the organization to fill executive positions. However, as sought after candidates are already employed, and often by a competitor firm, it is imperative that searches are covert because of their commercial sensitivity. It is, therefore, essential that the candidate’s current employer does not become aware that their leading executive is about to be headhunted, and that candidates do not know who has employed the headhunted until they are committed to interview for the post. Headhunters are seen as being able to manage this process most effectively, preserving both the client’s and the candidate’s confidentiality. So, in effect, headhunters can open doors to candidates that would be closed to direct approaches from a firm with an executive vacancy. This ‘socially constructed’ nature of elite labour search requires the ability, then, to negotiate the embedded nature of acceptable talent hunting (see Grannovetter, 1985). Executive search firms have the expertise and ability to do this and successfully connect supply (candidates) with demand (executive vacancies) whilst not crossing or contravening the socially-defined boundaries and norms of headhunting. As intermediaries, they both ensure the interests of the client and candidates are best served. Britton et. al. (2000) described this as a complex three-way relationship in which the executive search firm, at the centre of the relationship, has to manage to the complexities of this embedded market in terms of both candidate and client expectations.
Geographical Expansion of the Worldwide Offices Networks of Europe’s Leading Transnational Headhunters
Following on from Boyle et. al.’s (1996) analysis of the expansion of European headhunting world city office networks until the early 1990s, in this section of the chapter we chart the global growth of the top sixteen European headhunters from 1992 to 2005, drawn from The Economist Intelligence Unit’s report on Executive Search in Europe (Jenn, 1993) and Jenn’s recent (2005) publication, Headhunters and How to Use Them, supplemented by individual firm Annual Reports and world-wide web sites.
World Regional Office Change, 1992-2005
A basic analysis of office expansion and distribution illustrates that the total number of offices operated by the sixteen largest firms at each census point increased by 55% between 1992 and 2005, from 471 to 729 (Table 3 ). During this time period, Europe remained the dominant region with office concentration in both absolute and relative terms, accounting for 261 offices in 1992 and 325 in 2005, and when North American (NA) office numbers are added to Europe, both regions accounted for the highest share of total world offices, 79% and 69% in 1992 and 2005, respectively. However, at this regional-level, an analysis of the world-wide office data also reveals two other significant trends in the distribution of office expansion. The first trend is the consolidation and growth of offices in the Asia-Pacific (AP) region, in both absolute and relative terms, from 67 to 142 offices, representing an increase of 112% between 1992 and 2005. The second trend is the growth of office networks in the genuine ‘emerging markets’ of these leading firms, Latin America (LA), and Africa and the Middle East (AME), with increases of 148% (from 29 to 72 offices) and 1500% (from 3 to 16 offices), respectively between the two time periods.
Transnational Firm Office Change, 1992-2005
At the firm-level, where regional office data is comparable between the same top firms in Europe in 1992 and 2005 (see Table 4) it is interesting to note that: (a) in absolute terms the highest office-expansion was recorded in the Paris and joint London-New York headquartered firms TransSearch International and Ray & Berndtson both recording +35 offices, but with respect to relative growth, it was Ray & Berndtson with a +233 per cent increase in offices from 15 to 50 which topped the table between 1992 and 2005; (b) all firms with the exception of Signium (formally known as Ward Howell) had two-digit relative percentage increases in their office networks in Europe, with significant increases by Heidrick & Struggles (+100% to 22 offices); (c) only four firms recorded two-digit relative percentage increases in offices networks in North America (Egon Zhender; Spencer Stuart; Korn/Ferry offices; and TransSearch), and both Amrop Hever and Signium reduced their office networks in the region by -18 and -50 per cents, respectively; (d) the highest relative growth rates were recorded by firms in the LA and AP regions, with firms either extending their already established offices networks in the regions (for example, Egon Zhender +100% to 6 offices and +120% to 11 offices in SA and the AP respectively) or opening new offices for the first time (for example, Heidrick & Struggles opened seven new offices in LA; and Ray & Berndtson opened five new offices in the AP); and (e), new absolute growth in the AME region was muted compared to growth elsewhere, but six firms did open up new offices here for the first time between 1992 and 2005, and two firms who were in the region in 1992 had increased their presence since 2005 by on average one extra office per firm.
World City Office Change, 1992-2005
Unlike many other KIBs (for example, accounting), Europe’s leading headhunters operate globally from a relatively small network of world city offices with usually one office per firm per city. In 1992, Europe’s largest sixteen firms had 471 offices distributed in 111 world cities, with Europe dominating this distribution (Table 5). By 2005, Europe’s largest sixteen firms operated 729 offices in 161 cities, with the highest share of offices in European cities, but the largest relative growth rates in AME (+700%) and the AP (+71%) (Table 6). An analysis of the change in concentration and magnitude of offices in cities in each region are shown in table 5 for 1992 and 2005, and four major trends stand out from these different city-offices data sets. First, the major world cities in each region accounted for the highest number of offices in both 1992 and 2005 (but London’s position was only ranked as four in 1992 in Europe), and moreover, these cities experienced further office growth between 1992 and 2005 (London +3 offices to 17; New York +3 office to 16; Sao Paulo (+5 offices to 13; Tokyo +3 offices to 13; and Johannesburg +2 offices to 5). Second, significant new office growth was experienced in a number of LA and AP cities who before 1992 had never had offices of Europe’s top sixteen firms (for example, Santiago +9 offices; Lima +6 offices; Rio de Janerio +4 offices; Shanghai +9 offices; Beijing +7 offices; New Delhi +5 offices and Dubai/Wellington each +3 offices). Third, in Europe, offices expanded in many of the post-Communist economies of the East (for example, Warsaw + 8 offices from 1992; Moscow +5 offices; Istanbul +7 offices), and in the USA there was growth in Denver and Miami. Fourth, in the AME region in 2005, Johannesburg and Dubai dominated the concentration of offices with half of the grand total, where the other eight offices were spread between six other cities (Sandton; Jeddah; Tel Aviv, Cape Town, Beirut and Kuwait City [2 offices]) (tables 5 and 6).
Case study firms in globalization
Three case study firms will be highlighted to tease out the nuances of internationalization and organizational form: Egon Zehnder, The Globe Search Group; and Amrop Hever.
Egon Zehnder International (Wholly-owned firm)
Egon Zehnder International, with HQs in New York and Europe, is a wholly owned headhunting firm which was the very first firm to be set up outside of the USA in 1964, by its founder of the same name who used to work for Spencer Stuart (Jenn, 2005; www.egonzehnder.com). After the opening of its first office in Zurich in 1964, the first years of internationalization were focused on consolidation in Europe, with new starts in Paris (1968), Brussels (1968), Copenhagen (1970) and London (1970). This was followed by step-by-step internationalization in Asia and Latin America (Tokyo – 1971, the first office to be opened outside of Europe, Sao Paulo – 1975; Mexico City – 1982; Buenos Aires – 1984). Egon Zender didn’t break into the USA until 1977 with the opening of the New York office, followed by Chicago in 1981 (it opened its last office in the USA in 2000 – Miami). Expansion into eastern Europe came in the early 1990s (for example, Budapest and Prague 1992), followed by expansion in the other emerging market regions (see Table 6) (www.egonzehnder.com). The firm’s mission statement is to specialise, ‘in assessing and recruiting business leaders with outstanding track records who will create competitive advantage and sustainable value’ (Egon Zehnder, 2001). As a wholly-owned firm, it is managed by a partnership that defines priorities and strategies for all ‘branch’ offices. The firm uses its wholly-owned organization as a competitive advantage to demonstrate global-local knowledge structures wherever clients may be in the world:
Egon Zehnder uses its wholly-owned structure as a mechanism to nurture long-term, sustainable relationships with clients such that whenever they require the services of a headhunter, they turn to one particular firm, their ‘retained’ firm, rather than accepting business from other competitors. Egon Zehnder, who specialises in several global practice groups – financial services, consumer, life sciences, technology and telecoms, energy and process, engineering and automobile, services, private capital and e-commerce – are able to use their extensive office-network located around the world (see Figure 1), to offer clients the same branding and corporate cultures, to reproduce an a highly-integrated transnational business model. In 2004, Egon Zehnder was the world’s fourth largest headhunter ranked by worldwide fee income (see Table 1).
The Global Search Group (Network firm)
The Globe Search Group, with HQs in New York, London and Munich, is a network organization of 13 independent firms formed in 1997 by Miles Broadbent in London (see Table 7 ), operating primarily in Europe, North America and the Asian-Pacific (see Figure 2; Table 6). The network model of organization in Global Search combines non-transnational, local firms in essentially a ‘best friend’ strategic alliance to meet client’s global executive labour search needs worldwide. Global Search is not a single entity world business like Egon Zehnder or other wholly-owned firms, but performs labour searches independently and calls upon other members of the network when they require an overseas search in a member’s national market. Independent firms associated with Globe’s network propagates the rhetoric of being ‘local’ to the market in order to maintain, ‘a very tightly managed client list and seeks to build deep and lasting relationships with its clients’ ( www.globesearch.com , accessed 13/01/06), and many have been established for fifteen years or more. Thus, several members of Globe’s network will all be operating in one country and competing for the same business outside of the ‘off-limits’ mantra. Hence, the Globe Search Group can operate effectively as an international collection of independent firms, ‘by combining international reach with regional excellence, the Globe Search Group expertly supplies the resources, experience and knowledge in the identification of key executives internationally’ ( www.globesearchgroup.com/ , accessed 13/01.06). As such, the Globe Search Group represents a corporate reincarnation of the ‘temporary teams’ Grabher’s (2002) identified within advertising agencies, which are temporary and dynamic inter-firm coalitions that grow through repetitive use, and are very ephemeral in nature. In 2004, the Globe Search Group was the eighth ranked firm in Europe and tenth worldwide (by fee income) (see Table 1).
The Amrop Hever Group (Hybrid firm)
The Amrop Hever Group is a hybrid transnational headhunter which is a formal global partnership of 59 independent firms that trades under one business model (Jenn, 2005; www.amrophever.com) with a very strong global identity, and often incorporating Amrop and/or Hever into the name of the independent firm, but also retaining the independent firm’s local name in the market. The Group is managed by a Chairman, three Vice-Chairmen (one each from Europe/Middle East & Africa, the Americas and Asia-Pacific) and a Board of Directors (of seven from: UK, Canada, Japan, India, China, Sweden, USA). Amrop Hever is the largest firm in Europe and worldwide has 70 offices in over 50 countries (see Table 1; Figure 3). The Group was established in 2000 through the merger of Amrop International and the Hever Group, ‘to serve more efficiently regional and international clients in light of the growing trend of globalization … speak[ing] over 100 languages but always with a single voice’ ( www.amrop.com/aboutus.html , accessed 12/06/05). Amrop Hever is more tightly-integrated than The Globe Search Group with an overall global headquarters in Brussels where the Worldwide Secretariat formulates strategy and policy, but it is not as culturally, socially or economically incorporated as the wholly-owned firm, Egon Zehnder.
Discussion and conclusions
Our contemporary analyses of the leading European transnational headhunting firms and practices have served to deepen an understanding of both the complexities of internationalization and the strategies by which labour-related KIBS intermediate in the marketplace. The entire rationale for internationalization is client-focused, which spills over into classic herding mentality as leading firms follow competitors into international markets to secure market share and maximise profitability, and mimetic managerial practice and performativity. We can offer four major observations which synthesize the intricate ways in which the internationalization of the leading European transnational headhunters have reproduced their almost compulsory mediation role in functions of executive labour markets at all scales. First, we have noted that the internationalization process is not uniform with respect to the mode and strategy of internationalization in the headhunting industry. Firms have internationalised through organic, wholly-owned growth, as characterised in all phases of internationalization (for example, Egon Zehnder), but equally penetration into new markets has been in the form of networks of independent firms (for example, The Globe Search Group) and hybrid forms, combinations of tightly organised and independent firms (Amrop Hever). Such organizational forms have been used by different firms at particular moments in their institutional history to not only spread risk in new markets through minimising the sunk costs of new starts, but also as a vehicle to gain immediate reputation in the new location through linking-up with knowledge rich, local firms who have significant experience in intermediation in the executive local labour market. Second, and linked to the first, internationalization through FDI has been reproduced by the requirement of firms to over come the ‘off-limits’ best practice. By minimising these ‘Chinese walls’ between independent firms (as in a network or hybrid form) and wholly-owned international offices, firms have been able to undertake transnational searches, cross-border, to overcome self-imposed regulatory frameworks to recruit executive labour from recent placements and clients. As with the previous observation, internationalization spurred by circumventing the ‘off-limits’ rule brings complexity into the rationale as accounting for such internationalization in the headhunting industry. Third, it is evident that the operation of the executive search industry in Europe and beyond is the classic Americanized industry (see for example, Daniels, 1999). The Big Four US firms not only set new standards and benchmarks in the operation of executive search, and thus recreated deep-rooted intermediary relationships with clients as ‘market makers’, but these practices very quickly became the norm in labour markets of all scales as local firms had to adapt to competition. Fourth, the pattern of internationalization as illustrated in worldwide office change for the sixteen leading firms in Europe shows clearly the desire to establish new ventures in emerging markets (like LA, AP and AME) with respect to all three forms of internationalization strategy, but also that the industry remains consolidated in Europe and the USA. Europe remains the leading market for the industry as indicated by fee income (Table 1) and office concentrations in 2005 (see Tables 3 to 6).
To conclude, we can only reiterate that this myopic case study of European transnational headhunters has been used as an exemplar to enhance the extant knowledge of the internationalization of KIBS in a contemporary world economy. The industry is dominated by the operations and practices of transnational corporations, tied to world city markets, but like many other KIBS, these are supported by thousands of SMEs, who specialise in narrow segments of the labour market, and remain impossible to quantify. Headhunting internationalization strategies are client-focused, but simultaneously are devised to make their own markets with clients and to continually nurture their, often, retained intermediary role. The future of headhunting is firmly established in the physic of the intermediary executive labour market as clients will always wish to recruit ‘stars’ employed by competitors, and individuals will always be willing to be seduced by the approach of headhunters who add significant gravitas to any new employment opportunity.
We would like to thank the United Kingdom’s Economic and Social Research Council for funding this research in the project, ‘The globalization of the executive search industry in Europe’ (Award Number: RES-000-22-1498 ).
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Table 1: Europe’s top sixteen transnational headhunting firms (ranked by 2004 European revenue), 2005
Source: Firm worldwide web sites, accessed 07/12/05; adapted from Jenn (2005)
NA Data not available
Table 2: Ownership, location and internalisation advantages in selected transnational KIBS.
Source: adapted from Dunning (1993, 272).
Table 3: Europe’s leading sixteen transnational executive search firms: office change by world region, 1992 – 2005 (ranked by revenue)
Sources: 1. Adapted from Jenn (1993); 2. Firm worldwide web sites accessed 07/12/05
Table 4: Firm world regional office network change 1992-2005 (ranked by 1992 firm)
Source: 1992 data adapted from Jenn (1993) and 2005 data sourced from firm worldwide web sites, accessed 07/12/05
Key: EZ Egon Zhender; AM Amrop (merged in 2000 with Hever to form Amrop Hever Group); SS Spencer Stuart; H&S Heidrick & Struggles Int.; BE. Berndtson International (merged in 1990s with Paul Ray to form Ray & Berndtson Int., and merged with Odgers in 2000); WH Ward Howell (changed their name to Signium in 1998); RR Russell Reynolds; KF Korn/Ferry Int.; BN Boyden Int.; Trans TransSearch.
Table 5: City-locations of number of international offices of the leading European sixteen transnational headhunters, 1992 and 2005
Note: 1. Cities with three or more offices
Sources: firm worldwide websites, accessed 06/12/05 (see appendix 1), adapted from Jenn (1993)
Table 6: Europe’s leading sixteen transnational headhunting firms world regional office networks, 2005 (ranked by revenue).
Source: Firm worldwide web sites, accessed 07/12/05
Table 7: The Globe Search Group network of independent firms in 2005
Source: www.globesearchgroup.com/locations.htm accessed 13/01/06
NA Not available; 1partners only
*Department of Geography, Loughborough University, Loughborough, England, LE11 3TU, United Kingdom.
** Department of Geography, Lancaster University, Lancaster, England, LA1 4YW, United Kingdom
Edited and posted on the web on 16th March 2006
Note: This Research Bulletin has been published in J W Harrington and P Daniels (eds) (2006) Knowledge-Based Services: Internationalization and Regional Development Aldershot: Ashgate, pp. 125-152