“Looking in my rear-view mirror, I can make it disappear, I can make it disappear, have no fear.”
Aeroplane, Red Hot Chili Peppers, One Hot Minute
With 2022 in the rear-view mirror and the road ahead looking bumpy – with the possibility of loose gravel in the corners – I thought I would quickly review the past year and make some 2023 predictions for you.
Intending to provide insights that aid your decision-making process, I’ll address executive-level search volume (a proxy for growth), hybrid and remote work (what our clients are doing), and candidate sentiment (a talent mobility influencer).
Executive-Level Search Volume – An Indicator of Growth
Newly opened executive searches across all industries were down nearly 30% in Q4 2022, returning to almost pre-pandemic levels when compared to the multi-year peak experienced in Q2 2022. The uncertainty in both public and private markets – driven by rising inflation being chased by rising interest rates; the ongoing war in Ukraine and its impact on global energy and food prices; and the lingering impact of the COVID-19 pandemic – have contributed to a slowdown in growth and executive-level hiring. According to Pitchbook and Thrive, a one-quarter lag exists between public and private market fluctuations and leadership hiring.
As I write this, the U.S. Federal Reserve is rumoured to be considering a 0.25% hike instead of a 0.5% hike.
The optimist in me thinks we are tapering, China is reopening, and the days are getting longer – only good times ahead. The pessimist in me thinks the Federal Reserve has been grossly wrong before, there is a war in Europe, and it’s snowing in Vancouver. Winter is coming.
I anticipate that the Q4 2022 low of newly opened executive searches, referenced above, is the bottom of the trough. While we will not see the peak that we saw in Q2 2022, newly opened executive search numbers will remain above pre-pandemic levels, indicating growth but below the peak. My inference is purely based on the conversations that I’ve had with you, our clients. While there is uncertainty, opportunity seems to be a stronger force. The optimist won.
Hybrid Working Environments – A Card Still Worth Playing
Although most of our clients, regardless of industry, are clamoring for more return to work, remote and hybrid environments have become a currency for candidates and a cost-savings for some employers. Remote or hybrid arrangements comprised more than half of the executive-level searches we completed in 2022.
A very interesting, related statistic: searches conducted for roles with a remote work environment were completed 14% faster, placing candidates into positions more than 2.5 weeks sooner.
We are seeing a groundswell of momentum in the return to work movement and I anticipate seeing completely remote roles decline in favour of corporate hybrid mandates of at least three days per week in the office.
However, if you want to attract an A-Player and have the ability to offer a remote work alternative, consider playing the card. If you allow us to access a larger talent pool on your behalf, you may fill the search sooner.
Candidate Sentiment – The Ability to Move Talent
Over the past couple of years, the volume of new search engagements contributed to an already demographically tight market. This supply and demand imbalance contributed to an increase in executive compensation, in some cases dramatically. Very quickly, the candidate pool became keenly aware of this increase in cash compensation and individuals became more likely to answer calls from executive search firms.
The tough news is that I expect the talent pool to become tighter over the next year. I’ve been in the search business since 1997 and have experienced my share of tumultuous markets. Two things happen simultaneously during these times:
The candidate pool becomes risk-averse, driven by fear of the unknown.
Mission-critical roles (e.g. CFO) become even more sticky, driven by leadership’s fears of losing key people when they need them most.
I’m always available to discuss the above thoughts. Please, do not hesitate to reach out if you have talent growth embedded into your strategic plans for 2023, or if you just want to take the temperature of the market and chat cycling (mountain bike or road).
About the Author
Dan serves as a Partner at McDermott + Bull, based in the firm’s Vancouver office. He has 20+ years of search experience across a range of industries, including healthcare and life sciences, consumer goods, and food and beverage. In his practice, Dan partners with private equity firms and their portfolio companies along with public and private companies to assist them in sourcing and engaging key executive talent nationwide.