Silent are the headhunters: Who are you going to call when you need a new managing director? Alison Eadie explores the secretive world of the search consultants

FORGET debt collectors and insolvency practitioners - top headhunters can also claim to be leading the list of those who have never had it so good, despite the recession. Last week, the long-awaited Cadbury report on corporate governance recommended every listed company split the roles of chairman and chief executive and have at least three independent non-executive directors. Currently, there are 6,000 listed companies in the UK; that's a lot of directors to find.

Then Michael Heseltine, the President of the Board of Trade, proudly disclosed the identity of the new chairman of the Monopolies and Mergers Commission. Graeme Odgers was plucked by Tyzack Accord, the headhunters, from his present job as chief executive of Alfred McAlpine to head the MMC. For Tyzack, it was a typical success: Mr Odgers was cold-called, he was interested, meetings were held, he saw Mr Heseltine, they shook hands and the job was agreed.

And on Thursday, Norman Broadbent International was said to be searching for a new chief executive for Gateway, the troubled supermarket group. Alistair Mitchell-Innes, head of Isosceles, Gateway's owner, took over temporarily two months ago. Broadbent's appointment is yet another example of headhunters making money in these difficult times.

Theirs is a confidential, secretive world. Headhunting, or executive search, as those in the business prefer to call it, starts at salary levels of pounds 70,000 or so. Below that the market is referred to as 'selection' or 'recruitment' and the jobs tend to be advertised in newspapers.

The barriers are clearly defined - partly out of the inherent exclusivity of the business and partly out of the sense of importance the headhunters attach to themselves. Theirs is an ultra-discreet, upmarket business. They play the part to the full. Their offices are plush and luxurious, full of antiques and fine art, tucked away in mansion blocks in Mayfair and Belgravia. They dress impeccably: dark Savile Row suits, double cuffs, matching silk tie and handkerchief in the breast pocket, highly polished black brogues, for men; designer power suits for the few women.

No matter that their clients may be industrial companies with humdrum offices, and that the people they are trying to poach may wear Marks & Spencer suits and take a dim view of such extravagance.

The search industry is no longer what it was, though. Gone are the retired generals lunching likely suspects at their club and using the Army or public school old boy network to scout for business. The desire to project the new image may explain why headhunters are happy to talk about their business - current assignments excepted. Many of those who have been headhunted, however, remain coy, possibly preferring to believe their career path meticulously planned by themselves, rather than by a chance phone call.

Today's headhunters are slick, ultra-discreet, research-intensive and in great demand. Many of the younger ones are armed to the teeth with degrees, and the older ones have come from successful careers in business.

'You need to have people doing it who are as good as the candidates, not body brokers,' explains David Kimbell, managing director of Spencer Stuart in the UK and chairman of the worldwide group.

Mr Kimbell joined Spencer Stuart in 1979 after 13 years with British Leyland, latterly as overseas director of Leyland Vehicles.

Peter Breen, managing partner of Heidrick & Struggles, says the job is not about putting round pegs in round holes - that is recruitment. It is about 'adding value'.

Mr Breen joined Heidrick in 1988, after a career in telecommunications with Plessey, STC and then National Telephones, which he co- founded in 1984 and which went on to a stock market listing four years later.

A well-executed search, he says, can result in a big increase in the profit and share value of the client company. He puts executive search firms in the same bracket as prestige management consultants such as Bain, Boston Consulting and McKinsey.

Despite their undoubted importance in filling the boardrooms of Britain, the top firms are not household names. Much of their success relies on discretion. 'Although people need it, you can't go and sell search,' says Sir John Trelawny, director of Goddard Kay Rogers, whose knighthood is inherited from an ancient family complete with coat of arms.

Their best advertisement is a job quietly done with the minimum of fuss and publicity. Miles Broadbent, chief executive of Norman Broadbent International, claims to have placed 72 managing directors in his 13 years in headhunting, including Sir Colin Marshall at British Airways. 'He is a good advertisement for himself as well as for me,' says Mr Broadbent of Sir Colin.

By the same token, a placement that goes spectacularly wrong is remembered for years, damaging the reputation of the firm involved.

Retainers are almost unheard of, and each assignment is treated as a one-off project.

However, the top firms go out of their way to build relationships with client companies, since they can lead to repeat business.

The relationship benefits both parties. A headhunter has to learn a vast amount about a client's business, its method of working and its culture, before being able to recommend a suitable candidate. If that knowledge, once acquired, were not re-used, it would be an expensive waste of time.

Ian Butcher, director of Whitehead Mann, says the firm prefers to work with a relatively small client base and have long-lasting relationships. Whitehead Mann has the unusual distinction of a woman founder, Anna Mann, who has a doctorate in psychology.

'We would dissuade transactional-oriented firms from using us. We are looking for clients who would have us on a small roster. We would not expect to do every search,' Mr Butcher says.

Client companies prefer to work with a limited number of headhunters, for similar reasons. Alan Watkins, recently headhunted to the job of chief executive of London Transport, and former chief executive of Hawker Siddeley, said the time spent familiarising a headhunter with the company necessitated keeping the number of firms used to a minimum.

When Dr Watkins found himself out of work after BTR's takeover of Hawker, he contacted the three headhunters who had worked for him, and updated them on his situation. He then contacted the other top firms, and the result was the LT job. Dr Watkins says it is important to have at least two headhunters working regularly for a company, because of no-go areas. 'There are certain pools they will not fish in. If they do a lot of work for a company, they will not look for a candidate in that company.'

Headhunters are sensitive to the dangers of biting the hand that feeds them. The dilemma of what to do if the ideal candidate for a post is already employed by their most important client company is sometimes resolved by an approach to the chief executive rather than to the individual, according to both GKR and Spencer Stuart. Surprisingly, David Kimbell says chief executives often allow headhunters to approach a valued employee, because they don't want to be seen blocking the career advancement of a high-quality individual.

Conflicts of interest mean that search firms remain small and independent. The London offices of the top eight search firms each employ an average of 10 to 15 fee-earning consultants. Expansion is not a high priority. 'We don't want to become victims of our own success and have nowhere to go to fill client assignments,' Mr Breen says.

Independence is also critical. The big accountancy firms have limited their forays into recruitment to the lower echelons of the market and steered clear of executive search. They could not be seen to poach people from a company whose audit they did. Saatchi & Saatchi, in its Eighties expansion drive, looked at buying an executive search company, but decided against it. The thinking was that poaching from Procter & Gamble would put the ad account at risk.

Headhunters follow their own code of conduct, designed primarily for self-preservation. Rule one is never approach anyone you have put into a job, even if it was 10 years earlier. If that person, however, moves on with the assistance of another headhunter, he or she becomes fair game again.

Rule two is do not headhunt inside a former client company for a decent interval - two years - after having stopped working for it.

Misuse of privileged information and abuse of candidate and client confidentiality are also court-martial offences.

The industry is surprisingly watertight. 'Top headhunters have a good reputation. We've earned it. People are not nervous about talking to us,' Sir John Trelawny says.

The rewards for such discretion are considerable. Fees are high and so are headhunters' personal earnings.

The rough rule of thumb is that fees are one-third of the first year's cash compensation of the executive placed. There has been a move towards fixed fees, as clients try to keep their costs nailed down. In the frenzied days of Big Bang in the financial services sector, headhunters got a bad name for bidding up salaries to enhance their take.

Those days have gone. Philip Burton, director of marketing at the outplacement consultancy InterExec, says: 'Salaries have been stagnant for the past year. Headhunters are much less aggressive now in forcing up salaries and fees.'

There is even talk of some search firms taking on contingency work and being paid only on a successful placement, although the largest firms maintain steadfastly they would never do such a thing. The norm is to stage the payments over the assignment, with a third of the fee paid up front, a third halfway through and the final third on finishing the job.

The greatest pressure on fees has come in middle management ranks, where salaries range from pounds 70,000 to pounds 95,000. At board level, search is still not a fee-sensitive business. Paul Buchanan-Barrow, managing partner of Korn/Ferry International, believes the top firms all quote within a few thousand pounds of each other.

'We would hate to be thought of as inexpensive,' murmurs Sir John Trelawny.

The grand addresses, chandeliers, swagged curtains and oriental rugs are deliberate. Peter Breen says Heidrick & Struggles's swish office at 100 Piccadilly is making a statement. 'Clients pay a lot of money and expect to get the best.'

Clients are prepared to accept the grandeur, provided the headhunter does a good job. 'The fees seem a lot, but are nothing compared to getting the wrong bloke in the job,' Dr Watkins says. 'Headhunters give a greater feeling of satisfaction that you have taken a broader look and perhaps that they have given you a more imaginative choice.'

Salaries for rank and file search consultants are comfortably in six figures. Last year, one prominent headhunter earned more than pounds 700,000 after a particularly good run. The high salaries do not appear to be jeopardised by recession - although they fluctuate with the fortunes of the business. The top search firms maintain that while they may be losing volume, assignments are at a higher level, so revenues are at least being maintained.

GKR, in the year to the end of August, saw revenues increase by 20 per cent. Spencer Stuart's revenues from search were up 15 per cent and from selection (pounds 40,000 to pounds 80,000 jobs) up 65 per cent, in the year to the end of September.

Norman Broadbent did the same number of search assignments in the first six months of this year as in 1991, but suddenly had a rush of 14 assignments in August. Its selection arm (pounds 30,000 to pounds 70,000 jobs) is also gaining ground in a shrunken market.

A brisk trade in non-executive directors explains part of the activity. A main recommendation in Sir Adrian Cadbury's code on corporate governance, published last week, is that public companies should have at least three non-executive directors on the board selected through a formal process.

Mr Buchanan-Barrow says he spends 80 per cent of his time hunting for non-executives. The one-third of remuneration fee does not apply, but a 'normal' fee is charged, as it takes just as long to hunt for non-executive as for executive directors.

Activity has also picked up this year because companies have been forced to make changes after a period of 'being frozen in a state of uncertainty' last year, Mr Kimbell says.

The experience of the big international search firms is not shared across the industry. Middle- sized firms specialising in middle management jobs have been squeezed, as some client companies have responded to recession by taking out or not replacing a layer of management.

The selection market has been ravaged, with advertised jobs down 62 per cent from the peak in 1988. So increases by the top firms in both the search and selection markets represent quantum leaps in market share.

Their ability to gain at the expense of smaller firms is partly explained by the increasingly international nature of the business. Searches for board-level UK appointments often involve a trawl through Europe, North America and even the Far East. Mr Broadbent says: 'Purely UK search firms can't service major appointments now.' He uses the example of the recent appointment of James Ross as chief executive of Cable & Wireless. Mr Broadbent tracked down Mr Ross in Columbus, Ohio, where he was head of BP's operations.

The leading search firms either have their own networks of offices through continental Europe, North America, Hong Kong, Toyko and sometimes Australia, or form part of an alliance of independent search firms. New areas are emerging. GKR is merging with the Austrian headhunter H Neumann to take advantage of increasing demand in Eastern Europe and Russia. Korn/Ferry's London office is looking for talent to fill an assignment in Poland.

The recession has made the headhunter's job more difficult. Mr Buchanan-Barrow explains that people are more reluctant to move. 'In the Eighties mood of optimism, if someone took a gamble that went wrong there would be another elevator to hop on to take them to the top. That is not true now.'

The downturn has also played into headhunters' hands, though. Nobody is going to be nasty to a headhunter now. You never know when you might need one. The tale of the headhunter whose efforts to poach a securities team were relayed on to the intercom system in a City dealing room, to the amusement of all, belongs to the brash Eighties.

But the search firms are always aware the relationship could switch. You never know who is buying and who is selling, Mr Buchanan-Barrow says. 'When I interview a candidate, I never know if he or she could be a client next time.'

Most of those sitting in British boardrooms have either been headhunted or have been measured against the outside competition. Benchmarking is an important part of the headhunter's job. For an agreed fee, a headhunter will tell a client company how its internal candidate for promotion stacks up against what is available outside.

Those who have been through the process of being headhunted are often surprised at how much is known about them.

John Miller, headhunted to be information systems director of Leeds Permanent Building Society in April, says: 'They do their homework well and develop quite an insight into what you have done.'

Whittling down an initial list of 100 possibles, selected from an extensive database, to 20 likely candidates is an exhaustive process of talking to 'sources'. 'If you want to find a good seller, talk to the buyers,' says Sir John Trelawny.

The 20 will be approached and, after a series of interviews to see who is interested and who is the best fit, a shortlist of three or four will be forwarded to the client.

Mr Miller says: 'They (headhunters) talk to people who know the industry, know the area you have worked in and to people you have worked with. It is almost like taking up references in advance. There is not much scope for overselling yourself.' He points out that 'there is nothing to lose in talking to a headhunter. There is always the feeling if the job they are suggesting is not the right one, the next one may be. It is a win-win conversation.'-

GREAT HUNTERS

(Ranked by users)

1 Goddard Kay Rogers

2 Norman Broadbent

3 Egon Zehnder

4 Russell Reynolds

5 Spencer Stuart

6 Whitehead Mann

7 Heidrick and Struggles

8 Boyden

8 Korn/Ferry

8 Tyzack

11 PA

11 MSL

13 Alexander Hughes

14 John Stork

14 Wrightson Wood

16 Clive and Stokes

17 Odgers

17 Knight Wendling

19 Hoggett Bowers

20 Saxton Bampfylde

Source: Executive search and the European

recruitment market; Economist Publications:

Special Report No 1198, January 1990

(Photographs omitted)