Should You Build An In-House Executive Search Function?

Marion Heil
2. Okt.
8 Min. Lesezeit

In today's talent-driven economy, CEOs and CHROs face a critical choice about executive recruitment. The question isn't simply whether to invest more in executive talent acquisition, but rather how to structure that investment most effectively.

Should you build internal capabilities, partner exclusively with external search firms, or create a hybrid model? The answer depends on your company's unique situation, strategic priorities, and competitive reality. This decision deserves the same careful analysis you'd apply to any major strategic investment.

The Current Economic Reality: Three Strategic Responses

The current economic climate has created an interesting dynamic in executive search. While overall top talent recruitment activity has decreased, companies less affected by economic headwinds still recognize that securing exceptional leadership remains critical. Some are even recruiting counter-cyclically, using market downturns as opportunities to future-proof their leadership bench and to attract talent that might otherwise be unavailable.

What's particularly noteworthy is how companies are rethinking their executive search spending. With budgets under scrutiny, I'm seeing three distinct strategic responses:

The traditional approach: Continue working with executive search consultants on a one-off basis per search. This maintains flexibility but potentially misses relationship depth and economies of scale.

The intensified partnership model: Deepen cooperation with specific consultants to build dedicated external teams. These client-focused teams develop intimate knowledge of your organization while maintaining external networks and objectivity.

The internalization strategy: Take the money that would typically go to several external search projects and invest it in building internal capabilities instead. Companies are realizing that the cost of a few major searches could fund a sophisticated internal function's foundation.

Some companies might build a strong internal executive search function or even acquire whole exec search teams from SHREKS or acquire whole boutique search firms, viewing top talent acquisition as something too important to outsource. Others might develop deep partnerships with specialized external search firms, leveraging their market knowledge and networks while keeping their own focus on running the business. Most successful companies use some combination, with clear guidelines for when each approach makes sense.

Each approach suits different contexts, and I'll help you think through which might work best for your situation.

There's no universal "best" approach.

Here's what I've learned: there's no universal "best" approach. The question isn't whether internal or external executive search is better, but rather which approach—or mix of approaches—gives your company the greatest advantage.

When Internal Capabilities Create Real Advantage

Internal executive search teams excel in certain situations:

Deep company knowledge. Internal teams understand your culture, strategy, and what kind of leaders actually succeed in your environment. This knowledge gets stronger with each search, creating assessment skills that external partners need time to develop with every new engagement.

Speed and seamless integration. When market opportunities appear or you need to pivot quickly, internal teams can move fast and coordinate easily with other parts of the business. This agility is especially valuable during major changes or rapid growth.

Authentic employer branding. Internal teams become genuine advocates for your company because they live the reality every day. They build ongoing relationships with potential candidates, creating talent pipelines that activate when the right opportunities come up.

Business intelligence integration. The best internal functions become intelligence assets for the business, spotting talent trends across industries and feeding insights directly into business planning.

When External Partnerships Deliver Better Results

But external search firms have their own distinct advantages:

Market reach and fresh perspective. Top search firms have networks across industries and geographies that no single company could build internally. Their outside perspective, not limited by internal thinking, often uncovers candidates that internal teams might miss.

Specialized expertise and instant credibility. For complex searches—CEO appointments, board positions, major transformation hires—external firms bring proven assessment methods, governance experience, and credibility with candidates that internal teams may struggle to match.

Confidentiality and neutrality. Sensitive searches, competitive situations, or confidential strategic moves often need the discretion and perceived neutrality that only external partners can provide.

Flexible resources. External partnerships let you access top-tier capabilities without the fixed costs and management complexity of building that expertise internally.

How to Decide What's Right for Your Company

So how do you decide what's right for your company? Here's what I've learned matters in making this choice:

Search volume and predictability. Companies doing 8 to 10 or more executive searches a year often find internal teams make economic sense. But don't let volume be the only deciding factor—what you're trying to achieve strategically matters more than just cost.

Company stage and market position. Fast-growing companies, those going through major changes, or organizations with high executive turnover often benefit from internal teams that can move quickly and retain knowledge. More stable companies with occasional search needs might find external partnerships more efficient.

Industry dynamics and network needs. Highly specialized sectors or roles requiring specific network access may favor external firms with established connections. On the flip side, if cultural fit and internal knowledge are paramount, internal expertise might be the way to go.

Economic positioning and timing. In today's environment, companies with strong balance sheets are using market conditions strategically. Technology companies with resilient business models, healthcare organizations and certain industrial sectors are investing in long-term capabilities while talent is more accessible. Companies in cyclical downturns might prefer the flexibility of external partnerships.

Strategic priorities and competitive reality. Companies that see talent acquisition as a competitive weapon—especially in talent-scarce industries—often invest in internal capabilities. Those preferring to focus organizational attention on core business might choose strategic external partnerships.

Leadership development philosophy. Companies with strong succession planning and internal development programs often build internal search capabilities that connect with broader talent strategies. Those preferring to source external talent for senior roles typically partner more with external firms.

The Smart Money: Hybrid Models

The smartest companies don't choose between internal and external—they figure out when to use each:

Internal teams handle the systematic searches: succession-related searches, roles where cultural fit is critical, quick turnarounds, and positions where deep company knowledge makes a real difference.

External partners tackle the specialized needs: CEO and board searches, major transformation hires, expansion into new markets or sectors, confidential situations, and searches requiring particular networks or assessment expertise.

Intensified partnerships work well for companies wanting external expertise with internal-level intimacy - particularly effective during transformation or for those with regular but varied search needs.

The key is thinking of this as a portfolio of capabilities rather than an either-or decision.

The key is thinking of this as a portfolio of capabilities rather than an either-or decision, with clear criteria for when each approach serves your objectives best.

Why an Executive Search Professional Advocates for Strategic Choice

You might reasonably ask: why would an executive search professional give advice that sometimes favors internal capabilities over external services?

Why would an executive search professional give advice that sometimes favors internal capabilities over external services?

The answer reflects both industry evolution and professional integrity. After twenty years in this business, I've learned that the most valuable client relationships come from honest advice about what actually works best for each situation, not from pushing any single approach.

And over time I've observed that organizations that make smart, deliberate choices about their executive search approach - whether internal, external, or hybrid - consistently get better results. They become more strategic about talent, more effective in their searches, and ultimately make better leadership decisions.

Even if they build strong internal capabilities, they become more sophisticated buyers of external services, not less engaged ones. They know when they need specialized help, they partner more strategically when they do engage external firms, and they achieve better outcomes overall.

The most successful organizations employ a hybrid model.

More fundamentally, the market has evolved beyond the false choice between internal and external approaches. The most successful organizations employ a hybrid model - strong internal capabilities for systematic talent needs, complemented by selective external partnerships for transformational searches, board-level appointments, and market expansion. This ecosystem approach delivers superior results compared to either extreme.

As advisors, our role has shifted from being the primary search engine to helping organizations build sustainable competitive advantage in top talent acquisition.

As advisors, our role has shifted from being the primary search engine to helping organizations build sustainable competitive advantage in top talent acquisition. This includes knowing when internal capabilities serve clients best, even if it means less immediate business for us. The long-term relationships built on this foundation of trust ultimately prove more valuable than short-term transactional revenue.

Critical Success Factors: A Framework for CEOs

Evaluating internal executive search effectiveness requires looking beyond traditional recruitment metrics to strategic outcomes:

Leadership quality and business impact. The ultimate measure is whether recruited executives drive superior business results. This requires tracking performance outcomes, strategic initiative success rates, and long-term value creation attributable to leadership decisions.

Organizational velocity. Does your ability to secure executive talent enable faster strategy execution? Can you capitalize on market opportunities that competitors miss due to leadership constraints? Strategic agility increasingly depends on leadership acquisition speed.

Succession resilience. Effective internal functions build organizational bench strength that reduces vulnerability to unexpected leadership departures. The test is whether you face succession crises or execute smooth leadership transitions.

Talent brand evolution. Over time, sophisticated internal functions should enhance your reputation among executive talent, improving access to passive candidates and reducing reliance on financial incentives to attract leadership.

Navigating Strategic Considerations and Trade-offs

Any approach involves navigating several strategic tensions and trade-offs:

The objectivity challenge. Internal teams offer unparalleled organizational knowledge, yet this intimacy can sometimes compromise objectivity. The challenge is preserving external perspective while leveraging internal insight. Leading organizations address this through rigorous assessment protocols, external calibration partnerships, and governance structures that maintain independence.

The credibility question. Top executive candidates sometimes harbor skepticism about internal recruiters' sophistication and market knowledge. Building credibility requires demonstrable expertise, often achieved by recruiting seasoned search professionals and maintaining visible thought leadership in talent markets.

The investment timeline. Building world-class internal capabilities requires patient capital—investments in people, technology, and networks that may take 18-24 months to fully mature. CEOs must resist pressure for immediate ROI while maintaining accountability for results.

The scope definition challenge. Without clear boundaries, internal functions risk becoming overwhelmed with non-executive searches that dilute their strategic impact. Success requires discipline in scope definition and willingness to resist organizational pressure for scope expansion.

Making the Right Choice for Your Company

Whether you build internal capabilities, develop external partnerships, or create a hybrid model, this decision affects your ability to execute strategy, seize opportunities, and build competitive advantage through leadership.

The smartest companies treat this choice with the same seriousness they bring to other major strategic decisions. They look honestly at their situation, evaluate their options objectively, and choose the approach that best serves their long-term goals.

Success in executive talent acquisition isn't about finding the universally "right" model—it's about finding what's right for your company and executing it well. Companies that get this alignment consistently outperform their peers in leadership quality, succession planning, and strategic agility.

Success isn't about finding the universally "right" model—it's about finding what's right for your company and executing it well.

The choice between internal capabilities and external partnerships deserves careful strategic thinking. Whether you're considering building internal functions, optimizing existing capabilities, or developing stronger external partnerships, success usually benefits from experienced guidance. Given how important leadership talent is to company performance, getting this decision right can significantly impact your company's competitive advantage.

ABOUT THE AUTHOR

Marion Heil is the founder and managing director of Board+CEO Advisors. She is based in Vienna.