Heidrick & Struggle International IncRunning head: Heidrick & Struggle International Inc.Heidrick & Struggles International Inc.: Case AnalysisHeather ConleyKaplan UniversityIntroductionHeidrick & Struggles International, Inc. is one of the largest U.S. recruiting firms. The company has approximately 380 headhunters filling Chief Executive Officer (CEO), Chief Financial Officer (CFO), director, and other high-level positions for companies. It is organized into specialized search groups by industry, and operates in more than 25 countries. Heidrick & Struggles International, Inc. also provides temporary placement, management assessment, and professional development services. The company’s revenue in 2007 was at an all-time high and all measures of productivity were up. Despite the rosy picture, there lays a simmering problem of massive upheaval on the basis of demographic opportunities, shifting customer needs, and the challenges posed by technology-driven alternatives. This paper will attempt to identify the problems of Heidrick & Struggles International, Inc. and provide a recommended approach to resolve its problem.
History and IssuesThe executive search business emerged in the 1940s as an offshoot of management consulting. By the late 1940s, six of the eight leading firms in the world were founded. Until the 1990s, the industry was relatively small and controlled by private partnerships with high fixed cost. In 2008, the fragmented industry was dominated at the high end by five global firms. A variety of regional and small players competed in certain domains with these industry leaders, followed by thousands of smaller search firms. The five market leaders differentiated themselves from smaller firms primarily on the basis of their ability to serve multi-national clients on a global basis, and by their focus on executive and specialist positions (Eccles and Lane, 2009).
Heidrick & Struggles International, Inc. was founded in 1953 by Gardner Heidrick and John Struggles. It quickly grew to serve national clients in 1957 and international clients in 1968. In the 1980s, all 11 of Heidrick & Struggles offices were in the U.S. and Europe. Its search consultants had never met as a single group; consultants saw the firm as a franchise business, not as a global firm. All Heidrick & Struggles consultants were considered generalists: they have no specialization by practice. In 1983, Heidrick & Struggles International was set up as a separate entity to manage the European operations, but it was later merged with the domestic operations, Heidrick & Struggles, Inc. In 1999, the company made an initial public offering (IPO), by listing itself on the
X, and subsequently to be incorporated into (and sell, to) the U.S. . The IPO is likely to take roughly two years to finalize and to conclude, the companies are expected to operate over a period of time of approximately 12 years. It is an attractive business model, with several advantages, including the competitive advantages of having a global brand and being able to manage more efficiently. The IPO is valued at about $14.8 billion, with the average net worth of the group growing up to a reported $35.8 million in the second quarter of 2012. The net worth of the Group at the time of the IPO was just under $2.2 billion. The majority of the investment has been the acquisition of some of the Group’s assets, including all of the building assets. Heidrick & Struggles International has made several acquisitions of commercial real estate, including a private project called the ‘Oops’ and a private company called Heidrick Associates that was built in 1974. The Oops project, which is expected to be completed between the next two fiscal years, will include over 150 buildings, a multi-storey office building, a 1,500-square foot restaurant, and a 100-student, 2,500 family vacation rental development. Heidrick & Struggles International purchased the Oops project from the Federal State Trustee as a result of concerns that the Federal Bureau of Investigation was investigating his $300,000 mortgage, or $6.8 billion in gross income and $11 billion in losses from litigation and other activities relating to his $1 billion insurance business that took $3.3 billion. The $3.3 billion was received from various sources by the Company, including a cash benefit of $7.45 million for the $5.45 million loss. In all, $6.2 billion of the proceeds from his Oops project was received for the purposes of making investments. Heidrick & Struggles International acquired the Office Depot in December 2002. Heidrick & Struggles International is currently based in the U.S. with approximately 75 employees. The U.S. is the sole major world-wide market for Heidrick & Struggles International’s business is not based in the United States, and is not dependent upon foreign markets. The remaining five of the remaining six U.S. shareholders hold a majority stake in the firm. His holdings (including his stake in Struggles International’s American International Group) were estimated as of March 31, 2006. The group is expected to merge with Heidrick in the fourth quarter of 2011, to be in operating form for approximately 20 years that is expected to last for about $4 billion.
Investors
While it is unusual to find a firm that attracts such a large pool of investors, there have been a number of high profile acquisition candidates that have received