This Q&A featuring Nate Pearl, Partner and Head of SPMB’s Digital Health, Wellness, and Life Sciences Practice, was originally published by Hunt Scanlon in their Healthcare and Life Sciences Recruiting Special Issue in January 2022.
Can you discuss the current supply and demand curve for healthcare/life sciences executives?
Over the last couple years, the COVID-19 pandemic has put a spotlight on the healthcare and life sciences industries and highlighted many of their inefficiencies and shortcomings. Every established company in the space has been forced to rethink how they do business and examine how they can improve products, services, and operations to provide quality care in a rapidly evolving healthcare environment. To do that, many companies and institutions have looked outside of their organizations for leadership that can bring fresh perspectives on innovation, healthcare reform, and technology to help determine the best ways to adapt and stay competitive in a world that is now virtual-first, more data driven than ever, and becoming ever more consumer-centric when it comes to healthcare experiences. At the same time, we are also in the midst of a remarkable boom when it comes to venture funding in healthcare. In 2021, there was $29.1B raised by U.S. digital health companies across 729 deals. That’s almost double the amount from 2020, which had previously been a record as well. Many of those companies are earlier stage and need to build out entire executive teams, or bring in transitional leadership as they navigate various phases of company growth. So, between the larger and more established organizations looking to add leadership that can inject innovation into their businesses, and the immense volume of smaller companies that are building teams to help them grow and scale in a highly competitive market, the demand for executive talent in healthcare and life sciences is off the charts right now.
What impact has COVID-19 had on the sectors?
COVID-19 has dramatically accelerated the adoption of technology across all segments of healthcare and life sciences. Take telehealth for example — a McKinsey report notes that as of July 2021, telehealth utilization had stabilized at a level 38x higher than before the pandemic. That’s an immense increase and it happened for three reasons – the pandemic 1) increased consumer willingness to use telehealth; 2) increased provider willingness to use telehealth; and 3) prompted regulatory changes enabling greater access and reimbursement for telehealth services. The result has been the emergence and rapid growth of an overwhelming number of telehealth companies and services. This same phenomenon also appears to be happening in other parts of healthcare as we see similar adoption of technologies, such as connected devices, remote patient monitoring, digital behavioral change programs and more. The rapid adoption of these technologies by established healthcare organizations, as well as the formation of new companies to address these needs in the market is what has led to the extremely high demand for senior leadership within the category.
What has changed in how you work with your clients to fill senior roles?
With some clients, when they decide to kick off an executive search, they aren’t necessarily prepared to do so. In many cases, they haven’t formulated a streamlined interview plan, don’t have a scorecard that all stakeholders are aligned on, and often have not done any pre-calibration to put themselves in a position to quickly and confidently say ‘yes’ when they see someone great. In this market, that’s a problem. It’s an all-out war for talent right now. Top candidates are often interviewing with a handful of companies and weighing multiple offers. For those reasons, it’s just not good enough to be a great company and tell a compelling story. To get the best talent, you also need to run a flawless interview process and know what you’re doing when you get to the offer stage. So while we’ve always taken a very consultative approach to working with our clients, recently we’ve become even more instructive at the beginning and end of search processes. We spend a lot of time upfront helping clients formulate an interview process that is set up for success. Then when we get to the finish line, we do a lot of work to educate and guide our clients around issues like market compensation, candidate expectations, and circumstantial factors, all of which need to be thoughtfully considered when putting together an offer.
Do you think these changes will be permanent?
Absolutely. The adoption of new technologies that are rapidly forcing the industry to evolve has always been inevitable. In fact, we were already starting to open that door before COVID-19 happened. All the pandemic did was definitively kick it open and accelerate the process, and now I don’t see a way or a reason to reverse it. I believe the future of healthcare will be one that is not just enabled by technology, but driven by it. It will be about integrating data, virtual care models, and consumer-centric experiences to help people manage their health more independently, efficiently, and proactively. That is a massive shift from what traditional healthcare has looked like and to get there, companies are going to need to continue hiring leaders who are innovation-oriented, willing to challenge the traditional models, and who bring experience from across various industries. That talent is scarce and in high demand, which means the market is going to remain extremely competitive for a long time. That’s why I fully expect recruitment firms to become even more integral as companies will need experienced shepherds to guide them through the complex and competitive talent landscape ahead of us.
Discuss some of the challenges that you and your firm have been facing this past year.
Our greatest challenge over the last year has been keeping up with the demand for our services. SPMB is different than other firms in that we take a very partner-centric approach to search execution, prioritizing high-quality execution above search volume or number of placements. For those reasons, we work on a relatively low number of searches at a time and closely monitor that search load. That has allowed us to do excellent work for our clients but it has also been challenging over the last year because we’ve had to turn away a tremendous number of potential clients we would have otherwise loved to work with. While it’s tempting to hire more partners and staff so we can absorb that demand, we’ve resisted doing that because we don’t want to dilute our brand or our work product. But it’s still tough to turn away prospective clients, especially when we know time is critical for them and that as a technology-focused firm we are uniquely positioned to help those organizations in their mission to transform their businesses with technology. With that in mind, the best advice I have for a company considering an executive search is to begin evaluating search firms far in advance. In many cases, we’re booking searches months in advance right now. So it’s important to have those conversations early.
What do you see moving forward for executive search firms in the next six to 12 months?
I expect the torrent of activity to continue, if not accelerate. 2021 was an explosive year for venture funding in digital health. Much of that investment was into small, early-stage companies. Those companies are now at the phase in their growth where they need to start building out more robust and expansive leadership teams, which will make the executive talent market even more competitive. All the while, we are also seeing a tremendous amount of consolidation in the sector as incumbents try to insulate themselves from competitors and consolidate all the various point solutions that have emerged over the last several years into larger platforms. That will bring a need for innovative leadership in those larger organizations as they develop strategies to best integrate and deploy those solutions in an ever-changing healthcare landscape. So things are not going to get any calmer in the talent marketplace and the role of an executive search firm will continue to be about finding ways to cut through the noise when recruiting top talent, but also to be a consultative thought partner to clients as they try to navigate the most competitive talent market in history.