The suitability of social media for headhunters to recruit managers from and for the fashion business

TABLE OF CONTENTS

TABLE OF FIGURES

APPENDIX

LIST OF ABBREVIATIONS

ACKNOWLEDGEMENT

ABSTRACT

1 Introduction
1.1 Initial situation und problem description
1.2 Objective of this thesis
1.3 Methodological approach
1.4 Layout and structure of the thesis

2 Basic principles and preconditions
2.1 Importance of the German fashion business
2.2 Theoretical basic considerations and assumptions

3 Tasks of personnel consultancies and headhunters
3.1 Headhunting as a service provided for the human resources area
3.1.1 Terms used
3.1.2 Development of a secretive business sector
3.1.3 Economic explanation of the development
3.2 The task of a headhunter – How does the daily routine work?
3.2.1 Consulting procedure
3.2.2 Legal basic conditions
3.3 The executive search sector: Recruiting trends and social media
3.4 Headhunters and the fashion business

4 Characterization of the term "social media" Definition and development
4.1 Characterization of the term "social media"
4.2 Social networks
4.3 Significance of social media for personnel work

5 Online instruments for personnel recruitment
5.1 The traditional Internet approaches – Erecruiting
5.1.1 General online job databases
5.1.2 Online job databases for specialists and executives
5.1.3 Industryspecific online job databases
5.1.4 Summary
5.2 Social media in personnel recruitment
5.2.1 Reasons and possibilities for the use of social media
5.2.2 General communities
5.2.2.1 Facebook
5.2.2.2 Twitter
5.2.2.3 Google+
5.2.3 Business communities
5.2.3.1 XING
5.2.3.2 LinkedIn
5.2.3.3 Anangu
5.2.4 Summary

6 Empirical survey: Detailed analysis of interviews conducted with headhunters in Germany
6.1 Introduction of the questionnaire
6.2 Presentation of the procedure and the target group
6.3 Analysis of the particular questions
6.3.1 Sociodemographic data
6.3.2 Professional and private behaviour related to using social networks
6.3.3 Estimation of the significance of social media for recruiters
6.3.4 Measurement of the usetosuccess ratio of social media in the search for candidates
6.3.5 Scope of use and the specific reasons for the use of social media in recruitment
6.3.6 Search for additional information to assess candidates
6.3.7 Recruiters' requirements for social media
6.3.8 Changes in way of working due to social media
6.4 Supplementary results and personal comments

7 Potential of social media for headhunters – Overall interpretation on the basis of relevant detailed results
7.1 Relevance of the different social media portals for headhunters
7.2 Gender and agerelated relevance
7.3 Potential of social media for recruitment in the fashion business
7.4 Estimation of the significance of social media for the recruiting process
7.5 Recruiters' needs and requirements related to social media

8 How can social media support the recruitment of executives – A response that takes into account the results of the analysis
8.1 Concrete recommendations for action
8.1.1 Use of social media to analyze a client's company
8.1.2 Use of social media during the research phase
8.1.3 Use of social media during the followup phase
8.2 Summary

9 Social media and the executive search sector – Conclusion and outlook

Reference List:

Bibliography:

TABLE OF FIGURES

Figure 1.1: Trends and Challenges in Recruiting 2011

Figure 1.2: External personnel recruiting by companies

Figure 3.1: Personnel recruitment process

Figure 3.2: Headhunting process

Figure 6.1: Headhunter survey results, response to question 19

Figure 6.2: Headhunter survey results, response to question 1

Figure 6.3: Headhunter survey results, response to question 3

Figure 6.4: Headhunter survey results, response to question 4

Figure 6.5: Headhunter survey results, response to question 18

Figure 6.6: Headhunter survey results, response to question 9

Figure 6.7: Headhunter survey results, response to question 11

Figure 6.8: Headhunter survey results, response to question 12

Figure 6.9: Headhunter survey results, response to question 15

Figure 6.10: Headhunter survey results, response to question 16

Figure 6.11: Headhunter survey results, response to question 17

APPENDIX

Appendix 1: Blank questionnaire for the empirical part

Appendix 2: Evaluation of the Headhunters survey - Table tapes

Appendix 3: Evaluation of the Headhunters Survey - Statistics frequency distribution

Appendix 4: Evaluation of the Headhunters survey - user behavior statistics

LIST OF ABBREVIATIONS

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ACKNOWLEDGEMENT

I would like to offer my sincerest thanks to all those who supported me in preparing this master thesis. First of all, I would like to thank Ms Christiane Bleuel, who assisted me with her invaluable advice, suggestions and understanding as reviewer for my thesis. Many thanks also go to the headhunters who accompanied the empirical survey and poll with a high degree of commitment and many useful tips and without whom it would not have been possible to compile this work. I would especially like to thank my wife for incessantly encouraging, motivating and supporting me during the many months of preparatory work on the thesis, often until deep into the night. In addition, thanks also go to my father-in-law for proofreading the master thesis, for his comments and suggestions for improvement and his moral support.

Düsseldorf, November 2012 Robin Schlesinger

ABSTRACT

In taking on a recruiting assignment headhunters shoulder an enormous responsibility within the framework of the search for competent qualified executives. Thanks to the development and expansion of a wide range of social media platforms, there are numerous, partly unknown, possibilities and means available to meet this challenge and select and identify suitable candidates who are willing to perform and also have a personal integrity. This master thesis examines the exciting question of whether social media are suitable for the recruitment of executives by headhunters, what new opportunities and tasks result from their use and to what extent they are already being used by headhunters, in particular in their search for executives for the fashion business in Germany. Using social media purposefully and systematically, the suitability of potential candidates can be verified prior to probationary periods or even personal interviews in a much better way than in former times. In these times of demographic change, skills shortage, "War for Talents", companies increasingly doing their own recruiting conducted by personnel managers, growing significance of social media and resulting increase in information about persons and companies on the Internet, headhunters in particular must prepare for these old and new trends. The empirical study presented in this master thesis analyses the current situation with regard to this development. Taking into account the results from the research discourse on the topics of headhunters, social media and the fashion business and including the results of the analysis of the study, concrete recommendations for action and potential for the future use of social media in the recruiting of executives by headhunters are made and elaborated.

1 Introduction

1.1 Initial situation und problem description

Seldom over the past few years have topics been discussed in specialist forums and magazines of the human resources community as intensively and extensively as the use of social media for recruiting and employer branding. Studies such as the Social Media Recruiting Study 2012 do prove this and demonstrate at the same time that the use of Web2.0 methods in the search for personnel in Germany has increased from 61% up 74% (Zils 2012: p.4).

Social media are considered to be a worldwide trend (Weinberg 2010). Growing numbers of people place their personal data on the Internet. Thus, social networks provide an almost unlimited pool of data on potential candidates for the recruitment of executives. One thing is certain: The topic is here to stay. The number of nearly one billion Facebook users worldwide in 2012 makes a powerful statement (Facebook 2012). According to a recent study of the German Federal Statistical Office (2012) 53% of all Germans ‑ and even 91% of those between the ages of 16 and 24 years ‑ are active in social networks. Thus, almost every job holder of tomorrow is already a member of a social network today. No wonder that authors like Meister (2007: p.90) consider social media to be a permanent fixture among the personnel marketing and recruiting trends.

However, the question is to what extent is social media recruiting still hype and to what degree has it already become a real benefit for the daily business in recruitment.

Using the example of the fashion and lifestyle business, this master thesis examines the exciting question of whether and to what extent these platforms and the information that can be found there are suitable for personnel recruiters in their search for executives. In particular for headhunters, the answer to the question of which tools and strategies are best suited for recruiting specialists and executives by using social media is a matter of great urgency if they want to remain competitive and successful. At times when, thanks to the new possibilities offered by social media, companies are increasingly conducting their own searches for suitable candidates, a headhunter not only has to be well versed in this area, but also has to create competitive advantages to be able to offer (again) relevant services for companies. The subject matter of this analysis is limited to Germany that is to say to the German fashion industry, to headhunters in Germany and to social media platforms that are relevant for Germany.

In an initial approach to the topic of this master thesis it is necessary to take a look at the current initial situation in personnel recruiting.

Within the framework of the study Recruiting Trends 2011 Weitzel et al. (2011: p.6) worked out the five most important cross-company recruiting trends as well as the five most important internal challenges regarding recruitment.

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Figure 1.1: Trends and Challenges in Recruiting 2011 (Source: Study Recruiting Trends 2011)

The most important cross-company recruiting trends include the following issues: the demographic change with its inherent change in the applicant pool; the skills shortage resulting in a reduced number of applicants; the Bologna Process with its changeover to Bachelor and Master programmes; new communication channels via social media, as well as the economic crisis, which dictates tougher targets regarding efficiency and effectiveness. This gives rise to key challenges with relevance for companies. Within the framework of this master thesis, some of these trends are also of relevance to headhunters.

Skills shortage, that is to say a reduced number of qualified candidates, plays an important role. In the German employment market, specialists are not available in sufficient quantity (Kolodziej 2012: p.4).

A study conducted by McKinsey Deutschland (2011) clearly shows that personnel recruitment is becoming increasingly challenging, thus making it more and more difficult to fill open positions.

If a company does not find qualified employees, this is called skills shortage. This can have negative effects on sales and economic growth as well as further expansion, or could cost the company a great deal of money. Work as a factor of production and thus the employees, too, still represent one of the most important factors for the success of a company (Karagah 2010). The search for qualified personnel is becoming increasingly difficult for personnel managers. Aside from the traditional employment market, an additional applicant market has developed in the meanwhile. Companies no longer simply wait passively for someone to apply for certain job offers. Instead, they search specifically themselves for specialists and executives; or they engage specialised personnel service providers to conduct the search. In the course of globalisation this search is being hampered by the fact that, due to the supra-regional nature of employment and applicant markets, suitable employees can only be found with increased effort. Owing to the competition for candidates with similar qualifications the companies are engaged in a so-called War for Talents (Strack et al. 2009: p.21) with each other. This poses a new big challenge to recruitment.

In addition, this situation becomes still more difficult because of the rise in fluctuation and the demographic change (Bierey 2009: pp.6-7).

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Figure 1.2: External personnel recruiting by companies (Nicolai 2009: p.58)

Such a situation requires different ways to be used to make potential candidates aware of positions to be filled. In doing this, companies can proceed in a passive or pro-active way.

In particular, regarding the filling of executive positions, the variety of possible procedures is decreasing. In addition to the change on the employment and applicant markets there have been other significant changes in recent years. Besides mechanisation and automation of work processes that have persisted for years, digital communication and the interconnected world have continued to spread increasingly via the Internet. Whereas traditional tools for personnel recruitment no longer suffice in the War for Talents to recruit suitable specialists and executives, the Internet and here especially Web2.0 provide various new and thus alternative tools and means for recruiting, such as studies like those carried out by Schneider (2012) or Kupka (2010). The technical possibilities and the exchange of information and communication via Internet have developed at very high speed. According to the above-mentioned study of Weitzel et al. (2011) on Recruiting Trends 2011, the 1,000 largest German companies expect to have problems filling 36.4 % of their vacant positions, and even 4.3 % cannot be filled at all. Participants in this study believe that the most striking lack of suitable candidates can be found in the areas of research and development as well as information technology.

Skills shortage has been intensified among other things by reductions in resources for recruitment within companies owing to the economic crisis. In consideration of these developments it is no surprise that almost seven out of ten companies believe that in the light of the economic situation it will become even more difficult in the future to find qualified specialists and executives on the labour market. Thus, this trend, too, will influence the work of headhunters. In times of economic crisis there must be an on-going optimisation in terms of effectiveness and efficiency, not only from the company's point of view.

It is hard to imagine our daily life without the Internet. Since the development of Web2.0 in particular, it has become a new platform that is perceived and used differently, where users organise themselves and communicate with each other, in social networks for example. This applies especially to the GenerationY (Hansen 2011), or the Millenials (Meyer 2011), meaning the generation of those born after the year 1981 who were the first to grow up mainly in an environment composed of the Internet and mobile communications (Weise 2011: p.15). Leisure-time activities and media behaviour have changed. Instead of reading newspapers many members of this generation keep themselves informed via the Web. Today, the upcoming generation of young leaders is already part of the "Digital Natives" (Palfrey & Grasser 2008: p.1). In contrast to the people born before the 1980s, also called baby boomers, GenerationX etc., these potential candidates grew up with an affinity for technology.

The results are largely confirmed by the current study on Recruiting Trends of 2012 (Weitzel et. al. 2012: p. 23).

In addition, there is also an experts' look into the "crystal ball". The recruiting managers of Germany's largest companies expect the recruiting trends of social media, Internet recruiting, demographic change, skills shortage and employer branding to become still more important. Mobile recruiting that provides information to potential candidates via smart-phone is another trend; however, experts say that today it does not yet play an essential role in the daily business of recruiters. In particular with a view to the future this is of essential relevance regarding the subject of this master thesis. According to a study of the Institute of Electronic Business (Sonne & Schmidt 2009: p.1) many companies are not yet familiar with the change in distributing knowledge and information; although it is high time to adjust to the employees of tomorrow or partially of today, the so-called Digital Natives. Special attention is put to urgently needed identifying of suitable strategies for the recruitment of specialists and executives.

The author's interest in this issue arises from a practical experience when searching for a specialist for a leadership position in the fashion business. As an initial search via traditional channels such as print media had not been successful, the subsequent active use of social media including employing a headhunter finally led to the desired result. In addition, there is the author's personal curiosity and a rich wealth of experience in using social media, in particular networking via business networks.

Analysing different platforms this master thesis focuses in particular on the German fashion business. This branch of business is small and highly specialised. Here, the search for and employment of specialists and executives is almost entirely carried out by a manageable number of recruitment companies. The author has many years of professional experience of his own and extensive know-how of the sector's interior view; this is why social media as a trend for recruiting personnel should be analysed in a field that is generally open for trends, novelties, lifestyle and vogue. The assumption that the fashion sector is per se more innovative and thus faster in implementing new trends has also been decisive when narrowing down the subject matter of subject of this analysis.

Moreover, the sector is also particularly well suited for analysing the significance of social media for recruitment. One reason is that the success of specialists and executives, in particular in the German fashion sales business, depends on the level of networking with important industry representatives; another reason is that affinity for fashion and sense of lifestyle can be displayed and verified via social media portals much better than various other qualifications.

The initial situation of this master thesis can be best described with the basic recruiting trends; as already shown, these trends may correlate, can be mutually dependent or reinforce each other.

It becomes increasingly difficult for companies from the fashion business ‑ like for other companies, too ‑ to find highly qualified employees for even more specific positions. The option of outsourcing the recruiting process to external service providers such as headhunters in particular in the search for executives offers a lot of potential regarding increased efficiency and effectiveness in personnel recruitment.

Web2.0 and in particular social networks are becoming more and more important. The constantly increasing number of users and the steady emergence of new social networks on the Internet are just two indicators for this development that is accompanied by changing lifestyle habits. Also in the area of human resource management or recruiting of specialists and executives by headhunters, there is intensified competition for coveted personnel resources (Bröckermann 2009: pp.61-62). On the one hand, the basic problem arises from the increasing significance of social media in general; on the other hand, it is due to the resulting partially changed requirements for the executive search sector, or its decreasing relevance regarding companies conducting their own recruiting via social media. Specialists from the headhunting sector such as Steppan (2011a: p.21) consider the work of headhunters unlikely to change in a different way than the rest of the world with the people's changed behaviour in communications and with rapid technological developments. All the more relevant is therefore the question of whether there is a potential for social media for the headhunters' work as a tool and an advantage in competition when applied in the right way; in other words, under the term of the title of this master thesis, the question is if social media is suited for the search for executives.

1.2 Objective of this thesis

The objective of this master thesis is to gain insights into the suitability of social media for recruiting, in particular conducted by headhunters, when searching for specialists and executives, taking the example of the fashion business. Up to now, there have been almost no scientific studies on concrete solutions and practical guidelines for social media recruiting by headhunters. Thus, a lack of a theoretical deep knowledge base can be observed. However, without any theoretical specialist know-how the practical use of social media in the recruiting process can only keep the status of presently successful practical examples or pure experimenting. Up to now, it has been unknown which levers headhunters can use efficiently to utilise social media as successfully as possible. Existing studies in the field of web recruiting refer to the characteristics and modes of operation of websites (Allen et al. 2007 or Braddy et al. 2006) or those of career platforms (Cappelli 2001 or Adam 2009).

To this day, no empirical studies on social networks such as Facebook and their concrete use exist at all. Concrete strategies and recommendations for action for headhunters regarding the practical handling and basic theoretical rules that should be adhered to exist at best only in a very initial approach; or they have been completely absent in specialist literature so far.

The results from this study shall finally provide a basis to identify development potential and to make recommendations for action related to the recruiting strategies of headhunters when using social media.

1.3 Methodological approach

Besides the presentation of the theoretical basis of the relevant sectors and topics and their respective developments an empirical study is carried out.

The theoretical part consists of initially four chapters. At the beginning, there is a presentation of the fashion business and its suitability for the subject matter of this master thesis. Then, there is an overview of the history of development, the existential basic conditions as well as an analysis of the headhunters' tasks. After that, the significance of social media in general as well as within the context of the topic discussed in this thesis is examined. Then, some individual social media platforms which are special for personnel recruitment are analysed.

Within the framework of the empirical part of the master thesis, the relevance and possible use of social media for headhunters from the fashion business is investigated by means of an Internet-based survey. Here, only headhunters who recruit executives for the lifestyle and fashion business in Germany were asked to take part digitally, partly after they had been contacted personally. As to the results of the survey, the significance of social media for the headhunter sector is then analysed in the analytical part of the thesis; and possible strategies, fields of application and potentials for development for their use in recruitment are derived.

1.4 Layout and structure of the thesis

The master thesis is divided into nine chapters in total. After the introduction there is the theoretical part, which comprises Chapters 2 to 5. Here, the second chapter gives an overview of the German fashion business, its characteristics and suitability for this analysis as well as fundamental general requirements.

The third chapter displays the basis of personnel recruitment carried out by headhunters, their tasks and the problems they are facing. The fourth chapter gives a definition of the term "social media" and explicitly of social networks and their significance for the recruiting process. The fifth chapter deals with analysing and filtering social media platforms which may be relevant for the search for executives, possibilities of these platforms as well as the services provided by them. The main focus of this master thesis in the empirical part is Chapter 6; here, the results of the empirical survey of headhunters for the fashion business are described and analysed. Within the framework of the two subsequent chapters the results of the analysis from the empirical part are presented in relation to new findings and assumptions stated in the theoretical part and then interpreted accordingly; the analysis regarding suitability and potential of social media for headhunters in recruiting is assessed and evaluated. The last chapter consists of a summary of the results studied as well as an outlook on the opportunities for development of the headhunters' work with regard to social media.

2 Basic principles and preconditions

This chapter describes and analyses the necessary basic principles and preconditions that are decisive for discussing the subject of this master thesis. In particular, the importance of the fashion business is examined. On this basis, the theoretical basic considerations are broadened in the second section of this chapter; and depending on the results described in the first section, fundamental assumptions and preconditions for this master thesis are developed and drawn up. The field of study of this thesis has been limited to the fashion business, specifically the German fashion business. The decision is based on the fundamental consideration that this business is better suited than others for analysing the trend of social media regarding the headhunters' work. The assumption set forth is analysed and backed up in the following two sections.

2.1 Importance of the German fashion business

A popular German saying states "There's life in the old dog yet" (Dieterich 2012). This is particularly true for the German fashion business. Owing to the important structural changes in the past decades and the relocation of production abroad a large number of German fashion companies were no longer able to keep pace. However, despite dismal prospects, thanks to its high flexibility and innovative strength, the German textile and fashion business has regained its position of being an important economic factor and is now even a global leader in some areas. The general association Textil & Mode (Jacoangeli 2012) assumes in its economics statistics of 2012 that currently the strong and innovative brands and designs of German fashion companies are in demand worldwide and will continue being so in the future, and this very often without competition. According to Dieterich (2012) this is also an explanation for the steadily increasing need for manpower that, owing to the diversity in the fashion business, offers a large number of modern career opportunities, ranging from the business economist to the artist. This wide range of professions includes among others mechanical and systems engineers in textile technology and finishing, apparel sewers and tailors, product designers, technicians in heavy-duty fabric goods manufacturing, textile laboratory technicians, sales managers, IT specialists, logisticians as well as internationally active purchasing and sales personnel. In a recent survey of TextilWirtschaft (2012) conducted in Germany, 1,100 specialists and executives where asked about their reasons for choosing a profession in the German fashion business.

78% of the participants mentioned exciting and diversified activities as a reason, 71% their great interest in design and fashion trends, 59% indicated the joy of creative work and 53% mentioned the international character of the work.

High fashion made by German fashion designers is well known on the catwalks of Paris, New York and other fashion metropolises. Karl Lagerfeld, born in Hamburg and creative mind of the French house of Haute Couture Chanel, and Wolfgang Joop, who is very successful today with his label Wunderkind, have been among the global players for decades. Bernhard Willhelm, Markus Lupfer, Stephan Schneider or Daniela and Annette Felder belong to the younger generation that is successful between Paris, London, Antwerp and New York. In Germany, it is Berlin that has become the trendy place of the fashion scene (Horn 2010). The world of fashion meets twice a year at the Berlin Fashion Week and at the streetwear trade fair Bread & Butter. There, nearly 700 fashion labels compete with the metropolises of London and Paris. Since the German reunification in 1990, the game with identities and traditions has led German fashion designers to an independent and self-confident style (Tatsachen über Deutschland 2012). To many fashion-conscious people in Germany, creativity and individuality are more important than status symbols. In particular German fashion blogs such LesMads, Modepilot, Stilinberlin or Styleclicker reinforce the importance of the German fashion business and increase their relevance and expressiveness thanks to up-to-date trends and topics and a steadily rising popularity (Horn 2010).

The German Fashion Modeverband (Tatsachen über Deutschland 2012) sees Germany as the second largest export country in fashion, and at the same time, Germany has become an important market for international fashion brands (Horn 2010). However, many companies are not perceived as being German because the names of their labels represent a kind of international camouflage. German fashion companies were among the first to focus on "green fashion" and emphasise sustainability and fair trade (Tatsachen über Deutschland 2012). German product design has the image of creating well-defined and functional products. Design made in Germany has a strong international reputation.

2.2 Theoretical basic considerations and assumptions

In accordance with these findings regarding to the German fashion business, this thesis is based on the strong conviction that the fashion business and its employees are in general much more open and have a higher affinity for trends, creativity and interconnection than other more conservative business sectors.

This becomes particularly clear upon looking at the analysis of the results of a survey on the reasons regarding the choice of profession within this sector (TextilWirtschaft 2012). Social media, too, represent a current trend as they are exciting and diversified. They continually demand creativity, for example regarding the type of language and the content; a content that has to be steadily reinvented and kept as relevant as possible, to be posted by the users in order to stay in touch with their contact persons, friends, fans or followers (Tamblé 2012). The suitability of the German fashion business for the subject matter of this master thesis also arises from the understanding that this business sector is based on a fast, dynamic and open communication culture; this is also proved by the author's own professional experience (cf. also chapter 3.4 "Headhunters and the fashion business"). Fashion companies must present new trends that are as innovative and up-to-date as possible, and they must do this constantly and at close intervals. German fashion companies have to fight a battle for the best places in shops and wardrobes as well as in direct competition on the catwalks worldwide. Another fundamental assumption here is that social media are part of the standard repertoire of executives in the fashion business, still more than in other more traditional sectors. This assumption can be made because both subjects have some things in common: on the one hand, the necessary affinity for technology (e.g. in manufacturing) due to the high speed and constant communication of trends and innovation as well as the individual character important for the desired success; and on the other hand, the required creativity and a compelling need for well-functioning interconnection (e.g. in the area of fashion sales). The degree of interconnection as well as a functioning marketing are not only key factors of success when using social media, but they also play an important role for the success of brands and fashion labels for which numerous advertising campaigns have been successfully run on the awareness that the success of a label has much to do with brand trust and the matching emotionality. Based on these findings and fundamentals, the assumption analysed in this section can be regarded as proved, meaning that fashion business is better suited for examining the subject matter of this thesis than other business sectors. Social networks play a prominent role for the success of fashion companies (Mode PR in Social Media 2010).Headhunters who search for executives for the fashion business can use social media in their recruitment process to select and appraise candidates, as the information density of social networks in this area is much higher than in other sectors. This thesis, and in particular its empirical part, shall find out whether and to what extent these possibilities are already being used by recruiters today, especially for the fashion business in Germany.

3 Tasks of personnel consultancies and headhunters

Jung (2008) defines the objective of personnel recruitment as the procurement of employees needed in the required quantity and with the required qualifications at the appropriate moment for the position in demand, with a performance-oriented income in line with the market. In particular, finding suitable executives often represents a major cost factor in the course of the search process; however, it is an essential factor of business success after hiring qualified executives (Leciewski & Söhlemann 1999: p.26).

3.1 Headhunting as a service provided for the human resources area

Headhunting is a specific personnel service that companies can make use of within the framework of personnel recruitment of specialists and executives as an alternative to conducting the search themselves. On the one hand, outsourcing can minimise the costs for this process, and on the other hand, the chance of recruiting a highly qualified candidate can be maximised thanks to an active and professional search.

3.1.1 Terms used

Before proceeding to a more detailed examination of the service of headhunting it is necessary to define and classify the terms of headhunting, personnel consultancy and personnel service. According to Steppan (2011a: p.16) headhunters are personnel consultants specialised in approaching executives personally.

Executive search also means the search specialised in directly approaching executives and is used here as a synonym, as is usual in practice. Headhunting is a special type of personnel consultancy. Frisee (1992) defines the term of personnel consultancy in the narrow sense of the word as "the search for and selection of executives on behalf of a company" (Frisee 1992: p.38).Besides the special type of direct approach personnel consultants also use job advertisements for the recruitment. In this narrow definition personnel consultancy is at first a part of employment exchange services. If the term personnel consultancy is understood more broadly, it includes "any services provided with the support of external consultants in the area of operational human resource management" (Kraft 2002: p.20).

In doing this, personnel consultancy can be regarded as a part of management consulting.

Here, the terms "personnel consultancy" and "personnel services" start to merge into each other. The term personnel services are defined as "the external and market-based provision of personnel functions" (Vosberg 2003: p.22).The term personnel service providers is primarily used for personnel service agencies or temporary employment companies that supply temporary workers to companies for a certain time and in accordance with the Arbeitnehmerüberlassungsgesetz [German Temporary Employment Act]. The complete range of services rendered by personnel service providers also includes: personnel procurement and staff-leasing, which is a mixture of temporary work and recruitment, outsourcing of personnel as well as project management, interim management or outplacement consulting.

This master thesis focuses on personnel service providers who search for and place executives on behalf of companies. To clearly distinguish the service provided by personnel procurement from employment exchange services a consistent differentiation has been made regarding these two terms. Personnel procurement is financed by the employers and should satisfy their demand for employees who in general are not available in sufficient quantity as the qualifications or requirements needed are difficult to get. Employment exchange services, however, are used by job seekers having problems in finding appropriate work. Here, the service provided is paid for by the job seekers themselves in case of private employment exchange services or financed by the German State in case of public authorities who contribute to reducing the number of unemployed.

According to Hofmann & Steppan (2011) the requirements for headhunters, however, go far beyond pure personnel service when it comes to filling executive positions. The preface of the German book "Headhunter: Blick hinter die Kulissen einer verschwiegenen Branche" states in a self-critical way that personnel consultants are, to a quite considerable extent, responsible for the undesirable developments in our economy (Hofmann & Steppan 2011: p.5). An example of this is the insolvency of U.S. investment bank Lehman Brothers: As per the audit report, there was no evidence of wrongdoing on the part of its managers. According to Hofmann & Steppan, it is the personnel consultants' duty to fill positions within the management and supervisory bodies not only with people who are competent and high in performance, but also with personalities who show integrity; persons who stand for the positive values of the Western industrial societies as well as an adequate sense of duty towards owners, employees, customers and society. No wonder that headhunters are also called kingmakers (Hofmann & Steppan 2011: p.6). The work of personnel consultants or headhunters thus represents a critical factor of success in the overall economic situation.

3.1.2 Development of a secretive business sector

First of all, this section provides a description of the historical development of the sector. In the subsequent chapter the economic conditions for its emergence have been worked out.

At the beginning of the past century, all services now being offered by headhunting companies were rendered directly between the employer and the employee or indirectly by the personnel department within a company (Vosberg 2003: p.150). In doing so, leadership positions within the company were mainly filled from internal sources (Steppan 2011a: pp.14-15). Owing to the changed economic and legal conditions, the increasing differentiation and specialisation of the functions within the companies as well as diversification into new business segments, it is no longer necessary to fill leadership positions only with internal executives, but also with qualified executives from outside the company (Gottwald 2004: p.8-10). After the Second World War, owing to the rising need in executives the first personnel consulting companies were initially founded in the U.S.A., such as Boyden International, Heidrick & Struggles, and Korn/Ferry that still today rank among the leading personnel consulting companies. Maximilian Schubert has been among the founding fathers in this sector in Germany since 1961. From 1964 on, American consulting companies also started to settle in Germany. At the beginning of the 1970s, other consulting companies followed from other European countries, such as Egon Zehnder from Switzerland, who have been successful to this day in Germany. From the end of the 1970s up to the 1980s, many former consultants set up their own businesses, the so-called spin-offs (Murmann 1999: p.128).From then to now, the field of action of headhunters has expanded from the search for top executives to include placement at middle and lower management levels as well as filling positions where special technical know-how is required.

In Germany, this expansion was possible thanks to the suspension of the Federal Labour Office's monopoly on placing job-seekers as of 1st of August 1994 (Föhr 1995: p.150). Before that, there were exceptions only for certain professions such as artists or executives. Moreover, headhunters also extended their activities along the process chain of provision of personnel, from analysing the situation to prolonged support of the new employee (follow-up). In addition to other economic aspects and the changed legal conditions, this enhancement has been one of the reasons for the sector's growth rate since 1994 (Gottwald 2004).

3.1.3 Economic explanation of the development

Using the service of headhunting and thus outsourcing certain recruiting steps, companies are able to generate savings in time, administration and costs related to the research for and selection of personnel. In addition, there are competitive advantages when filling positions with optimum candidates. The following chart shows the personnel recruitment process according to Knapp (2010: p.137) in a modified form:

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Figure 3.1: Personnel recruitment process

The steps 2 to 4 can be assigned to headhunters, in part or entirely. Thanks to outsourcing and the resulting professionalization the companies resolve a problem that in theory is designated as a market failure and market weakness (Spreman 1990). This consideration is based on the signalling theory, an often-used theoretical idea to explain correlations in the areas of recruiting and personnel marketing (Kupka 2010: p.11). Here, the starting point is an asymmetry of information between the employer and the potential employee. In practical terms, this means that the reason for the mentioned problem is that companies have much less information on qualifications, motivation and interests of potential candidates than they themselves; on the other hand, employees have only little or no information on the employers' work conditions or the actual tasks. The exchange of labour for compensation becomes more effective for companies and potential employees when well-aimed measures are used to provide and forward information. Therefore, functional weaknesses when initiating employment relationships, in particular with executives, constitute a necessary precondition for the economic justification of the executive search business sector (Vosberg 2003: pp.151-152). Headhunters specialise in finding, testing, judging and selecting executives who fit the previously analysed position, thus acting as intermediates between the potential candidate and the searching company. Since these services are rendered not only with reference to one company or one position, but for different clients in parallel, there are advantages in terms of operating costs that can be realised from the synergies that provide opportunities to make profit for the companies as well as the headhunters according to Gottwald (2004: p.10).

3.2 The task of a headhunter – How does the daily routine work?

To choose the right headhunter it is important to develop an understanding of the business sector, the processes and the framework within which the headhunter is acting (Rapp 2011). Briefly, a headhunter is paid a commission from the employer for placing suitable personnel. According to Steppan (2011b: p.259-260), to achieve the given objective, after being engaged to fill a vacancy, the tasks of a headhunter include at least the following steps: thorough analysis of the client's situation, definition of the job specifications (job profile), systematic search, matching the job profile with existing candidates, conducting first interviews, collecting information about the candidate as well as implementation of a profiling, presentation of the candidates, including confidential reports on them, obtaining references, advising the candidate and the client until a contract is concluded and, if necessary, providing further support until the executive in question has been fully integrated into the company.

3.2.1 Consulting procedure

Headhunters are personnel consultants specialised in directly approaching potential candidates. Murmann (1999: p.127) defines the term "direct approach" as "a method applied in researching executives and specialists where the interest of potential candidates in a vacancy should not be aroused by an advertisement, but directly by a personnel consultant [...] in an individual way". A company wishing to fill a vacant position by direct approach with the help of an external consultant first has to decide on a suitable headhunter. As the service offered by headhunting is based on experience and its quality can in general only be evaluated subsequently, personnel consultants attempt to set trustworthy and credible signals by performance promises and self-marketing. This includes developing an appealing reputation, publishing references as well as being member of one of the sector supervisory associations such as VDESB (Handelsblatt 2001).

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Figure 3.2: Headhunting process (The author's conclusion from various descriptions of the services provided by personnel consultancies)

After being commissioned, within the framework of the briefing the headhunter analyses the client company regarding its range of services and products, its economic situation and the company goals. Based on this information, the personnel consultant prepares the job description and then phrases the profile of the position to be filled in terms of technical and behaviour-oriented aspects. After that, the actual phase of systematic searching starts, which is also referred to as "research". Large agencies have "researchers" who are specialised in this (van Emmerich, 2011: 29f). Analysing numerous sources of information, they develop a list of target companies where potential candidates may be employed. On the basis of this list of target companies the telephone recruiters start their search for potential candidates. They call companies and try to get the desired information by using sophisticated strategies or they talk to so-called "industry insiders". Headhunters who have specialised in smaller sectors or the top management use their own networks and personal contacts. The headhunter makes the first contact to the potential candidate via telephone. If the person addressed is interested, in general a personal interview is arranged. There, the headhunter presents the job description, the position and, as yet anonymously, the client company to the candidate. At the same time, he tries to find out about the candidate's needs and values. If the person addressed is interested, he/she is asked to provide his/her curriculum vitae. If the headhunter considers the CV to be positive, further personal conversations will follow. The objective is to filter out the most suitable ones from the mass of possible candidates. Then, they are presented to the client company in form of a presentation. If the company decides on one of the candidates, the final contract negotiations will follow. Even after contracting, a professional and committed headhunter endeavours to stay in touch with the recruited employee as well as the employer, to be able to provide continued support in case of possible difficulties in integration. The headhunter's fee is calculated, at approximately 80% of the companies, on the basis of a fixed percentage of the future annual salary of the recruited candidate (Steppan 2011a: 24) and depends on the success achieved. To prevent headhunters from opportunistically behaving by trying to fill a position quickly and sometimes even with less suitable candidates, a portion of the fee is non-performance-related: approximately one third is due upon placing the order, one third after presentation of the candidates and the remaining part after the signing of the work contract, meaning upon project completion.

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