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Ep 534: AI & Executive Search

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The potential impact of AI on Talent Acquisition is 2023’s biggest talking point, but what impact will these new technologies have on relationship-driven hiring at the top of organizations?

Will AI disrupt executive search or just provide a better toolset? At the same time, how are the next generation of leaders thinking about their careers as we move further into an AI-driven future?

My guest this week is Bill Hogenauer, a Partner at JM Search. Bill specializes in placing C-Level Technology executives, and it was great to get his insights into the current state and likely future direction of Executive Search.

In the interview, we discuss:

• The current market for tech talent

• How market conditions are fueling innovation

• How has Executive Search evolved since the pandemic?

• The importance of hyperspecialization

• Using technology to develop relationships

• Partnerships, not transactions

• The impact of AI

• Automating and streamlining

• How do you identify value creation and impact potential?

• How is the next generation of leaders approaching their careers

• What will the balance between humans and machines look like in recruiting

Listen to this podcast on Apple Podcasts.

Transcript:

Matt Alder (1m 2s):
Hi there. This is Matt Alder. Welcome to episode 534 of the Recruiting Future podcast. The potential impact of AI on Talent Acquisition is 2020’s biggest talking point, but what impact will these new technologies have on relationship-driven hiring at the top of organizations? Will AI disrupt executive search, or just provide a better toolset? At the same time, how are the next generation of leaders thinking about their careers as we move further into an AI driven future? My guest this week is Bill Hogenauer, a Partner at JM Search.

Matt Alder (1m 47s):
Bill specializes in placing C Level Technology executives, and it was great to get his insights into the current state and the likely future direction of Executive Search. Hi Bill, and welcome to the podcast.

Bill Hogenauer (2m 1s):
Thanks, Matt. Good to be here.

Matt Alder (2m 2s):
An absolute pleasure to have you on the show. Please, could you introduce yourself and tell us what you do?

Bill Hogenauer (2m 8s):
Sure thing. My name is Bill Hogenauer. I am a partner with a retained Executive Search firm called JM Search here and headquartered in King of Prussia, Pennsylvania. I am the co-lead for our IT executives practice, and I also head up a center of excellence around software product development, so searching for chief technology and chief product officers primarily in enterprise software businesses.

Matt Alder (2m 38s):
There’s been a huge focus over the last six months or so in terms of some of the issues with layoffs in technology, some of the ways the market’s been turning, all those kind of things. You’d be the perfect person to get a view on this. What is the hiring market, the talent market, what does it look like from your perspective at the moment?

Bill Hogenauer (2m 59s):
What we’re seeing is a bit of a perfect storm that’s typical of technology cycles. What happened in recent years, especially during covid, is large tech companies overhired. At the same time that was happening, a lot of investors and other players were hoarding cash. They were keeping cash to ensure that they’d be able to support their portfolio companies as they tried to weather the storm and/or even grow with some of the more interesting products and investments that were made during covid.

Bill Hogenauer (3m 40s):
Now that we’re coming out of that, these large tech companies are realizing, “Wow, we overhired.” The market has softened a bit and those layoffs are impacting technology in very broad strokes, however, mostly at levels beneath where we tend to work in our space. What that also means is there’s a lot of talent, really talented programming, coders, and developers of novel products that have hit the market and have landed at a time where there is still a glut of cash. A lot of those people are now focused on interesting novel technologies in and around AI and other places.

Bill Hogenauer (4m 29s):
What we’re going to see is that I think the market, at least from the leadership perspective, where we sit will and that has also softened a bit, but not really gone down. We’re actually up this year, but it’s plateaued a bit more than in recent years. What we’re seeing is that the overall market is gonna open up moving into 2024. We’re a bit of a leading indicator in our business, Matt, and we’ve seen a significant uptick in activity with our client base in recent months.

Matt Alder (5m 4s):
You mentioned there lots of talented people, lots of cash, interesting mix. Are we gonna look back on this particular time and see it as the time that the next big tech companies were started, or at least a time of great innovation that drives the next us next cycle?

Bill Hogenauer (5m 24s):
I would say so, yeah. You’re seeing people who have left their positions either involuntarily or voluntarily and have gone and found ways to raise funding for some pretty significant novel ideas. Those will undoubtedly take advantage of this time to grab other talent that is out there and put together teams that will push those businesses forward.

Matt Alder (5m 54s):
You mentioned the pandemic and how things have been very volatile over the last few years. How have the last three years changed Executive Search? What’s different? How’s it evolving?

Bill Hogenauer (6m 9s):
Look, I think everyone out there understands that Executive Search, in many ways, is a relationship business. You use partners in our space, companies use partners that they trust, that they know, and with whom they’ve had success over the last few years, though clients, even existing clients of ours have become a lot more discerning in their selection criteria. They are looking for specialization, which is something that we, as a firm, have been building over the last, approximately, seven years as we’ve grown from 75 people to more than 200 now.

Bill Hogenauer (6m 57s):
We have focused exclusively on hyper specialization. That’s how I would say our business has changed the most dramatically. What I mean by that is we will recruit board CEO and direct reports to the CEO at the C level primarily for growth-oriented businesses, growth, equity, late stage venture, et cetera. If we can demonstrate to a client that we have a senior level resource because we are a partner led firm, there is a very senior resource focused on every Recruiting job that we see.

Bill Hogenauer (7m 46s):
If we can convince our client that we have someone that focuses, not only in their vertical, but in the function for which we’re searching, it is a much more compelling partner opportunity. For instance, if a client comes to us and says, “We have a business,” this is just an example, “that is in distribution and they’re looking for a head of technology,” we can clearly demonstrate that we have done several heads of technology for distribution tech businesses and demonstrate a competency that will enable us to get what’s key for our client.

Bill Hogenauer (8m 31s):
That is out in the market quickly and start having conversations with qualified candidates early in the process to ensure that their vision of this candidate for the role is refined very early in the process in order to stay aligned throughout.

Matt Alder (8m 50s):
You mentioned that Executive Search is all about relationships. Has the way that you communicate and build relationships developed since the pandemic?

Bill Hogenauer (8m 59s):
In some ways, yes. Look, there’s the technology we have these days. The one you and I are on now enables people to connect so much better and in such higher fidelity than it used to video audio. It’s almost like being there, but that is still an almost. There is nothing that will ever replace personal interaction, face-to-face, actually shaking hands, breaking bread, and developing a relationship that goes deeper than the transaction of an Executive Search.

Bill Hogenauer (9m 39s):
What we do has a lasting impact on so many levels for our clients. It’s the stakeholders of the business, the investors, it’s the executives of the business and how they enjoy going to work with each other. It’s the impact on the employees and the employees families. Developing that relationship is extremely important to strengthen the understanding between client and service provider that this is not just a transaction. This is important on far too many levels to be just a deal between two parties.

Matt Alder (10m 19s):
You mentioned novel, innovative technologies and obviously the one that’s in all the headlines this year is generative AI and other developments in AI. How are they impacting what you do and how do you think they might do so in the future?

Bill Hogenauer (10m 37s):
It’s a great question, Matt, and it’s the kind of thing that we do give a lot of thought to, partially because many of our clients are investing in generative AI and other technologies, but partially because we’re constantly introspective about how we can provide better service and does AI actually help us do that? The answer in the short term is that we’re going to see a much bigger impact of AI on lower level recruiting and retention, so entry, lower, individual contributor, lower and middle management. At our level, at the most senior level, AI, at least in the short term, will be about a few limited areas.

Bill Hogenauer (11m 24s):
Those are, I say, limited with respect to the actual delivery of what we do, identifying, engaging, and closing candidates. It will have much more of an impact on the operational side of our business, streamlining elements of what we do, automating processes that would otherwise take time, ensuring timely communication and optimizing the candidate experience so that, look, it’s human nature and as feverishly as we work to identify and engage candidates, we strive to give every candidate, whether or not they’re the best and the one that gets the job, with a good experience throughout the process.

Bill Hogenauer (12m 13s):
You can forget to call someone, you can inadvertently send a message that sends an indication to somebody that they’re not a candidate when they still are. You can make those mistakes. Communicating is obviously the way to resolve. Communicating clearly is the way to resolve those things and with a human element. AI, again, will I think facilitate a much smoother and more thorough process on our end, but it is going to take a long time for AI to displace the ability that we have when we are meeting people face-to-face and understanding their drivers andtheir motivations, and putting into context what they have done rather than treating it as a Boolean logic or a checkbox in some algorithm.

Bill Hogenauer (13m 19s):
It will take a long time if it ever happens for AI to replace that human interaction and the interpretation of the data provided by a candidate.

Matt Alder (13m 32s):
Do you think it can help with research though, in terms of looking into someone’s background, trying to predict their suitability? Is there a role that it can play in that?

Bill Hogenauer (13m 43s):
Absolutely, and those are the things that will take some time and some really large data sets. In fact, I think that the data set like LinkedIn is sitting on right now has absolute gold in there that they don’t seem to be mining. We don’t rely on that platform all that much. We do use it, but as a tool. That platform has the opportunity to become something truly special. They have something called LinkedIn recruiter where you can look up somebody’s profile. If you have a certain access, and then they have this algorithm that presents similar profiles to you.

Bill Hogenauer (14m 24s):
That algorithm is really clunky. If you ask me, it’s horribly inaccurate when it comes to executive level recruiting. Now it could be really, really good when you’re looking for a programmer that has experience in a particular tech stack or a manager that has worked with teams of a certain size and structure, but when you’re looking for a combination of early career experience along with strategic as well as tactical value creation, that algorithm does not yet exist.

Bill Hogenauer (15m 8s):
It could. I think AI could play a large role in detecting the kind of attributes of what we’ll call real athletes, these candidates who have grown quickly in their careers, because you can inflate titles, you can use keywords, and you can trick the current algorithms into thinking that you’re more than you really are from a career perspective.

Matt Alder (15m 37s):
I suppose that leads us on to talking about the candidates themselves, the talent, the potential talent. How are things changing in terms of people’s careers? What are the views of the next generation of leaders in terms of how they approach their careers, and also, how they look for jobs?

Bill Hogenauer (15m 55s):
A great question and one that I can’t answer empirically. Anecdotally, and this isn’t a blanket statement, but it’s pretty clear that today’s leaders seek purpose. They’re not just looking for a job. They’re looking for a career with impact. I think AI actually has a lot to do with that change. Again, I can’t make a blanket statement because there are people throughout history who have always been driven by purpose instead of just having a job. AI, in a way, has made people embrace the fact that they are unique, that they can create value, and that they’re really unafraid these days to say no to something that feels like just a job.

Bill Hogenauer (16m 48s):
That’s going back to the previous question about AI’s impact on recruitment. If you’re not speaking with another human, if you’re not engaged in a way where you can truly seek to understand the motivations of an individual and what drives them, if you can identify and help facilitate a discussion with a client around the things that the role offers to someone that will trigger those underlying principles that they have or really get them up and going in the morning and excited about going to do what they do because they’re going to have an impact.

Bill Hogenauer (17m 34s):
The next generation of leaders is thinking that way because the world has changed so dramatically after we’ve emerged from the industrial into the technical revolution that you can pick a career that combines so many attributes and elements of what really gets you going that. There’s so much out there to do. The employment market is surprisingly rich right now that people just don’t wanna go find a job. They wanna find a career with impact.

Matt Alder (18m 10s):
Final question, which really draws together a lot of the topics that we’ve been talking about. If we look out into the future, AI’s gonna develop, technologies gonna develop, the way that people think about careers is gonna develop. Obviously, we’ve talked about relationships and the role that AI is playing in the short and medium term. What do you think the balance between humans and machines will look like in the future when it comes to Executive Search?

Bill Hogenauer (18m 39s):
If you really pin me down on that one, the core of it is data, however. What I mean about data is what you might find in someone’s resume. By the way, the notion of a resume seems to be dying. The opportunity for people to have a digital living resume these days is so much more a apropos than having a paper resume, but it’s data. What I mean about that, Matt, is that the best way to determine the value someone can provide to an organization is to understand that data and not just what they write, but to speak directly with people with whom that person has worked in the past.

Bill Hogenauer (19m 41s):
It’s referencing, it’s hearing from the market, from the actual source. What did that person do? What did they contribute? How did they create value? How did they interact with others? AI can’t do that. AI can analyze written reference information and data about the business and how it changed under their leadership, but did they influence it or were they along for the ride? Also, if we have bias built into AI, it’s going to be difficult to trust that data and that’s gonna take time to remove bias from that and to really sustain what I’ll call a human to human interaction for understanding exactly what the value those candidates have provided their employers.

Bill Hogenauer (20m 43s):
From what I see in our space, the data is going to get better over time. It’s going to get cleaner, but you have to understand the source of the data. You have to understand the context of the data. You have to combine it with other data sources. Humans right now for Executive Search, and I think for at least the next decade or more are going to be much better at discerning the truth and the real value in somebody’s background at the executive level than AI.

Matt Alder (21m 18s):
Bill, thank you very much for talking to me.

Bill Hogenauer (21m 21s):
Matt, it was a pleasure. I really enjoyed it.

Matt Alder (21m 25s):
My thanks to Bill. You can subscribe to this podcast in Apple Podcasts, on Spotify, or via your podcasting app of choice. Please also follow the show on Instagram. You can find us by searching for Recruiting Future. You can search all the past episodes at recruitingfuture.com. On that site, you can also subscribe to the mailing list, Recruiting Future Feast, and get the inside track about everything that’s coming up on the show. Thanks so much for listening. I’ll be back next time and I hope you’ll join me.

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