Headhunters: Matchmaking in the Labor Market - Book Review

Administrative Science Quarterly, Dec, 2002 by James N. Baron

William Finlay and James E. Coverdill. Ithaca, NY: Cornell University Press, 2002. 203 pp. $29.95.

Finlay and Coverdill provide an engaging and intriguing glimpse into the relationships among headhunting firms, their client firms, and prospective job candidates. Their study focuses on contingency headhunters--those who receive a fee that is contingent on successfully locating a candidate who is hired--and their client firms within a major metropolitan area in the southeastern United States. The authors make use of a rich, diverse archive of data they gathered through semistructured interviews with headhunters and their clients; fieldwork at various headhunting firms; attending industry seminars and conferences; analyzing industry newsletters and various audio, video, and written training materials; and a mail survey they conducted of recruiting firms belonging to a statewide personnel services association.

What emerges is a fascinating portrait of how headhunters--despite their vulnerable and highly competitive role as labor market intermediaries--deftly exploit information, contacts, emotion, and various interpersonal stratagems to lubricate transactions between hiring firms and job candidates. A particularly distinctive facet of the headhunter's role is the need to manage impressions and close the sale on both sides of the transaction: because the most attractive candidates for any given position are usually the individuals least likely to be searching aggressively for work (because they are highly valued by their current employer), headhunters must not only secure assignments from hiring firms but persuade reluctant candidates to consider "jumping ship" from their current firm. Finlay and Coverdill describe a menu of tactics that headhunters employ toward that end, encouraging candidates to view their current employer cynically, in purely instrumental terms, and focusing prospective hires on "wounds" or aspects of their current employment situation that are "hot button issues" that the headhunter can exploit. They also describe how headhunters must often circumvent resistance from human resource (HR) professionals and line managers in their client firms, who view headhunters as intruding on their prerogatives in hiring employees.

The authors' fieldwork leads them to conclude that headhunters often perpetuate stereotypes with respect to age and physical appearance. Their findings with respect to gender and race are more ambiguous. They find little evidence of explicit attention by headhunters to gender and race (except in engagements targeted specifically as "diversity searches"), but the authors suggest that the premium placed by their clients on social similarity, combined with the powerful incentives for headhunters not to rock the boat, can perpetuate gender and racial inequalities. Thus, reliance by firms on labor market intermediaries doesn't necessarily reduce discrimination and, in fact, may sometimes have the opposite effect.

Consistent with network perspectives on brokerage, Finlay and Coverdill find that headhunters often seek to minimize direct interactions between clients and potential candidates, monopolizing information and manipulating perceptions on both sides. Interestingly, their analyses suggest that such brokerage opportunities actually increase as the stakes of the parties in the transaction increase. One might surmise that both client firms and prospective candidates would have ample reason to confront one another directly, given the high stakes each party (especially the candidate) has in the outcome. Yet Finlay and Coverdill argue that it is precisely because the stakes are so high that intermediaries can play such a valuable role--preserving confidentiality, managing expectations, and buffering the parties from the social, emotional, reputational, and other risks associated with courtship.

Although headhunters seek to build reputations with client firms and prospective candidates, there seem to be few enduring sources of trust on which to build lasting relationships, at least based on economic considerations. The business is fiercely competitive. Clients often misrepresent matters to headhunters (e.g., claim that a search is exclusive when in fact multiple headhunting firms have been engaged). It is difficult for headhunters to create and sustain enduring partnerships with clients (e.g., due to resistance by HR personnel and frequent departures of managers at hiring firms), and because the contingent-fee headhunter is only paid after successfully placing a candidate, client firms often have an incentive to engage multiple headhunters. Given how infrequently candidates change positions and the existence of multiple headhunters, candidates presumably also may be tempted to embellish the truth when dealing with headhunters. And everyone involved knows all of this.

The authors make sense of this puzzle by emphasizing that (1) hiring is a social activity; (2) headhunters often acquire invaluable information by virtue of their social connections with clients and candidates; and (3) it is precisely the emotion and potential embarrassment involved in the hiring process that creates a role for skilled third parties to mediate interactions between the parties. Hiring managers and job candidates may know their own preferences, intentions, and aptitudes well, and they certainly have high stakes in the outcomes. But headhunters broker transactions between these two constituencies on a daily basis (and hope to continue to do so in the future), which ostensibly gives them greater ability and incentive to be dispassionate than hiring firms and candidates might be on their own. Moreover, by controlling the information that each party receives about the other, headhunters are able to create more psychological "bang for the buck" than might obtain if the parties negotiated all the details directly. A key role for the headhunter is not just filling job openings with competent people in a timely manner, but doing so in a manner that leaves both the employer and candidate content, committed, and copasetic. Finlay and Coverdill also argue that by running interference between parties, headhunters are often able to preserve enduring long-term relationships of value to their clients. For instance, client firms are often tempted to recruit personnel from their customers, suppliers, and business partners; by delegating their searches to a headhunter, a client firm can often minimize the fallout that would occur by directly poaching talent from organizations with whom it has key long-term relationships.