Boutique Search Firms Step In Where Big Recruiters Falter

by Andrew W. Mitchell, Managing Editor  – Hunt Scanlon Media

 

Big teams and diversified offerings boost the bottom line for the large recruitment providers. But there are growing dilemmas. That’s why more companies are turning to boutiques.

The biggest selling points for large search firms – the depth of their recruitment manpower and the diversity of their services – are the very elements that are causing many clients to turn to boutique recruiters. Craig Lapham, chief executive officer of the Lapham Group, a New York based executive recruitment firm that specializes in insurance and diversified financial services, even goes as far as saying that many companies are seeking an alternative to the “challenges and dysfunction” that plague the bigger talent providers. “A boutique firm simply through its smaller structure comes to any search engagement with a tremendous competitive advantage in terms of greater access to talent in the marketplace,” said Mr. Lapham.

“A big search firm may use its large team of search professionals as an effective marketing tool, but when it comes time to actually conduct a specific client search engagement, the larger firm becomes encumbered with conflicts both internal and external.” As the bigger search firms diversify their offerings, meanwhile, they raise the possibilities of potential ethical concerns. “Again, these multiple services help in marketing pitches and their recurring revenue streams smooth out P&Ls, particularly for publicly traded firms,” said Mr. Lapham. “But they also exacerbate conflicts and present dilemmas for any type of retained search being conducted. Is a major search firm going to poach talent from its non-search clients for which it’s providing ongoing HR related services?” That seems to be a pressing question on the minds of more and more clients.

A New Normal

As a result, situations that would have been unlikely in the past are all part of the new normal in executive recruitment. “Our firm in 2016 conducted a successful C-suite search for a Fortune 100 publicly traded insurance client and, once the finalist candidate was identified, the executive assessment was done by a division of one of our largest retained search competitors,” said Mr. Lapham. “We chuckled at the irony of that situation, but that is the reality of the search industry today.” Mr. Lapham has been CEO of the Lapham Group since 1997. Under his leadership, the firm has conducted senior executive search engagements on a global basis for multiple Fortune 100 insurance clients and smaller emerging insurance/ financial services firms across both P&C and life insurance.

This includes board of directorship and CEO search engagements, as well as executive searches across finance, risk management, legal, claims, actuarial, underwriting, technology/ digital and marketing/ distribution. Previously, he was an attorney with global insurer American International Group (AIG) within the corporation’s U.S. property & casualty business. Like virtually every other industry, the insurance sector is being transformed by digital automation, data analytics and science, said Mr. Lapham. These innovations are driving changes across the underwriting, distribution and claims models of the industry’s insurance carriers. The impact is manifesting itself across all segments of the industry, he said, with the effects being most visible in the more consumer/ customer-centric lines of business like personal auto and certain segments of life insurance.

Looking Outside

The quality of the senior-level talent pool in the insurance sector varies by line of business and functional expertise, Mr. Lapham said. The more traditional lines of business have greater depth of talent, but in the emerging P&L sectors, such as cyber-insurance, recruiters often have to seek candidates outside of the core insurance industry.

“We are currently conducting a president of global cyber insurance for client Chubb,” said Mr. Lapham, “and the search’s scope has gone well beyond the insurance industry and into fintech and even government to identify highly strategic global thought leaders in cyber risk.”

But even from a purely functional perspective, there is a greater need to look outside the insurance sector. “We’re looking to broader diversified financial services and the larger SIFI banks where you may find a more sophisticated experience base than may exist in a traditional insurer,” said Mr. Lapham.

Deeper Understanding

As an example, he points to a recent chief risk officer search that his firm conducted for Allstate Corporation in which the right candidate required a wide-ranging risk management background covering market, investment, model and financial risk, including experience with sophisticated risk-related concepts such as economic capital and ALM.

“Given this very broad and highly sophisticated experience base, a decision was made to expand our targeted search beyond the P&C and life insurance industry and into other segments of diversified financial services to include banking and investment management,” said Mr. Lapham. “Where historically a CRO search for an insurer may have focused solely on career insurance executives, likely with a classic actuarial background, the scope of our engagement became much broader into the risk management functions of the largest and most complex financial institutions globally.”

Mr. Lapham’s earlier days with AIG gave him valuable insight into the industry that he serves today. “My prior industry experience working for one of the top-tier global multiline insurance corporations does provide a sophisticated perspective and multinational network of C-suite relationships that bring significant value to a client engagement,” he said. “I also believe insurance to be the most complex segment of the diversified financial services industry and my prior industry experience allows me to hit the ground running on the most complex engagements.”

A Family Business

With that said, he observed, “I believe the ultimate value add to a client is my expertise in the access, identification and recruitment of premium senior executive talent versus my technical skills as an insurance attorney, underwriter, actuary, etc.” Mr. Lapham left AIG to partner with his father in building an entrepreneurial, family owned business. The elder Mr. Lapham had 40-plus years of retained search industry experience, including running his own boutique and leading a large search practice with Peat Marwick & Mitchell, when father and son started the Lapham Group 20 years ago. “My father was the classic founder entrepreneur: independently motivated, relentlessly positive, laser-like customer focus, and a deep conviction his business model was superior to the competition,” said Mr. Lapham. “Specifically, he felt an independently owned boutique search firm offered tremendous competitive advantages to his clients in terms of higher quality talent access without the layers of internal and external conflicts of the major search firms. It also offered the opportunity to build deep and longstanding relationships with clients in order to truly understand an organization’s culture and persuasively market a client opportunity to top-tier executive talent.”

The Road Ahead

Looking ahead, Mr. Lapham expects technology to play an ongoing role in how the insurance industry operates. Ongoing innovations pose big challenges as well as big opportunities. “Insurance touches every segment of our lives, from both a business/ professional and personal perspective,” he said. “While technology will disrupt certain legacy structures of the industry, it will also allow the nimble and strategic to create and deliver new and innovation solutions to mitigate risk.” It is also a good idea, he said, to keep an eye on the continued influence of investors and their voracious appetite for profits. “In addition to continued advancements in technology, and depending on what happens with inflation and interest rate environment, you may see the continued influx of third party capital sources seeking greater returns,” said Mr. Lapham. “Whether these are hedge funds or other types of investment vehicles, the inflow of capital will put pressure on all segments of the industry, both primary and reinsurance, to remain relevant and competitive.”