In this discussion, Kevin Barry shares his perspective on the current state of the executive search industry. He also addresses questions around key recruiting and leadership themes we’re seeing today — and whether they have the staying power to persist in the years ahead.
Give us a sense for how business went for SPMB in 2022 and how you see 2023 playing out. What macro factors will play a part in the year ahead and how do they impact your outlook?
2022 was a tale of two halves for our firm. Overall we experienced record topline revenues for the year and eclipsed the goals set in January. The first six months were a continuation of the Covid era up-cycle with ongoing steady growth and project volume. In the summer, there was a noticeable slowdown in project volume that continued into the fall. The second half of 2022 was lumpy and inconsistent in terms of new projects initiated and overall executive search demand.
Heading into 2023, our outlook for the year is best described as ‘highly uncertain’. Weighty factors like the war in Ukraine, political gridlock, and macroeconomic headwinds are the main drivers of this uncertainty and ‘psychological overhead’ from our vantage point. As a result of these factors and a mounting list of unknowns, the vast majority of our client base has flipped 180-degrees from this time last year. In fact, there is palpable caution and hesitation to make investments in certain hires — and, at times, clients are opting to take a ‘wait and see’ approach for non mission critical executive hires.
To further compound today’s uncertainty, a crisis in the banking system that services the technology ecosystem surfaced in Q1 with the government takeover of Silicon Valley Bank. This event, paired with subsequent events, has only exacerbated the uncertainty for our underlying economic systems — and we anticipate it having a material impact on the outlook for our industry for likely years to come. On a macro level, the era of ‘easy money’ has come to an end and the bill is coming due.
To summarize: Over the past handful of years, our industry and the clients we serve have navigated a series of challenges ranging from Covid, overblown valuations, rising interest rates, material layoffs and now a banking crisis. And thus far, 2023 is proving to be yet another year bringing unforeseen challenges that make our outlook somewhat murky for the balance of the year and beyond.
Which executive roles are on the rise — and why?
We’ve seen a marked increase in the number of CEO/President, Chief Financial Officers as well as GTM leadership roles. This is reminiscent of trends witnessed nearly 20 years ago post the dot-com bust, but not what we experienced post the 2008 Financial Crisis.
- What we’re seeing today are a number of founders and CEOs that have weathered the largest pandemic in 100 years and are now navigating formidable economic conditions who are either electing to step aside for more experienced CEO leadership, or are looking to hire strong #2s to partner with them in building their business in these challenging times.
- With regard to Chief Financial Officers, the need for financial stewardship and a steady hand on the tiller is heightened in challenging macroeconomic conditions. The focus for many growth-stage companies is on making sure they have the right financial leadership in place to extend runway, manage costs, optimize margins, and proactively anticipate what is around the next corner. As a result, the CFO hiring profile has rightly changed from “we need a person to get us ready for an IPO” to “we need a thoughtful, strategic financial leader to guide us through the storm.”
- Like in past downturns, GTM leadership (CRO, VP Sales) projects are spiking relative to other functions as well. Growth and revenue are top priorities for earlier stage startups as well as growth stage technology companies. As such, many companies — across sectors — are making moves to uplevel their sales function to help reinvigorate growth in very challenging conditions.
On the other end of the spectrum, we’ve also experienced the slowdown in certain functions in terms of search activity volume. One area we’ve witnessed this is post sales / customer support. Over the last few years, post sales has been one of the most active areas with the industry transformation to SaaS, subscription, and consumption pricing models — and the need for expertise in areas such as utilization, net retention, deployment and upsell / cross sell opportunities. Recently a number of Chief Customer Officers and Vice Presidents of Customer Success have reached out about their roles being eliminated and the function being embedded within sales (versus its own department) as companies pare down certain functions and/or divisions. Our view is that this could be an anomaly and is shortsighted, making it an optimal time to recruit top tier post sales executive talent.
Is it still a candidate’s market? What are candidates looking for from prospective employers? Are there any trends you’re seeing that will have an impact in 2023 and the years ahead?
From our perspective, the market is in an interesting state of balance that seems to be a function of the specific circumstances of a company’s prospects, the specific type of hire, and the candidate’s unique personal situation.
For companies that are profitable, have healthy balance sheets, and focus on resilient sectors with product offerings that are considered ‘oxygen’ versus ‘vitamins’, the opportunity to hire top grade executives is as good as it’s ever been due to the considerable increase of this talent pool in the last year. Factors such as capitalization challenges, slowing growth in a number of sectors, and layoffs in both smaller and larger companies alike have led to an expansion of what has been a very tight market for executives over the last few years. Conversely, if a company finds itself contending with any of the aforementioned related challenges, then a candidate has the stronger position within the recruiting process.
With regard to the candidate community, one theme we’re seeing over and over again is — the depth of diligence from sophisticated candidates in today’s environment is at a level we’ve not ever seen. Specific candidate diligence ‘asks’ include historical Board materials, financials including cap table and strategy docs, operating plans, and forward looking pro forma models. In fact, the customary expectation on the part of candidates today is that a ‘data room’, or something of the like, will be set up to provide such information and this request is coming much earlier in the search process. We’re unsure where this goes longer term, but the expectation is that this becomes standard operating procedure for the balance of 2023 and into 2024, and our opinion is that the rigor and discipline that this creates within a thorough search process only helps the candidate and client alike.