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Search Firms Feel Chill of Recession

Search Firms Feel Chill of Recession
Executive Headhunter Shops Cutting Back
By Anita Huslin

Millions of Americans have lost their jobs, tens of thousands of them in the Washington region, many in the financial services and information technology fields. And now, the industry that traditionally has been fueled by workplace turnover and executive departures is feeling the repercussions of the economic downturn in its own ranks.

Over the past month, in response to shrinking revenue and declines in demand for their services, some of the nation's top executive search firms have announced or quietly begun implementing plans to trim their workforces, consolidate offices and move their services toward more business consulting work.

In the D.C. market, boutique firms with high-rent offices are downsizing to reduce expenses and meet corporate cost-cutting directives. Firms are luring top headhunters from the competition and trimming those who lack the active Rolodexes to keep clients coming in.

"The industry is on its back, floored," said John W. Franklin Jr., president and founder of JWF Advisors, a D.C. consulting firm that specializes in helping executives make career transitions. Search firms, Franklin said, "are all taking out the bottom fourth of their people."

It can be good for business to cull less productive workers and upgrade staff. But when public firms are forced to think in terms of quarterly earnings, Franklin suggested, they may also have to pass up opportunities to bring on new talent and build for the future. Korn/Ferry International, the largest publicly traded executive search firm in the country, led the search that yielded a successor to former New York Federal Reserve president Timothy F. Geithner, last month. At the same time, the firm's overall number of searches declined in the second quarter of '09, its fee revenue dropped and the firm announced it would lay off 15 percent of its employees. Locally, company officials said they have trimmed several of its search partners who work out of its K Street and Reston offices.

"We haven't done a dramatic reduction, yet," said Nels Olson, who manages the local Korn/Ferry offices, which employ 28 consultants. "We're not saying we wouldn't go through that going forward. We're as sensitive to the overall economic impact on our business as any other is." Earlier this year, Korn/Ferry announced a shift in focus to providing more executive consulting services and mid-level and interim placements.

At one of Korn/Ferry's top competitors, Heidrick & Struggles, the second-largest publicly traded U.S. executive placement firm, searches dropped 20 percent more than expected at the end of last year, and in January the company announced that it would seek to save about $30 million by closing and consolidating some of its 21 U.S. offices and by cutting 12 percent of its workforce. At the same time, the firm is restructuring its practice to beef up its executive advisory services, a process that is prompting it to take a $20 million write-down.

Read more >> washingtonpost.com

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