The demands of black economic empowerment (BEE) and affirmative action are putting pressure on the executive search market. The industry is at the cutting edge of transformation in the workplace because it interacts with companies as they grapple with equity employment while tackling the need for change itself.
Transformation of the industry has become an important issue. The mining and banking sectors have embarked on sectoral charters that have a trickle-down effect, with mining companies and banks, among others, insisting that their suppliers also have a BEE profile.
For companies to get work from parastatals and private-sector firms, which are increasingly applying government's broad-based BEE balanced scorecard, equity partnerships are essential. The scorecard measures the totality of BEE in a firm or industry, through ownership, affirmative action, affirmative procurement and corporate social investment. It is central to the framing of the various industry charters, and companies that do not comply stand to lose business.
The executive search industry has lagged behind in transformation and present initiatives have been implemented because of the realisation that it makes "good business sense", says Woodburn Mann Equity Partner MD Simpson Nondo.
"Change is taking place as clients increasingly demand it. Empowerment scorecards call on companies to support BEE through procurement opportunities, and recruitment services fall under procurement," he says.
One of the problems is the lack of a local professional body regulating the industry. There are low barriers to entry and anyone can set themselves up in the executive search business. One reason why there is no representative body for the executive search industry is the absence of clearly defined strata in the industry. Only a few companies meet the criteria for membership of the international Association of Executive Search Consultants, which has a global code of conduct.
"This ad-hoc set up is detrimental to the industry. It would be good for the industry to change and become more structured," says Chris van Melle Kamp, a partner at international executive search firm Spencer Stuart, which also has its own internal code.
Despite the lack of a local representative body, there has been some discussion about the need for an industry charter. But it is still early days and issues such as whom a charter would govern and whether it should be broader than the recruitment industry to cover human resources and small consultancies have not been resolved.
The industry might have started later than others, but it is in catch-up mode. A number of empowerment negotiations are under way, including one involving Heidrick & Struggles, which is "close to a deal".
Woodburn Mann has already set up Woodburn Mann Equity Partners with Nondo, who owns 51%. Nondo owned a small agency for five years before this and says he was looking for "a big brother, while Woodburn Mann was seeking representation.
"Getting together made business sense for both parties," says Nondo. "Success in this industry is driven by relationships. Leveraging off this partnership provides me with exposure to the big league and global best practice. Such a partner was bound to be one of the traditional established firms. Executive search competence and skills are acquired over time."
Spencer Stuart is dealing with transformation by bringing people onto their team. About 70% of the firm's placements are previously disadvantaged people and transformation within the company has been part of the organic growth that has come with this diversity, with partners being brought in at management level, says van Melle Kamp.
"In this industry, our economic assets are our revenue. The acid test for the transformation of search firms will be the equitable sharing of fees with partners, which we do," he says.
