Unit 3 - Heidrick & Struggles Case Study GB520 Strategic Human Resources Management Professor Andrew Klein May

21, 2013

Introduction

Heidrick & Struggles International, Inc. is one of the largest U.S. recruiting firms. The company has approximately 380 headhunters fillings positions such as Chief Executive Officer (CEO), Chief Financial Officer (CFO), director, and other high level positions for companies. It is organized into search groups specialized by industry and operates in more than 25 countries in North America, Latin America, Asia Pacific and Europe. Temporary placement, management assessments and professional development services are also provided by Heidrick & Struggles International, Inc. In 2007, the companys revenue was at an all-time high and all measures of productivity were up. Despite the rosy picture, there lays a simmering problem of massive upheaval because of the demographic opportunities, shifting of customer needs and challenges posed by technology driven alternatives. History and Issues This executive search business emerged as a result of management consulting in the 1940s. By the late 1940s, six of the eight leading firms in the world were founded. In the 1990s the industry was fairly small and private partnerships were controlled with high fixed costs. The broken industry was dominated at the high end by five global firms in 2008. A variety of regional and boutique players competed in certain areas with these industry leaders and then were followed by thousands of smaller search firms. The five market leaders separated themselves from the smaller firms on the basis that their ability to serve multinational clients on a global basis and by their focus on specialist and executive positions (Eccles and Lane, 2009). Gardner Heidrick and John Struggles founded Heidrick & Struggles International, Inc in 1953 and quickly grew the business to serve national clients in 1957 and international clients in 1968. By the 1980s Heidrick & Struggles had eleven offices in U.S. and Europe. All search consultants employed had never met as a group and were considered generalist even though they

had no specialization by practice. In 1983, Heidrick & Struggles International was set up as a separate entity to manage European operations, however later merged with the domestic operations Heidrick & Struggles, Inc. Heidrick & Struggles characterized itself as the worlds premier provider of senior level executive search and leadership consulting services and focused on building the best leadership teams in the world. Managers of the company believed that emphasizing the senior level search business created access and influence with the top decision makers, increased the probability of downstream work, maintained and strengthened the Heidrick & Struggles brand, established barriers to entry, generated higher fees per search and attracted consultants of the higher magnitude. When Kevin Kelly took over as the CEO of Heidrick & Struggles International, Inc. there was little in the way of structure and systems either to help manage the flow of information and issues upward to the CEO or across the firm or to organize and carry out policy and process implementation (Eccles and Lane, 2009). The firms strategy was a document with little solid impact, not a set of decisions or an action plan. After becoming the CEO, Kevin Kelly only relied informally on a small number of individuals in the firm on strategic matters. Even though Kelly became to understand a strategic vision of his own, the consultants of Heidrick & Struggles had not yet fully embraced the new direction. Consultants received a reasonable base salary and were able to potentially earn a bonus based on individual billings. The company used a formula including the amount of business created (source of business (SOB)) and the amount of business executed (FEE). The individual employees annual compensation included accrued SOB and FEE credits. The compensation system makes the consultants more driven but does not have enough strategy around decisions.

The partners of Heidrick & Struggles were not used to the market and demographic developments that had evolved in the late 1990s. The developments included new entrants and technology driven services that would undermine the traditional executive search model, increased client sophistication and expectations and demographic trends that required search firms to find and evaluate management talent faster and better than before. Strategic Human Resources Management Analysis Heidrick & Struggles fell into the trap of concentrating on being the worlds premier provider and most profitable executive search firm that it ultimately failed to see the internal challenges and adapt to the external environment that was impacting the industry. When Kevin Kelly communicated a strategic vision, the consultants were resistant to the change. Strategic in training and development refers to how effective the training and development programs are in improving the way the employees perform their jobs. The better one performs the higher the productivity of the company. Employee training and development is increasingly becoming a major strategic issue for organizations for several reasons (Mello, 2001). First, there are fast changes in technology that cause increasing rates of skill uselessness. Next, the redesign of work into jobs with broader responsibilities that require the employees to take on more responsibilities , take initiative and further develop interpersonal skills to ensure their performance and success. Third, the increase in mergers and acquisitions. Fourth, the fact that employees are moving from one employer to another at a rate a lot higher than in past years. Lastly, the globalization of business operations requires that more managers understand the knowledge and skills related to language and cultural differences.

Training involves changes and changes can be deemed as threatening. Organizations and businesses can benefit from training outside of the bottom-line, general efficiency and profitability measures; they can create more flexible employees and have more holistic understandings of what the organization does and the role they play. Whereas technology will not replace key variables or judgment, peer acceptance, trust and value alignment between consultants, client boards and CEOs (Eccles and Lane, 2009). However, technology can assist in providing information faster and more thoroughly. The continuous advancement of technology can more human resource functional capabilities of clients improved to the point that many sought to much of the talent sourcing, vetting and assessments that Heidrick & Struggles has used in the past. In some cases, clients had developed their own succession planning, coaching, leadership development and performance management capabilities (Eccles and Lane, 2009). The in house skills threatened Heidrick and Struggles consultants with loss of business. In order to stay successful, Heidrick & Struggles needed to differentiate themselves from the other search firms. During 2007, in response to the internal and external challenges, Kelly began to make changes on several fronts. Complementing the executive search business with Heidricks leadership consulting capability; growing Heidricks own human capital through internal development and significantly enhanced recruitment activity, investing in technology to enhance the productivity, and maintaining a high-end brand image and creating visibility with emerging young talent were among the changes. In 2008, in order to grow the learning process more rapidly, Heidrick planned three changes, to add internal training and development for account managers, require key account managers to identify and pull other consultants into key accounts to participate in a team approach and take work on key accounts in consideration when

reviewing possible cases for promotion to a partner. These changes began to stick with the company and helped to make Heidrick and Struggles more successful. Conclusion Training and development of employees is a key strategic issue for organizations (Mello, 2011). Much of the return on investment in training and development can be difficult to measure, organizations should take a more holistic view of the training and development. Steady employee development is vital to maintain or enhance skills. Employees need to brush up on their training regularly to ensure they are aware of changes or just stay familiarized with their job. Changes in how the work is performed and the organizational contexts which work is conducted mandates that each organization conduct specific, targeted, strategic training and development initiatives in order to have continued success.

References

Mello, J.A. (2011). Strategic Human Resource Management. South-Western Cengage Learning. Chapter 9, p.396-409. Eccles, R.G. and Lane, D. (April 28, 2009.). Heidrick & Struggles International, Inc.. Harvard Business School.