Professional services firms confront both extreme peril--and potential opportunity--as their reeling clients question every bill from high-priced outside advisers.
For example, companies aren't hiring much and headhunters feel the pain. L. Kevin Kelly, chief executive officer of executive search firm Heidrick & Struggles International, says his industry's business model "is broken." Beyond the economic downturn, high-cost headhunters are losing assignments as client companies take advantage of free online networking services.
In the final three months of 2008, executive hiring contracted radically. The financial-services industry--typically one of the biggest profit generators for search firms--shed nearly 150,000 jobs, according to outplacement firm Challenger, Gray & Christmas. The sharp acceleration in job losses in the final quarter of 2008 makes it clear that U.S. businesses headed into 2009 in an all-out retrenchment mode. Up to now, the drag on economic growth from the corporate sector has been modest, but in the classic recession pattern, the main focus of the economy's downturn is now shifting from consumers to businesses.
Heidrick's database of executives has been a closely guarded crown jewel for half a century. Now websites like LinkedIn, a social-networking service for professionals, are chipping away at that business. Simply cutting costs is not enough, argues the CEO. "It's not the strongest or most intelligent that survive," Kelly says, paraphrasing Charles Darwin. "It's those that are willing and able to adapt and change."
Source: BUSINESSWEEK, February 2, 2009
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