Is Outside the New Inside? Trends in Recruiting Outside the Industry Have Implications for Compensation Philosophy

A new study released by Salveson Stetson Group, a Pennsylvania executive search group, confirms a trend that I have also noted among my clients: organizations are more often purposefully recruiting management and executive talent from outside their industry.

According to Sally Stetson, firm co-founder and principal, the industries most often searching beyond their own for leadership talent, and the reasons that they are doing so, are as follows:

Hospitals and health-care systems. “They are recruiting finance executives, in particular, from other industries as a result of tighter government regulations, increasing financial demands, and the need to manage investment portfolios, think strategically, and adopt fresh approaches to chronic problems,” said John Salveson, co-founder and principal with Salveson Stetson Group.

Pharmaceutical companies. “Typically, pharmaceutical companies have focused solely on recruiting managers and executives from their competitors. However, many of the larger companies have started to concentrate on candidates from consumer products and retail companies such as PepsiCo, Frito-Lay and The Limited. Executives from these types of companies are perceived as being more progressive, and more accustomed to working in a fast-paced environment,” said Stetson.

Manufacturers. “The more progressive industrial manufacturers are also looking for talent with consumer products experience because these types of executives are accustomed to operating in leaner organizations, which are better able to respond quickly to changing business needs,” said Stetson.

Banks. “More banks are hiring managers and executives with retail experience as they change their cultures to become more customer-oriented,” said Salveson.

Non-profit agencies. “Non-profits have become more open to looking for candidates who have for-profit business experience. This supports their desire to operate more efficiently and effectively. Many non-profits also are seeking managers and executives close to retirement age who want a change in their careers and are interested in meaningful work," said Stetson.

As organizations seek access to different talent pools to fill management and executive openings, it will be critical that their compensation philosophies and packages are reviewed and re-aligned accordingly.  This will impact not only the competitive pay data they use to set compensation levels, but also -- potentially -- the very nature and make-up of the compensation plans offered to leaders.

Yet one more reason why it is important for staffing and compensation professionals to be talking to one another.

More about the Salveson Stetson study here.