Two Human Capital Strategies to Grow Profits: Executive Search and Acquisition

Acquisitions in the design industry happen all the time.  They are great tools to use for firms interested in growing revenues by moving into new markets, or adding additional services. When done effectively, acquiring firms get backlogs of work, client lists, and talented people who possess the knowledge and skills needed to profitably manage and execute design projects.  The owners of acquired firms get cash, exit strategies, opportunities to win better projects, higher compensation, etc.

Acquisitions are, however, quite difficult to execute. Expectations are often unrealistic.  One side may feel that a firm is worth one figure.  The other side may feel that they’re worth much more than what they’re being offered.  With people also comes communication and integration challenges.  The larger the acquisition, the more people affected, and the more potential for problems.  It’s no wonder that less than 20% of acquisition searches are successful.

Even though acquisitions are difficult to execute, it doesn’t mean that firms shouldn’t try.  They might, however, be able to still accomplish their growth goals by doing executive and acquisition searches simultaneously.  When acquisition searches are conducted, firm owners are often not looking to sell. It’s often difficult, especially when multiple partners are involved, to motivate all of them to consider being acquired.

Executive searches are similar in that the people contacted are gainfully employed, and not seeking new employment.  Even though many of these prospects will not be interested, we’re talking about motivating one person versus a group of people in an acquisition. The pool of prospects is also likely to be larger with an executive search.  As a result, executive searches usually have about a 70% probability of success. By combining both processes, firms improve their chances of reaching their strategic growth goals.

Suppose, for example, an 800-person Civil Engineering firm, headquartered in New York, wants to expand their Transportation services to the Boston market.   By doing both executive and acquisition searches, they’re able to expand their pool of prospective leaders for their Boston operations.  The firm, for example, will then be able to identify prospective leaders from the large firms, who wouldn’t be available by doing an acquisition search alone.  If the firm can hire a leader for the Boston office, he/she might then be able to bring a following of employees, in addition to client relationships.

An acquisition might be a way to supplement the new hire with a backlog and additional support staff.  On the other hand, the acquiring firm may decide that the best leader comes from the firm that they’re able to acquire.  But in this case, the firm Principals have choices.  Two years later, the firm could realistically be 1,000+ people because they decided to undertake the two projects simultaneously.

Both types of searches (acquisition and executive) are very difficult to execute, and neither one is guaranteed to work.  They involve people, who can often be unpredictable.  That makes outcomes difficult to control.  Doing both simultaneously, however, increases the probability that firms interested in growing their profits will be successful.

About the Author

John Kreiss
John is an experienced Executive Search Consultant specializing in the recruitment of AE industry talent. For over 15 years he has advised and assisted architecture, engineering, planning, landscape architecture, and environmental firms in filling key positions and making strategic hires.

Comments are closed.