Brokered Careers: The Role of Search Firms in Managerial Career Mobility

Key Question Being Explored in This Insight:

How are career paths shaped by the involvement of search firms in hiring?

Institution: University of Pennsylvania

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How are career paths shaped by the involvement of search firms in hiring?

Image courtesy of interviewee. December 5, 2024

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This video discusses the processes through which individuals find jobs, highlighting the role of search firms or headhunters. It outlines various typical methods of job hunting, including applying to job postings, networking, and utilizing search firms, which reportedly account for about 3-5% of job placements in general, and a significantly higher percentage for executive positions (about 35% among MBA alumni).

The author examines the impact of using search firms on job seekers, specifically focusing on "horizontal mobility" (switching to different roles or industries rather than moving up the career ladder). Research findings indicate that job seekers tend to make fewer horizontal moves when they are placed through a search firm; they are more likely to transition into similar roles or industries.

This video suggests that search firms tend to act as gatekeepers, primarily directing candidates toward the most logical next step in their career paths rather than facilitating more exploratory lateral moves. This video is largely due to the firms' established networks and incentives that favor efficient placements over innovative or unconventional pairings.

The study mentions some limitations in the data collection process and acknowledges that candidates placed through search firms do not necessarily achieve better outcomes in terms of job retention or promotion rates. This video raises questions about the effectiveness of search firms, as they often lead to more linear career trajectories but do not guarantee improved job performance or satisfaction. The author highlights a tension between employers' preference for straightforward candidate matching and job seekers' interest in exploring diverse career paths.

Future research directions are suggested, particularly in understanding the dynamics of horizontal moves and the efficacy of search firms in finding suitable candidates. The author expresses curiosity about why search firms may not consistently deliver better job matches despite their established methods and networks.

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Here are five key points from the video:

1. **Job Search Methods**: People find jobs through various methods, including job postings, personal networks, and search firms (also known as headhunters). While the latter are relatively rare overall, their usage increases for more senior positions, like executive roles.

2. **Horizontal vs. Vertical Mobility**: The video discusses "horizontal mobility," which refers to moving into different jobs (e.g., a marketing manager moving to a technology product manager) as opposed to "vertical mobility," which is about moving up to higher positions within the same field. Horizontal moves can allow for career exploration and broader experience, which are beneficial in the long term, but can be seen as a disadvantage by potential employers searching for candidates with specific experience.

3. **Impact of Search Firms**: The presence of search firms tends to result in candidates making more linear career moves—staying within similar functions and industries—rather than exploratory or diverse transitions. This is because search firms primarily seek to fill specific roles with candidates who closely match the job requirements.

4. **Candidate Quality and Outcomes**: Despite being gatekeepers in the labor market for high-value roles, the video suggests that candidates placed through search firms do not show significantly better outcomes in terms of promotions or job retention when compared to those who find jobs through other means. In fact, candidates from search firms were found to be slightly more likely to face termination.

5. **Future Research Directions**: The video highlights the need for further research on the effects of horizontal mobility on career success, as well as a desire to better understand why search firms do not consistently deliver better matches for employers despite their expertise. The author expresses curiosity about both the inherent challenges in recruitment processes and the dynamics influencing search firm operations.

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Here are some key quotes from the video that encapsulate the main ideas:

1. **Job Search Methods**:
"If you think about getting a job, there are a bunch of ways that people find jobs."

2. **Role of Search Firms**:
"These are basically companies that are hired by employers to help them find candidates."

3. **Effectiveness in Executive Searches**:
"We looked at this among alumni of MBA programs where about 35% of people found... through an executive search firm."

4. **Horizontal Mobility**:
"We focus on one particular dimension of careers, which is what we describe as horizontal mobility."

5. **Importance of Horizontal Mobility**:
"Horizontal mobility enables us to try different things that might actually be better for us."

6. **Downside of Search Firms**:
"Search firms act as gatekeepers for the most valuable roles... but they don’t seem to necessarily lead to better outcomes for the employers."

7. **Employers' Preferences**:
"The ideal hire is often somebody who is already doing the job that I'm trying to fill... There's gonna be zero ramp up time."

8. **Searching Through Search Firms**:
"When they moved through a search firm, about 46% of the cases, they moved to a different function compared to 58%... when they move through other means."

9. **Impact of Search Firms on Career Paths**:
"They lead to these very linear careers, but they don't seem to necessarily lead to better outcomes for the employers."

10. **Limitations of Search Firms for Job Seekers**:
"For those job seekers saying, I've done this and I'm not enjoying it and I want to try something different, search firms are unlikely to be helpful."

These quotes highlight the key themes of job searching, the role of search firms, the concept of horizontal mobility within careers, and the implications for both job seekers and employers.

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If you think about getting a job, there are a bunch

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of ways that people find jobs.

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So I think the, the biggest one is you find a job

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posting and you apply to it.

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Lots of people find jobs through people that they know,

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so somebody tells 'em about a job.

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But another way that people sometimes find jobs

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is through headhunters.

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They're formally known, generally a search firms

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or executive search firms.

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So these are basically companies that are hired by employers

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to help them find candidates.

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Um, overall it, they're pretty rare.

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So I think some surveys in the US find that about three

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to 5% of jobs are filled using these search firms.

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But once you start to get into more senior jobs,

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so particularly executive jobs, it starts

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to be a much bigger proportion.

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Um, and so we looked at this among, alumni of

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MBA programs where about 35% of people found,

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or 35% of the jobs were found

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through an executive search firm.

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So this is a company working for the employer that will try

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and identify who are good candidates, go out, call them up

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and ask, do you wanna apply for this job?

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There's been, a reasonable amount of researchers trying

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to understand who the search firms are, what they do.

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We are very interested in it kind of in terms

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of a careers basis.

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Um, and so people wanna find new jobs at certain times.

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Uh, they're kind of thinking, do I get it?

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You know, how do I find this job?

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Um, we're wondering, does it make a difference the fact

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that sometimes when you hire, you go direct to the employer?

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Sometimes those employers have hired an intermediary to,

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mediate the job search.

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How does that matter? Um,

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we focus on one particular dimension of careers, which is

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what we describe as horizontal mobility.

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So careers are always mobility.

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We think about vertical mobility,

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which is moving into a kind of higher pay job

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with more responsibilities, kind

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of traditional promotion type stuff.

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We also think about horizontal mobility.

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That's moving into a different kind of job.

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So say I am a marketing manager,

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I could search for other jobs as a marketing manager

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or maybe a marketing director somewhere else.

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I could also decide

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that I want to do something a bit different.

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Maybe go for like a technology product manager

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role or something like that.

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And so the more different the job I'm moving into would

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describe that as kind of horizontal mobility,

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moving into something that's more different.

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That tends to be important for careers in a couple of ways.

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Um, so one is that it enables us to

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try different things that might actually be better for us.

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There's the strong suggestion that it's quite hard

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to know exactly what the right job for you is.

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Um, there's a lot of trial and error

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and so often we'll, we'll start out doing something,

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we'll discover that actually it doesn't work that well

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and we'll want to go try something different.

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Um, and so horizontal mobility enables us to kind

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of do this experimentation.

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The other reason why it can be valuable in the long run is,

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there's

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A bunch of evidence finding that people have broader

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experience end up being more desirable

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and better in their careers

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and doing better in their careers.

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Um, and so it can be quite valuable to kind

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of move across different areas.

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In the short run though, it can be a bit of a handicap.

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And I think particularly among employers,

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when I'm looking at who I want to hire,

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the ideal hire is often somebody

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who is already doing the job that I'm trying to fill.

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'cause they clearly know how to do it.

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There's gonna be zero ramp up time.

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So horizontal mobility can be quite quite good

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for employees, particularly in the long run.

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Employers not so excited about it.

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And so we were kind of curious,

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how did this dynamic play out?

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When you get an intermediary into the mix?

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Data came from a survey of MBA alumni.

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We quite like using these surveys to study careers.

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What you really want is a group of people

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who basically started in roughly the same place and they go

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and make different decisions and,

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and it's nice to kind of take a group that's pretty similar

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and see how their careers evolve.

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And so with a colleague, we surveyed all the alumni

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of a leading business school program,

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asking them really about every job that they'd held.

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Um, particularly we asked when they moved employers,

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why did they move employers?

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How did they find out about the job?

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We also asked were they actively looking for a job?

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I think one of the stories that's often told about search

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firms or headhunters is they're good

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for helping you find people who weren't necessarily looking

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for a job at the time.

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So we kind of asked that as well

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to make sure this wasn't just

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about who's looking for the job.

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So we did the survey.

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If you've ever done these surveys, getting people

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to answer them is really hard.

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So we got, I think our, our response rate was a little

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less than 20%.

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Uh, we tried really hard to, to bump it up.

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Um, we did some checks afterwards.

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So one thing you can do is go to LinkedIn,

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basically compare the profiles of the people who responded

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to the survey and those who didn't

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to see, are they broadly similar?

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It didn't look like we had major response biases,

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but it, it's certainly a limitation.

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What we found was that the probability

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that somebody would make a horizontal move, so

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that is when somebody moved jobs, the probability

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that they would move into a different functional area

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or a different industry was substantially less

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when they moved through a search firm.

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Um, you know,

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I think the figures I've gotten written down somewhere.

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So, yeah, when they moved through, a,

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when they moved through a search firm, about 46%

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of the cases, they moved to a different function compared

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to 58% of the cases in, when they move

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through other means and so much more likely to stay kind

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of on the same track when they move through a search firm.

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We found similar effects for industry.

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Um, you know, there's also some evidence they're moving into

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higher paid roles through search firms.

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Basically what happens is search firms act

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as gatekeepers the most valuable roles.

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And so if you're going into one of those roles,

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you're gonna get paid.

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Well, it's more likely to be through a search firm.

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But the piece we focused in, focused on was this,

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was this fact that it tends to be when people move

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through search firms, it tends to be the kind

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of the next logical step in the career.

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People moving through other means are kind of

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engaged in kind of slightly more exploratory moves.

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To be honest, it's hard to absolutely

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pin down the mechanisms.

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We point to two characteristics of the intermediaries that,

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that we think are most likely to be driving this.

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Um, so one is they,

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they tend to have broader networks.

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One of the reasons you go to a search firm is

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they have more approaches to trying to find candidates.

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They have more people they can talk to.

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In theory, they're gonna do a better job of finding you.

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Um, people I think you, you could believe

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that this would actually lead them to, to come up

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with more unusual candidates.

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So kind of have less, have, sorry,

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have more horizontal mobility.

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Here's somebody who comes from a completely different

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background that you wouldn't have

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thought of, but we think that'd be great.

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In practice, it seems to work the other way around.

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Like if you want a finance manager for a media firm,

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they can go find a finance manager for a media firm.

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And so it may be they're kind of, that network enables them

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to find square peg for a square hole.

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We also think they probably have incentives

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as well to do that.

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Um, if you're one of these intermediaries,

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you basically get paid for completing the search.

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And so you wanna do that as quickly as possible.

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And so you wanna present candidates

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who look great on the surface, kind of various stage.

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They wanted to call the paper round up the

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usual suspects, right?

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There's a sense of you.

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They're great at finding the usual suspect.

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Somebody who kind of passes master.

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It's not always clear how well they'll actually do the job,

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but I think they wanna find somebody who looks the part,

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they have the networks to find somebody who looks the part.

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And so there's not such a sense of companies kind

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of experimenting or kind.

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We can't find somebody perfect, but,

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but this person might be really good.

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Let's try them. Um, an obvious question that raises is

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are the candidates actually better when they're coming in

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through search firms?

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It's hard to prove definitively.

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We basically looked at what happens next

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to those people after they get hired.

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So we figured if they are finding better people,

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those people should be more likely to stay,

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more likely to get promoted.

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Um, we don't find them more likely to get promoted.

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We don't find them more likely to stay.

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We actually find the people who come in

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through search firms are slightly more likely

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to be terminated.

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So kind of to be laid off or, but the cause

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or similar hard to know exactly what's going on there,

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but it certainly doesn't seem consistent with the idea that

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because these search firms can deliver these square pegs

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and square holes, they actually end up

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Kind of delivering better candidates.

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And so it's kind of a, a little irony.

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They kind of lead to these very linear careers,

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but they don't seem to necessarily lead

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to better outcomes for the employers.

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We kind of say these, these search firms are

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gatekeepers in the labor market.

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They're not a huge proportion.

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When you look at the kind of

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most valued jobs in our society, they are a big number.

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So like I say, it was 35% of our sample

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and disproportionately amongst the jobs that were kind

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of highest paid

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and large organizations, more subordinates.

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And so they play a really important role.

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They do seem to shape how people get into those jobs.

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And like I said, I think there's a little tension between

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the incentive employers.

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Employers want somebody who's done the job

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exactly the same job.

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People searching jobs may want to move around a little more.

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I say I think they do make,

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career paths more linear in ways that c that suit employers

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For job seekers.

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I think it's it's a fairly clear story,

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which is if you are looking at the most logical next step

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in your career, then potentially search firms are going

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to be interested and they're going to help you.

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But for those job seekers or saying, I've done this

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and I'm not enjoying it

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and I want to try something different,

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search firms are unlikely to be helpful

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because they see their role as basically, you know,

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placing you in the job for which you're ideally qualified

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and that's not going to work.

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Um, in terms of future research, I continue

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to be interested in kind of the outcomes of these,

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horizontal moves.

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Um, so, you know, to what extent moving into kind

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of different functions changes careers.

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And so I've done a, a stream

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of research since looking at some of this impacts

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and fairly consistently finding the people who build

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that greater breadth are doing better in their careers.

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So more likely to be promoted, subsequently more likely

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to be hired and so on.

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Um, there's still a lot

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that we don't know about search terms.

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I would love to dig deeper into some

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of these findings about kind of not delivering better match

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in the long run.

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And I would love to understand why that is.

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'cause I do believe, I mean, I think the search firms,

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they should be good at what they do.

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Um, I speak to a lot of search consultants, I respect them.

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Um, so, and you know, clearly firms value their services

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and so I'm curious as to, you know, how much

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that is just about kind of the fundamental difficulties

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of finding exactly the right person for the right job,

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or if there are other things going on in the search kind

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of actor to compromise the value of using those firms.

Exploring Job Search Methods: The Role of Headhunters and Search Firms

00:00:00 - If you think about getting a job, there are a bunch of ways that people find jobs. So I think the, the biggest one is you find a job posting and you apply to it. Lots of people find jobs through people that they know, so somebody tells 'em about a job. But another way that people sometimes find jobs is through headhunters. They're formally known, generally a search firms or executive search firms. So these are basically companies that are hired by employers to help them find candidates. overall it, they're pretty rare. So I think some surveys in the US find that about three

00:00:38 - But once you start to get into more senior jobs, so particularly executive jobs, it starts to be a much bigger proportion. and so we looked at this among, alumni of MBA programs where about 35% of people found, or 35% of the jobs were found through an executive search firm. So this is a company working for the employer that will try and identify who are good candidates, go out, call them up

00:01:06 - There's been, a reasonable amount of researchers trying to understand who the search firms are, what they do. We are very interested in it kind of in terms of a careers basis. and so people wanna find new jobs at certain times. they're kind of thinking, do I get it? You know, how do I find this job? we're wondering, does it make a difference the fact that sometimes when you hire, you go direct to the employer? Sometimes those employers have hired an intermediary to,

Exploring Horizontal Mobility in Careers

00:01:38 - How does that matter? we focus on one particular dimension of careers, which is what we describe as horizontal mobility. So careers are always mobility. We think about vertical mobility, which is moving into a kind of higher pay job with more responsibilities, kind of traditional promotion type stuff. We also think about horizontal mobility. That's moving into a different kind of job. So say I am a marketing manager,

00:02:09 - or maybe a marketing director somewhere else. I could also decide that I want to do something a bit different. Maybe go for like a technology product manager role or something like that. And so the more different the job I'm moving into would describe that as kind of horizontal mobility, moving into something that's more different. That tends to be important for careers in a couple of ways. so one is that it enables us to try different things that might actually be better for us. There's the strong suggestion that it's quite hard

00:02:40 - there's a lot of trial and error and so often we'll, we'll start out doing something, we'll discover that actually it doesn't work that well and we'll want to go try something different. and so horizontal mobility enables us to kind of do this experimentation. The other reason why it can be valuable in the long run is, there's A bunch of evidence finding that people have broader experience end up being more desirable and better in their careers and doing better in their careers. and so it can be quite valuable to kind

Horizontal Mobility: Pros and Cons for Job Seekers and Employers

00:03:11 - In the short run though, it can be a bit of a handicap. And I think particularly among employers, when I'm looking at who I want to hire, the ideal hire is often somebody who is already doing the job that I'm trying to fill. 'cause they clearly know how to do it. There's gonna be zero ramp up time. So horizontal mobility can be quite quite good for employees, particularly in the long run. Employers not so excited about it. And so we were kind of curious, how did this dynamic play out? When you get an intermediary into the mix?

00:03:42 - We quite like using these surveys to study careers. What you really want is a group of people who basically started in roughly the same place and they go and make different decisions and, and it's nice to kind of take a group that's pretty similar and see how their careers evolve. And so with a colleague, we surveyed all the alumni of a leading business school program, asking them really about every job that they'd held. particularly we asked when they moved employers,

00:04:12 - How did they find out about the job? We also asked were they actively looking for a job? I think one of the stories that's often told about search firms or headhunters is they're good for helping you find people who weren't necessarily looking for a job at the time. So we kind of asked that as well to make sure this wasn't just about who's looking for the job. So we did the survey. If you've ever done these surveys, getting people to answer them is really hard. So we got, I think our, our response rate was a little less than 20%. we tried really hard to, to bump it up.

Impact of Search Firms on Career Mobility

00:04:44 - So one thing you can do is go to LinkedIn, basically compare the profiles of the people who responded to the survey and those who didn't to see, are they broadly similar? It didn't look like we had major response biases, but it, it's certainly a limitation. What we found was that the probability that somebody would make a horizontal move, so that is when somebody moved jobs, the probability that they would move into a different functional area or a different industry was substantially less

00:05:15 - you know, I think the figures I've gotten written down somewhere. So, yeah, when they moved through, a, when they moved through a search firm, about 46% of the cases, they moved to a different function compared to 58% of the cases in, when they move through other means and so much more likely to stay kind of on the same track when they move through a search firm. We found similar effects for industry. you know, there's also some evidence they're moving into

00:05:44 - Basically what happens is search firms act as gatekeepers the most valuable roles. And so if you're going into one of those roles, you're gonna get paid. Well, it's more likely to be through a search firm. But the piece we focused in, focused on was this, was this fact that it tends to be when people move through search firms, it tends to be the kind of the next logical step in the career. People moving through other means are kind of engaged in kind of slightly more exploratory moves.

Search Firms: Gatekeepers of Career Mobility

00:06:15 - pin down the mechanisms. We point to two characteristics of the intermediaries that, that we think are most likely to be driving this. so one is they, they tend to have broader networks. One of the reasons you go to a search firm is they have more approaches to trying to find candidates. They have more people they can talk to. In theory, they're gonna do a better job of finding you. people I think you, you could believe that this would actually lead them to, to come up

00:06:47 - So kind of have less, have, sorry, have more horizontal mobility. Here's somebody who comes from a completely different background that you wouldn't have thought of, but we think that'd be great. In practice, it seems to work the other way around. Like if you want a finance manager for a media firm, they can go find a finance manager for a media firm. And so it may be they're kind of, that network enables them to find square peg for a square hole. We also think they probably have incentives as well to do that.

00:07:20 - you basically get paid for completing the search. And so you wanna do that as quickly as possible. And so you wanna present candidates who look great on the surface, kind of various stage. They wanted to call the paper round up the usual suspects, right? There's a sense of you. They're great at finding the usual suspect. Somebody who kind of passes master. It's not always clear how well they'll actually do the job, but I think they wanna find somebody who looks the part, they have the networks to find somebody who looks the part.

Evaluating the Effectiveness of Search Firms in Candidate Placement

00:07:54 - of experimenting or kind. We can't find somebody perfect, but, but this person might be really good. Let's try them. an obvious question that raises is are the candidates actually better when they're coming in through search firms? It's hard to prove definitively. We basically looked at what happens next to those people after they get hired. So we figured if they are finding better people,

00:08:23 - more likely to get promoted. we don't find them more likely to get promoted. We don't find them more likely to stay. We actually find the people who come in through search firms are slightly more likely to be terminated. So kind of to be laid off or, but the cause or similar hard to know exactly what's going on there, but it certainly doesn't seem consistent with the idea that because these search firms can deliver these square pegs

00:08:54 - Kind of delivering better candidates. And so it's kind of a, a little irony. They kind of lead to these very linear careers, but they don't seem to necessarily lead to better outcomes for the employers. We kind of say these, these search firms are gatekeepers in the labor market. They're not a huge proportion. When you look at the kind of most valued jobs in our society, they are a big number. So like I say, it was 35% of our sample and disproportionately amongst the jobs that were kind of highest paid

Search Firms: Shaping Career Paths and Mobility

00:09:27 - And so they play a really important role. They do seem to shape how people get into those jobs. And like I said, I think there's a little tension between the incentive employers. Employers want somebody who's done the job exactly the same job. People searching jobs may want to move around a little more. I say I think they do make, career paths more linear in ways that c that suit employers For job seekers. I think it's it's a fairly clear story,

00:10:00 - in your career, then potentially search firms are going to be interested and they're going to help you. But for those job seekers or saying, I've done this and I'm not enjoying it and I want to try something different, search firms are unlikely to be helpful because they see their role as basically, you know, placing you in the job for which you're ideally qualified and that's not going to work. in terms of future research, I continue

00:10:30 - horizontal moves. so, you know, to what extent moving into kind of different functions changes careers. And so I've done a, a stream of research since looking at some of this impacts and fairly consistently finding the people who build that greater breadth are doing better in their careers. So more likely to be promoted, subsequently more likely to be hired and so on. there's still a lot that we don't know about search terms.

Questioning the Effectiveness of Search Firms

00:11:00 - of these findings about kind of not delivering better match in the long run. And I would love to understand why that is. 'cause I do believe, I mean, I think the search firms, they should be good at what they do. I speak to a lot of search consultants, I respect them. so, and you know, clearly firms value their services and so I'm curious as to, you know, how much that is just about kind of the fundamental difficulties of finding exactly the right person for the right job, or if there are other things going on in the search kind

00:11:29 -

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