Once a tiny
industry, dominated by boutique firms, leadership / executive coaches have moved into
the mainstream. In the last few months, headhunting company Korn/Ferry
International spent $24 million to purchase Lominger (a
Minneapolis-based leadership development company) and LeaderSource (terms
not disclosed). Heidrick & Struggles another large, public
executive search company, has also moved into the leadership coaching
"leadership consulting" division, recently brought for about $9 million, this year expects to grow to $15 million.
Global war for talent
The growing trend of large, established companies acquiring small
leadership / executive coaching practices is driven partly by
demographic shifts. In North America and Europe, the executive-age
population--i.e., baby boomers--is nearing retirement. Companies need to
start focusing on developing internal leaders, rather than just recruiting
from the outside.
There is a real premium for companies to try to
retain talent and available talent is getting scarcer and scarcer.
Meanwhile, India, China and many Asian countries are growing faster than their business
schools can churn out candidates. While the twin tigers are developing a
large class of professional workers, the executive ranks are still thin.
"It's going to take another generation before they have enough
management talent," says Peter Felix, president of the Association of
Executive Search Consultants, which recently published a survey about
the executive job market worldwide. "It takes a whole generation to
train effective, modern management."
As a result, companies will have to rely on younger people to take on
management roles, says Gary Burnison, Korn/Ferry's chief operating
officer. And they will have to identify candidates who might have been
overlooked in past years. "What we see is a war for talent,"
Burnison says. "Despite all the technological innovations of the past
century, a simple truth remains: people make businesses successful."
Those overlooked middle-managers are now prime coaching candidates.
Leadership coaches now frequently work with managers who
have been highly successful, but see barriers preventing them from
reaching the C-suite. Some are technical whizzes who simply don't have the
interpersonal skills to manage a large staff.
In other cases, coaches are called in when there has been turnover on
an executive team, and the senior officers need to get to know each other.
Leadership coaches can help a new CEO adjust to his or her position, or
aid a board trying to develop a succession plan. The price for such
leadership insight can vary, but it's not for executives with low bank
balances. LeaderSource charges anywhere from $25,000 to $65,000 for a
coaching engagement, which lasts a year or more and involves 20 to 30
As the demand for leadership coaching grows, the boutique firms that
dominate the industry will have a hard time serving larger companies.
Multinational corporations don't want a different
leadership coach with a different method in every port. The industry is
now ripe for consolidation, and the large coaching providers open to acquisitions.
"The boutique coaching practices will not be able to
serve global companies with quality and reach," says one industry