Difficult Road Ahead As Heidrick Starts Its Search For A New Leader

A week after the surprise resignation of its chief executive Piers Marmion, Heidrick & Struggles International was in "turmoil," say people familiar with the firm. The Chicago-based executive recruiting company is trying to hold onto a number of top recruiters who are concerned about its leadership and direction, these people say.

Mr. Marmion resigned last week less than a week after word first surfaced that he was under pressure to go. In a conference call, he said he wanted to spend more time with his family and that it was time for him to relinquish his post after 19 months of transforming the firm through a difficult period. "Now I believe the prudent course is for me to pass the baton to someone who can push the business forward without the excess baggage of radical change," Mr. Marmion told analysts.

Heidrick observers say Mr. Marmion, an intelligent, articulate executive, didn't have the full support of the board or from some influential senior recruiters. They say he wanted to remain in his post. Only a day before his announcement, Mr. Marmion sent a voicemail to employees assuring them he was still in charge.

In an interview, senior chairman Gerard R. Roche said that Mr. Marmion's resignation took him by surprise. "It was Piers' call," Mr. Roche said. "He didn't resign out of any pressure." Mr. Roche also hotly disputed that Heidrick was troubled or seen anything but "normal" recruiter turnover in recent weeks. He said there's always an uptick in departures after bonuses are paid in March and that the firm had completed or was working on a number of large assignments. "Our financials are sound, our management structure is sound," Mr. Roche said. "Turmoil and massive leaving is nonsense."

Some of Mr. Marmion's detractors believed he wasn't fast enough in bringing down costs and making management changes, such as replacing David Anderson, the former chief operating officer and head of North America. Others say Mr. Marmion was too fixated on reducing expenses and didn't do enough to market the firm. They say Mr. Marmion was too distant when some recruiters needed reassurance and that morale has suffered, especially in recent weeks when a number of top recruiters departed the firm, including David Barrett and John de Regt. Mr. de Regt, whom one person described as a "premium recruiter" in the industrial sector, switched to Spencer Stuart. Mr. Barrett, who specializes in asset management assignments, joined veteran recruiter Henry Higdon to form Higdon Barrett LLC. " It was death from 1000 cuts," says one person. "It was layoff after layoff."

Only last month, Mr. Marmion announced he was cutting 236 jobs and closing 14 offices. Mr. Marmion said "barring a cataclysmic drop in the market," those would be the last cuts for a while. "It is now time to direct the lion's share of our energies outward to clients, and to revenue enhancement opportunities," he said.

Some Wall Street analysts felt he made great strides in slashing bloat and overhauling the firm's governance, compensation structure and senior management. Outside investors had grave concerns about these areas when Mr. Marmion took the reins as the industry went into freefall. The outsiders saw Heidrick's expenses outstripping its revenue stream, which dwindled as hiring in tech and financial services dried up.

With the firm's stock price languishing, Mr. Marmion cut costs – overall about $200 million from the firm's budget. He reduced the Heidrick workforce by about 40 percent from a peak of 2,400 employees and streamlined his management team. The firm also shuttered or consolidated about 30 offices and it tied recruiter pay-outs more closely to the collection of revenues. In addition, since last September, Heidrick saw outside directors take the majority position on its board. Some critics felt the board was too insider-heavy with recruiters who were more interested in preserving compensation than protecting investors. "Piers did a commendable job of getting the firm right-sized and profitable and getting some things done on the compensation side," says Mark Allen, an analyst for Sun Trust Robinson Humphrey. (Mr. Allen doesn't own shares in the company).

Who will lead the firm is difficult to say. Mr. Roche was a logical choice to head the firm on an interim basis. The 71-year-old Mr. Roche is a former Heidrick chief executive and known for his personable style. "This firm needs someone with heart and soul," says one recruiter. "To me Gerry is exactly what the firm needs right now."

But Mr. Roche is well known to prefer recruiting over management responsibilities. He will lead the search for a new CEO, the firm says.

Several people familiar with Heidrick say it should promote someone from the inside. But others say Heidrick then risks alienating outside investors by doing too much to satisfy the firm's recruiters. "If they go to an outsider, they risk getting someone with limited internal relationships who may try to expand on things Piers was trying to achieve," says Adam Waldo, an analyst for Lehman Brothers, adding that "an insider might rescind some of Piers' changes." In the analysts' call announcing his resignation, Mr. Marmion has said he didn't expect his changes to be overturned.

Among the names being floated earlier this month were Brian Sullivan, the founder of Sullivan & Company, Joie Gregor, who replaced Mr. Anderson as president of North America earlier this year, and Tom Friel, a vice chairman of the firm. Mr. Sullivan was considered a candidate two years ago. Ms. Gregor is well-respected as a recruiter and for her decisiveness. Mr. Friel is a former board director who helped establish the firm's technology practice. He and Ms. Gregor get along well, said one person.

Whoever takes over faces a continued uphill struggle, with the slumping economy despite pressure for publicly traded companies to keep earnings up. "Whoever takes over as CEO over the longer term will be between a rock and a hard place," says Mr. Waldo.

Bert Hensley believes he's found a way to do faster, better searches by applying the principles of Six Sigma at Los Angeles-based Morgan Samuels.

Six Sigma is a mathematical approach to management that requires companies to measure and analyze everything they do. Its proponents, who include former General Electric chief executive Jack Welch, say it enables corporations to quickly determine where they are falling short and to motivate employees to reach lofty goals.

Some executive recruiters have adopted parts of this philosophy, such as recording contacts with clients and candidates. But Mr. Hensley, a former Korn/Ferry partner who is Morgan Samuels' chief executive, is going farther – institutionalizing Six Sigma throughout his firm of 13 recruiters.

So far the results have been promising. Last year, Morgan Samuels' revenues dropped just five percent, well below the average 18 percent decline reported by Hunt-Scanlon Advisors in its annual ranking of the top 25 U.S. search firms. Morgan Samuels placed 25th on revenue of $4.7 million. It was the firm's first appearance on the list since Mr. Hensley took a controlling interest in the company six years ago. This year, the company's revenues are up about 20 percent.

Mr. Hensley says clients have appreciated his recruiters' thoroughness in scouring the market for talent. Shortly after acquiring his firm, he created a computer template for categorizing about 200 different types of interactions that may occur during an assignment. When recruiters finish a call, they are required to check appropriate message fields. Each week they distill the information into progress reports. Failure to complete these tasks or to meet certain standards may result in financial penalties – called "dings" by one Morgan Samuels recruiter – ranging from hundreds to thousands of dollars. Yet the firm also rewards employees for helping the firm in a variety of ways. The money is added or subtracted from bonuses.

Skeptics say search is an art based on intuition, and that keen record keeping and a high volume of calls don't guarantee good hires. Even Mr. Hensley says his philosophy isn't for everyone. But he says the chronicles help Morgan Samuels maintain a fresh supply of data on companies and executives. That enables the firm to reach out to nearly triple the number of candidates in about one quarter the time of other firms. Mr. Hensley says his firm takes 51 fewer days to fill a position than the industry average but has a 95 percent completion rate. One client, Capital One, gives Morgan Samuels high grades. "They come out of the gates, partner with clients and stick with searches better than anyone I've seen," says Jim Reo, manager, executive recruiting for the financial services company.

The life of Riotto-Jones executive recruiter Alan Starkie reads like something from fiction. The 45-year-old Mr. Starkie is best known for writing a tell-all book about Sarah Ferguson, the Duchess of York. He had been a trusted friend of Ms. Ferguson and the royal and civilian jet-setters who surrounded her through much of the 1990s. Prior to that, he'd jumped out of airplanes for the army during the invasion of Granada, helped overthrow the dictatorship in Panama and served in the CIA.

These days Mr. Starkie lives a quieter life recruiting for New York-based Riotto-Jones. He uses his network of high-profile connections to find private banking officers and managers, as well as the odd chief executive. The author of four books, including Fergie Her Secret Life, he has also put his writing skills to good use in recruiting, publishing several articles on private banking trends. His latest article considered how companies could measure and predict the success of people selling wealth management products.

One client, Kenton A. Thompson, praises Mr. Starkie's ability to understand his candidates' needs. The former president of Key Bank's private banking group said Mr. Starkie found a high-quality trust manager for one of the bank's less desirable locations in Southern Ohio. "It wasn't exactly a garden spot," Mr. Thompson says. "Alan was able to put himself in the candidate's shoes."

After graduating West Point in 1979, Mr. Starkie served in the elite airborne Ranger and special forces units. He was among the first soldiers to land in Granada, whose Marxist regime had irritated the Reagan Administration. In the late 1980s, he collected military intelligence, first as a Green Beret in Panama and later for the CIA. He left public service in the late 1980s to boost his income. Based initially with a British company, he developed a bond with John Bryan and joined the businessman as a partner at Oceonics Group, a London-based financial services, construction and real estate development company.

Mr. Bryan would make the front pages of the English tabloids for his relationship with the Duchess of York, while Mr. Starkie became a close confidante of both. The affair ended unhappily amidst financial and personal disagreements and the three friends grew estranged. Ms. Ferguson unsuccessfully tried stopping the publication of Mr. Starkie's book, although they have subsequently become friendly again, says Mr. Starkie.

Mr. Starkie joined Riotto after a recruiter and industry observer suggested that Mr. Starkie's personal contacts and personality were well-suited for executive search. He recently placed an executive in a key management role in part after learning that she had grown up on a farm and risen early mornings to complete her chores. Mr. Starkie says this told him the woman would thrive with a Portland company that was looking for a hard worker to coddle clients. "That sort of background research is very similar to what I did with the CIA and in writing," he says. "You're constantly trying to figure what makes people tick."

Integrity Is Most Important For Executive Recruiting Firms

While most of his contemporaries retired long ago, William Willis has continued recruiting and seeking new business. The 75-year-old founder and managing director of Greenwich, Conn.-based William Willis Worldwide entered the search business in the 1960s. He considers himself a generalist but with special expertise in research and development executives for large food and beverage companies. While Mr. Willis has outlasted many of his clients and competitors, he believes his years of experience give him an advantage over more junior recruiters. In this interview with Executive Search Review editor-in-chief James Peter Rubin, he looks back at his career and compares the most recent executive recruiting slump to past downturns.

ESR: In your four decades as a search consultant have you ever seen worse conditions?

Willis: The current situation in executive search is the worst I've seen in 36 years. I've seen downturns in the 70s, 80s and 90s but nothing ever as dramatic as this globally. In the 1980s, business was down but it didn't vanish. In the 1970s there was a downturn in Wall Street caused by weakness in the national economy. Financial services, the investment business dried up. At other times, some sectors were weak but not others. I'm sort of reinventing myself and doing some marketing, which I haven't done much of for a long time. I attended this food industry conference recently. I talked to three or four clients who have hiring freezes but need people. It's all the uncertainty we're dealing with. People are keeping their risk levels and overhead down, so they're hiring no one. I know companies who need people and have been getting along without them temporarily. They can't do that forever. One of our clients has hired a couple of senior people. They said, 'if we don't hire any people, we're not going to have any new products in a few years.'

ESR: Do you know search consultants who are older? What are the advantages and disadvantages of being 75 and doing searches?

Willis: I have a friend in Chicago who beats me by two years but he said he would take a sabbatical so I could catch him – Dick Cronin. No one can copy your experience when you're talking to a client or prospective client. I know a lot about getting and keeping clients. The disadvantages are that a lot of the people who I've known over the years are gone – died or retired. People in their 30s and 40s, I know a lot of them, but they're more apt to deal with their contemporaries.

ESR: Do some companies hold your age against you?

Willis: Not that I'm aware, but they probably wouldn't tell me if they did.

ESR: Heidrick & Struggles chief executive Piers Marmion just resigned and there have been a number of leadership changes at some of the larger executive search firms over the past two years. What are the qualities necessary in running a search firm?

Willis: Integrity has to come first. You certainly have to have someone with a solid record of accomplishment who is respected by the people in the firm and also by people in the profession and people outside the profession.

ESR: What principles have you followed in running your own search firm?

Willis: Setting high standards. I've always prided myself on my integrity. We were asked every once in a while to bend the rules. Prospective clients would say, 'we know you're a retainer firm, but would you try something on contingency?' I once had that presented to me by a large firm. They said, 'we have 35 searches if you prove to us you can do one well.' I said, 'we don't work on a container.' That was in the depths of one of the earlier recessions – in the 1970s. We never have and never will do anything on a contingency. We had no doubts we could have filled the first assignment. When you compromise your principles, you give up the lifetime belief in integrity and doing what's right. At the recent conference of the Association of Executive Search Consultants, people alluded to loosening up their standards because of the market conditions.

ESR: Do you believe in group discounts?

Willis: If you're asked to conduct a number of searches simultaneously, I can understand that.

ESR: Have clients' demands changed?

Willis: They've become more sophisticated at spilling out what they need, but their needs are the same. It's harder to get people to relocate than it used to be. But everyone is looking for appropriate experience, good people skills, leadership skills. For a Ph.D. scientist, maybe you don't care about the leadership skills.

ESR: Do you appreciate what you've accomplished as a search consultant more than you did nearer the beginning of your career?

Willis: I appreciated it then. But I've been able to reflect on accomplishments, on changing people's lives. I was at another conference last weekend. One of the vice presidents of research and development at a major food company was a professor and chairman of one of the leading food science departments in the world when I placed him at General Foods and he ended up senior vice president and then he retired from all that and now he's back as a VP. My recruiting him changed his life dramatically. He told me how much he appreciated it. I had another person who had the same experience. He had been the chairman of a department at Puget Sound and it never occurred to him to go into industry and he ended up being senior VP at Kraft. It's nice to have a personal side to it.

ESR: What's your method for finding people?

Willis: Instincts are part of it once you've found the people. We use the network of people we know. I've had people say I have the largest Rolodex in existence. Arthur Levitt, I know him from previous times. I went up and had a nice talk with him afterward. The chief executive of Colgate-Palmolive. He said, 'how are you Bill?' We had a person on a panel who was a retired chairman of Sears and I play tennis with him during the summertime in Maine.

ESR: How did you get involved in executive recruiting?

Caldwell Partners Net Income Rises 62 Percent In Q2

Toronto-based executive recruiter The Caldwell Partners International reported revenues of $3,687,000 for the second quarter ended February 28, 2003, a one percent decline from $3,734,000 for the same period a year earlier. Net income for the quarter was $561,000, or 3.3 cents per share, compared to $346,000, or 2.1 cents per share, a year earlier. "The quality and strength of our culture and the determination of our people combined with The Caldwell Partner's reputation and brand, which they have helped build, are to be credited with the firm's achievements," said C. Douglas Caldwell, chairman and founder of Caldwell Partners. "Every business person recognizes profits are hard won these days."

Korn/Ferry Creates Internal Audit And Compliance Sector

Korn/Ferry International has launched its internal audit and compliance practice in response to the increasing demand for experienced audit management. Over the past year, the Los Angeles-based firm has completed more than 30 senior audit placements with Fortune 500 companies and top 10 accounting firms. Co-heading the new practice are Chuck Eldridge, a senior client partner based in the firm's Atlanta office, and Ellen Williams, a senior client partner from the firm's Stamford office. "The emphasis on compliance has grown tremendously with the more stringent government requirements and the passage of Sarbanes-Oxley," said Paul C. Reilly, chairman and chief executive officer of Korn/Ferry International. "Several of our major clients are restructuring their internal audit function, and thus, we are expanding our already significant infrastructure to include management search in senior audit with dedicated resources and consultant expertise."

Dale Winston Receives Gardner Heidrick Award

Executive recruiting veteran Dale Winston received the Gardner W. Heidrick Award at the annual conference of the Association of Executive Search Consultants. Ms. Winston, the chief executive of New York-based Battalia Winston International, becomes just the second woman to win the award in its 22-year history. "I'm incredibly optimistic and proud to be part of a profession that's in its adolescence, that will continue to grow and add value," Ms. Winston said in accepting the honor. The Heidrick award, named for one of the founders of Chicago-based Heidrick & Struggles, recognizes outstanding contributions to the executive search profession. Previous winners have included such industry stars as Spencer Stuart's Thomas J. Neff and Russell S. Reynolds Jr., the founder of Russell Reynolds Associates and now chairman of The Directorship Search Group. Ms. Winston entered the search profession in the late 1970s. In 1983, she joined Battalia and Associates, which was then a three-person boutique. The firm ranked 13th in the U.S. last year on revenues of $12.6 million, according to Hunt-Scanlon's annual survey of executive search firms. Battalia Winston now has about 60 employees, including 25 search consultants, and counts Corning, Deloitte & Touche, Disney, McGraw-Hill and Sony among its clients.

Executive search firm Heidrick & Struggles International has placed Joe Gromek as president and chief executive officer of The Warnaco Group. He will succeed Tony Alvarez, who has served as president and CEO since November 2001. Mr. Gromek most recently served as president and chief executive officer of Brooks Brothers. Warnaco is a manufacturer of various men's and women's clothing under various owned and licensed brands.

Russell Reynolds Recruits CFO For Community Bank

New York City-headquartered executive search firm Russell Reynolds Associates has placed Mark E. Tryniski as executive vice president and chief financial officer of Community Bank System. The appointment is effective as of June 1, 2003. Mr. Tryniski currently serves as a partner in the Syracuse office of PricewaterhouseCoopers. Community Bank System is a registered bank holding company based in DeWitt, NY with $3.4 billion in assets.

Cook Associates Places Board Member At Patron

Chicago-based executive search firm Cook Associates has placed Anthony J. Carbone as a member of the board of directors at Patron Systems. Mr. Carbone has held senior level positions for Dow USA and serves on the board at Dow as a chairman of the environmental, health and safety committee and as a member of the finance committee. In addition to Dow, Mr. Carbone also serves on the board of directors and executive committee of Rockwell Collins, a $3.6 billion manufacturer of avionics, communications, and in-flight entertainment systems for commercial and military applications. Patron Systems is a development-stage information security company that provides security services and technology products to global enterprises.

Major, Hagen & Africa Places General Counsel At Synopsys

Anna Marie Armstrong and Carl Baier of the San Francisco Bay Area offices of legal search firm Major, Hagen & Africa have recruited Rex S. Jackson as general counsel of Synopsys. Mr. Jackson previously served as president and chief executive officer of Atlantes Services. Synopsys, based in Silicon Valley, is a leader in electronic design products and services.

Arcus Group Places Scott Dixon At Lanner

Executive search firm The Arcus Group has recruited Scott Dixon Smith as president of Lanner. Mr. Smith formerly served as vice president worldwide sales and marketing of HOLOSOFX, (recently acquired by IBM) an international software developer and manufacturer of Business Process Management software. Established in 1996, Lanner is a leader in business performance improvement and simulation-enabled business process management and optimization software and services.

Spencer Stuart Recruits Kodak President And COO

Executive search firm Spencer Stuart has placed Antonio M. Perez as president and chief operating officer of Eastman Kodak Company, according to a story reported in The Wall Street Journal. Mr. Perez formerly served as president and chief executive officer of Gemplus. Kodak is engaged primarily in developing, manufacturing and marketing consumer, professional, health and other imaging products and services.

Levin & Co. Places President And CEO At Archemix

Executive search firm Levin & Company has recruited Dr. Errol De Souza as president and chief executive officer of Archemix Corp. Dr. De Souza most recently served as president and chief executive officer of Synaptic Pharmaceutical Corporation. Archemix Corp. is a privately held drug discovery and development company based in Cambridge, Mass.

Conboy, Sur Recruits Gary DiOrio For Intershop

New York City-based executive search firm Conboy, Sur & Associates has recruited Gary DiOrio as president, Americas for Intershop Communications AG. Mr. DiOrio previously served as co-chief executive officer of Plaunt AG. Intershop Communications AG is a Jena, Germany-based provider of e-commerce solutions for enterprises automating marketing, supply chain and sales using Internet technology.

Korn/Ferry Recruits CEO For Dollar General

Korn/Ferry International has placed David A. Perdue as chief executive officer of Dollar General Corporation. Prior to serving as CEO of Pillowtex in July 2002, Mr. Perdue was executive vice president of Reebok International and president and CEO of Reebok Brand. Dollar General currently operates 6,192 neighborhood stores in 27 states with distribution centers in Florida, Kentucky, Mississippi, Missouri, Ohio, Oklahoma and Virginia.

EDITORIAL