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Korn/Ferry International - Executive Recruiters
- Category Directory
(310)
552-1834
1800
Century Park East, Suite 900
Los Angeles, CA 90067
www.kornferry.com
Sales
$351
million
Business Description
Korn/Ferry International, is a leading provider of recruitment and
leadership development services with the broadest global presence in the
recruitment industry. Since 1969, when we opened our first office in Los
Angeles, we have expanded to 67 cities in 35 countries. In 1998, we extended
our market reach into the middle-market with the introduction of Futurestep,
our middle-management recruitment service. As of April 30, 2004, we have
approximately 1,414 employees, including 379 executive recruitment and 47
Futurestep consultants who are primarily responsible for client services.
Our clients include many of the world’s largest and most prestigious public
and private companies, middle-market and emerging growth companies, as well
as governmental and not-for-profit organizations. We have established strong
client loyalty; more than 79% of the executive recruitment assignments we
performed in fiscal 2004 were on behalf of clients for whom we had conducted
previous assignments over the last three fiscal years.
We were originally formed as a California corporation in November 1969 and
reincorporated as a Delaware corporation in fiscal 2000.
We file annual, quarterly and current reports, proxy statements, and other
documents with the Securities and Exchange Commission (the “SEC”), pursuant
to the Securities Exchange Act of 1934, or (the “Exchange Act”). You may
read and copy any materials that we file with the SEC at the SEC’s Public
Reference Room at 450 Fifth Street, N.W., Washington D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. Our reports, proxy statements, and other
documents filed electronically with the SEC are available at the website
maintained by the SEC at www.sec.gov.
We also make available free of charge on or through our Internet website at
www.kornferry.com our annual, quarterly, and current reports, and, if
applicable, amendments to those reports, filed or furnished pursuant to
Section 13(a) of the Exchange Act as soon as reasonably practicable after we
electronically file such reports with, or furnish them to, the SEC.
Our Corporate Governance Guidelines, Code of Business Conduct and Ethics and
the charters of the Audit Committee, Compensation and Personnel Committee
and Nominating Committee and Corporate Governance Committee of our Board of
Directors are also posted on our Internet website at www.kornferry.com.
Stockholders may request copies of these documents by writing to our
Corporate Secretary at the address above.
We provide the following recruitment services:
Executive Search: Executive search, our core business, focuses on board
level, chief executive and other senior executive positions for clients
predominantly in the consumer, financial services, industrial, life sciences
and technology industries. The relationships that we develop through this
business are valuable for introducing our other service offerings to
clients.
Leadership Development Solutions—Through our Leadership Development
Solutions business, we assist clients in understanding the expertise,
behaviors and values critical to their strategy and how their management
team aligns with these important characteristics. We provide clients with
the resources to address existing misalignment through focused coaching and
development as well as a state-of-the-art framework for monitoring
performance against key success factors.
Middle-Management Recruitment: Futurestep, our middle-management recruitment
business, draws from Korn/Ferry’s more than 30 years of industry experience
to create customized recruitment strategies based on clients’ individual
workforce needs. In addition to middle-management search, Futurestep offers
project recruitment, managed services and interim solutions. Futurestep
combines solution-oriented service with customized technologies to deliver
strong candidates and fast cycle times. At April 30, 2004, the Futurestep
database contained over one million recruitment candidates.
Financial information regarding our business segments is contained in the
Notes to our Consolidated Financial Statements.
Industry Overview
Executive Recruitment: The executive recruitment market concentrates on
searches for positions with annual compensation of $150,000 or more, which
generally involve board level, chief executive and other senior executive
positions. The industry is comprised of retained and contingency search
firms. Retained firms typically charge a fee for their services equal to
approximately one-third of the annual cash compensation for the position
being filled and bill for their services in three installments, regardless
of whether a position has been filled. Contingency firms generally work on a
non-exclusive basis and are compensated only upon successfully placing a
recommended candidate.
We also provide leadership development solutions, which includes management
assessment and executive coaching services.
Middle-Management Recruitment: The middle-management recruitment market
focuses on searches for middle and lower management positions with annual
compensation generally in the $75,000 to $150,000 range. Firms in this
market usually operate on a contingency basis. This market has undergone a
fundamental transformation over the past several years towards a technology
based environment and has also seen the emergence of outsourced recruitment
services. Technology and the Internet have made identifying, targeting and
reaching potential candidates much quicker. This market also benefits from
the efficiencies of maintaining large databases of qualified candidates,
employing advanced assessment software, and reducing placement times.
Industry Trends
With the global economy steadily improving, we believe that the business
outlook for the recruitment industry is more positive than it has been in
several years. The economic upswing combined with the shortage of qualified
executives fuel job growth and hiring. We believe that the following current
market trends will contribute to the long-term growth of the recruitment
industry:
Consolidation of Human Capital Solution Providers—In choosing their
recruitment and human resource service providers, companies are actively in
search of preferred providers in order to consolidate vendor relationships.
Companies that can address a broad range of recruitment needs are becoming
increasingly attractive. Clients are seeking trusted partners who understand
their business and their unique organizational culture and who can manage
their business on a global scale.
Increased Use of Advanced Technology—Emphasis in the recruitment business is
shifting from candidate identification to candidate assessment and
placement. The emphasis on assessment and placement is being driven by
enhancements in technology, as it is becoming easier to identify desirable
candidates in on-line and off-line databases. In addition, information
technology and the Internet are creating efficient ways to manage the
recruitment process in identifying, recruiting and assessing candidates.
Increased Outsourcing of Recruitment Functions—Recent economic factors are
requiring companies to focus on core competencies and to outsource
recruitment functions to providers who can efficiently provide high quality
recruitment services. A shortage of qualified management-level candidates
has made identifying and recruiting exceptional candidates more difficult.
Companies increasingly rely on experienced global executive recruitment
firms to address their management recruitment needs. By hiring global
executive recruitment firms, companies can expect to:
• Access a diverse and highly qualified field of candidates on an as-needed
basis;
• Reduce or eliminate the costs required to maintain and train an in-house
recruiting department in a rapidly changing industry;
• Benefit from the most updated industry and geographic market information;
• Access cutting-edge search technology software; and
• Maintain management focus on core strategic business issues.
Globalization of Business—As the world’s individual markets continue to
integrate into one global economy, more companies are required to supplement
internal talent with experienced senior executives who can operate
effectively in a global economy. The rapidly changing competitive
environment challenges multinational and local companies to identify
qualified executives with the right combination of skills, experience and
cultural compatibility. Today, clients are turning to those firms that
combine proven expertise with specialized knowledge of key industries and
local markets, enabling them to address their mounting global recruitment
needs.
Aging Population—The global workforce population is aging at a rapid pace.
Increasingly, baby boom generation executives are beginning to retire, with
a lack of qualified professionals to replace them. It’s projected that there
will be twice as many people retiring this decade than there were in the
previous. Moreover, the supply of available qualified candidates is
constricting, making it difficult for employers to secure executives. We
believe that this trend will have a positive impact on our business, as
employers increasingly seek service providers who can provide a solution to
the impending talent shortage.
Other Industry Trends—In addition to the industry trends mentioned above, we
believe the following trends will also contribute to the growth of the
recruitment industry:
• Increasing demand for managers with broader qualifications;
• Increasing desire by candidates to more actively manage their careers;
• Increasing demand for senior executives who can exceed the high standards
of due diligence and public scrutiny as a result of new securities
legislation; and
• Shortening executive management tenures and more frequent job changes.
Growth Strategy
Our objective is to expand our position as a leading provider of recruitment
and leadership development services. The principal elements of our strategy
include:
Recruiting and Retaining Key Consultants
In an ongoing strategic effort to promote the firm as a premier career
destination, we successfully recruited 46 new consultants globally in the
current year. The new additions originate from a diverse range of
backgrounds and areas of expertise and were recruited based on their track
records as top performers in the human capital industry. The number of new
consultants in the current year was offset as attrition and restructuring
activities took place. While we experienced a net decrease in the number of
consultants year over year, we believe we have significantly upgraded our
professional staff in the current year. We believe that the recruitment and
retention of key consultants will be an ongoing driver of growth.
Broadening our Product and Service Offerings
In addition to being a leading provider of executive recruitment, we also
offer clients middle-management recruitment, project recruitment, managed
services and interim solutions through Futurestep and leadership development
solutions. We will continue to develop and add new products and services
that our clients demand and that we feel are consistent with our brand
positioning.
Global Account Management
In an effort to better coordinate global recruiting and to gain operational
efficiencies, we expect that multinational clients will increasingly turn to
strategic partners that can manage their recruitment needs on a centralized
basis. This will require vendors with a global network of offices and
technological support systems to manage multiple hires across geographical
regions. Our global account management program, Integrated Services,
continues to identify account leaders for multinational clients, provides
training and software support to manage these accounts, and develops
guidelines and protocols to support and increase the rate of cross-border
assignments for these clients.
Expanding our Market Reach and Presence through Technology and Assessment
Solutions
An advanced technology infrastructure has become a critical element of the
recruitment business. In the executive recruitment market, we have made
significant investments in developing a state-of-the-art technology
infrastructure, including a worldwide network and our proprietary executive
recruitment software. e-Korn/Ferry is our executive search Internet tool
that allows executive candidates to submit relevant employment information
to us. In fiscal 2003, we introduced our proprietary tool, Search
AssessmentSM, which represents a powerful method to assess executive
candidates. Search AssessmentSM has been integrated into our standard search
process, thus further enhancing our capabilities. We will continue to refine
our technology, including our exclusive candidate assessment tools, in order
to strengthen our relationships with our existing clients, attract new
clients, expand into new markets and position ourselves to gain a
competitive advantage in marketing complementary services.
Leveraging our Leadership and Brand Name in Executive Recruitment
We believe that there are significant opportunities to extend our market
share and develop new client relationships by aggressively marketing our
proven global recruitment expertise. Our leadership in executive recruitment
enables us to grow our business by increasing the number of recruitment
assignments we handle for existing clients in all areas of recruitment. We
also believe that our strong relationships and well-recognized brand name
will enable us to introduce new services to our existing clients and
potential new clients and will allow us to build communities of candidates
to directly market services, such as career management, to executives and
other candidates who are actively seeking to manage their careers.
Our Services and Organization
We address the global recruitment needs of our clients at all levels of
management by offering the following services:
Executive Recruitment Services
Overview. Our executive recruitment services are typically used to fill
executive-level positions, such as members of boards of directors, chief
executive officers, chief financial officers, chief operating officers,
chief information officers and other senior executive officers. Once we are
retained by a client to conduct an assignment, we assemble a team comprised
of consultants with geographic, industry and functional expertise. Our
search consultants serve as management advisors and work closely with the
client in identifying, assessing and placing a qualified candidate. In
fiscal 2004, we performed over 5,400 executive recruitment assignments.
We use a search methodology that has been developed through many years of
experience in conducting executive recruitment. We emphasize a close working
relationship with the client and a comprehensive understanding of the
client’s business issues, strategy and culture, as well as an in-depth
knowledge of the skills necessary to succeed within a client’s organization.
Initially, the search team consults with the client to better understand its
history, culture, structure, expectations, challenges, future direction and
operations. In these meetings, the team identifies the specific needs of the
client and develops a profile of an ideal candidate for the position. Early
in the process, the team also works with the client to develop the general
parameters of a compensation package that will attract high quality
candidates.
Once the position is defined, the research team identifies, through the use
of our proprietary databases and other information resources, companies that
are in related industries facing similar challenges and issues with
operating characteristics similar to those of the client. In addition, the
team consults with its established network of resources, and our databases
that contain profiles of over 2.7 million executives, including those
obtained through e-Korn/Ferry, to help identify individuals with the right
backgrounds and personal abilities. These sources are a critical element in
assessing the marketplace. The original list of candidates is carefully
screened through phone interviews, video conferences or in-person meetings.
The client is then presented final qualified candidates to interview. We
conduct thorough due diligence and background verification of the candidate
throughout the process, sometimes with the assistance of an independent
third party.
The finalist for the position will usually meet with the client for a second
and possibly a third round of discussions. At this point, the compensation
package will have been discussed in detail increasing the likelihood that an
offer will be accepted. Generally, the search consultants will participate
in the negotiations until a final offer is made and accepted. Throughout the
process, ongoing communication with the client is critical to keep client
management apprised of progress.
Industry Specialization. Consultants in our five global markets and three
regional specialty practice groups bring an in-depth understanding of the
market conditions and strategic and management issues faced by clients
within their specific industry and geography. We plan to continue to expand
our specialized expertise through internal development and strategic hiring
in targeted growth areas.
Functional Expertise. We have organized executive recruitment centers of
functional expertise, composed of consultants who have extensive backgrounds
in placing executives in certain functions, such as directors, chief
executive officers and other senior executive and financial officers. Our
board services practice, for example, was first established in 1972 to help
clients assemble an effective, knowledgeable and cohesive board of directors
to meet the growing demands for accountability and more effective board
performance. The shortage of experienced directors, the tightening of
governance policies and the desire on the part of companies to broaden the
expertise of their board are raising the standards required to identify and
recruit directors with the needed skills. We have established significant
expertise in this area and have built a proprietary database with the names
and backgrounds of all the Fortune 1000 directors, plus a significant number
of middle-market and high-growth company board members, to help support
board searches. Members of functional groups are located throughout our
regions and across our specialty practice groups.
Organization
North America—We opened our first office in Los Angeles in 1969, and
currently have 23 offices throughout the United States and Canada. In fiscal
2004, the region generated fee revenue of $170.7 million from over 2,100
assignments in this region, with an average of 195 consultants.
Europe—We opened our first European office in London in 1972, and currently
have 18 offices throughout 16 countries in the region. In fiscal 2004, fee
revenue was $78.2 million from over 1,700 assignments in this region, with
an average of 107 consultants.
Asia/Pacific—We opened our first Asia/Pacific office in Tokyo in 1973, and
have built a 15 office network throughout ten countries in the region. In
fiscal 2004, fee revenue was $36.8 million from over 900 assignments in this
region, with an average of 60 consultants.
South America—We opened our first South American office in Brazil in 1974.
We expanded our practice to Mexico through the 1977 acquisition of a less
than 50% interest in a company in Mexico City and currently conduct
operations in Mexico through subsidiaries in which we hold a minority
interest. As of April 30, 2004, we operate a network of seven offices in six
countries covering the entire South America region and two offices in
Mexico. The region, excluding Mexico, our unconsolidated subsidiary,
generated fee revenue of $8.4 million in fiscal 2004. We handled nearly 500
assignments in fiscal 2004 in this region, with an average of 17
consultants. Our share of the operating results for our Mexico subsidiaries
are included in equity in earnings of unconsolidated subsidiaries on the
consolidated statements of operations.
Client Base. Our clients are many of the world’s largest and most
prestigious public and private companies, including 42% of the Fortune 500
companies in the current year. In fiscal 2004, no single client represented
more than 2% of fee revenue. We have established strong client loyalty; more
than 79% of the executive recruitment assignments we performed in fiscal
2004 were on behalf of clients for whom we had conducted previous
assignments over the last three fiscal years.
Competition. We are a leading provider of recruitment and leadership
development services. Other multinational executive recruitment firms
include Heidrick & Struggles International, Inc., Spencer Stuart &
Associates, Egon Zehnder International and Russell Reynolds Associates, Inc.
Although these firms are our primary competitors, we also compete with
smaller boutique firms that specialize in specific regional, industry or
functional searches. We believe our brand name, global network, prestigious
client list, strong specialty practices and quality of service are
recognized worldwide. We also believe that our equity-based compensation
arrangements distinguish us from most of our competitors and are important
for retaining consultants.
Leadership Development Solutions. In 2004, we consolidated our strategic
management assessment and executive coaching services under the name,
Leadership Development Solutions, with services in Europe, North and South
America, Australia and Japan. This service focuses on helping corporate
leadership evaluate the individual and collective performance of their
management team. This service, which further extends the range of leadership
capital solutions we offer to our clients, is a valuable tool for the chief
executive, board of directors and other senior officers in pursuing
organizational transformation and the alignment of senior management with
the company’s strategic goals and internal values. This service responds to
our clients’ needs for a tool to address the challenges of changing company
relationships and global restructuring and, for venture capital and private
equity firms, to evaluate the leadership team in existing or prospective
portfolio companies. The assessment process is performed by consultants with
extensive experience in interviewing and evaluating senior executives and
who understand local cultural differences and the relevant business and
industry challenges. The assessment process is backed by a statistically
validated and proprietary assessment instrument that was developed for us by
leading assessment experts and is supported by a proprietary systems
platform.
Another aspect of the service is coaching. We offer a global network of
coaches who are highly skilled and certified at developing executive leaders
to contribute to overall organizational success. Additionally, we offer
clients a Web-based, highly customizable human capital management system
called Executive Center. Executive Center automates and streamlines the
traditionally cumbersome process of setting objectives and tracking and
evaluating performance. Through Executive Center’s individual and team-based
analysis and reporting capabilities, talent assessment and management can be
greatly simplified, allowing for skills and experience gaps as well as
succession planning to be more efficiently addressed.
Middle-Management Recruitment Services
Overview. Futurestep offers clients a portfolio of services, including
middle-management search, project recruitment, interim solutions and managed
services. Each Futurestep service benefits from the in-depth industry and
functional-area expertise of our global consultant network, guaranteeing
that clients work with people who understand their business and have the
knowledge to qualify candidates effectively.
Futurestep combines traditional search expertise with a multi-tiered
portfolio of recruitment solutions. Futurestep consultants, based in 12
countries, have instant access to one of the world’s largest databases of
prescreened middle-management professionals. The global candidate pool
complements our international presence and multi-channel sourcing strategy
to ensure speed, efficiency and quality of service for clients worldwide.
Futurestep’s middle-management search uses multiple sourcing channels,
validated cultural assessments and a global database of more then one
million prescreened professionals to offer a low overhead approach that
accelerates the recruitment process and provides a diverse set of candidates
matched with specific cultural and strategic requirements.
For multiple recruiting projects, Futurestep consultants work with clients
to analyze existing internal recruitment capabilities and develop a
co-sourcing platform that emphasizes shared ownership of the recruitment
process. Futurestep also offers managed services to clients seeking a fully
integrated, single source for their recruitment needs.
For clients needing professionals on an interim basis, Futurestep offers an
interim solutions service which delivers direct access to highly qualified
professionals, fulfilling an organization’s critical needs for a temporary,
flexible workforce. Whether the client needs a mid-level position filled on
a monthly or yearly basis, Futurestep draws interim executives from one of
the world’s largest talent pools of prescreened, middle management
professionals in the industry.
Organization. We opened our first Futurestep office in Los Angeles in May
1998. In January 2000, we acquired the ESS business of PA Consulting with
operations in Europe and Asia/Pacific. Over the last three years, we
consolidated Futurestep’s back office functions with executive recruitment
and co-located Futurestep with executive recruitment offices in North
America and Europe to streamline the business. At April 30, 2004, we had
Futurestep operations in 13 cities in North America, eight in Europe and
seven in Asia/Pacific.
Competition. Futurestep competes for assignments:
• generally, with contingency firms who do not have the same pricing
structure or provide all of the same services; and
• to a lesser extent in the technology based middle-management recruitment
industry, with firms such as Monster Worldwide.
Although technology oriented companies may be drawn to the recruitment
business by their ability to leverage their existing technology, their lack
of a recognized brand name, experienced consultants and global footprint act
as significant barriers to entry.
Additional information regarding fee revenue is contained in Item 7 under
the headings “Fiscal 2004 Compared to Fiscal 2003” and “Fiscal 2003 Compared
to Fiscal 2002.”
Organization
Our executive recruitment business is managed on a geographic basis
throughout our four regions: North America, Europe, Asia/Pacific and South
America. Futurestep is managed on a worldwide basis with operations in North
America, Europe and Asia/Pacific.
Professional Staff and Employees
As of April 30, 2004, we had approximately 1,163 executive recruitment
employees consisting of 379 consultants and 784 associates, researchers,
administrative and support staff. In addition, we had 11 consultants in our
two unconsolidated Mexico offices. Futurestep had 212 employees at April 30,
2004 consisting of 47 consultants and 165 administrative and support staff.
Corporate had 39 professionals at April 30, 2004. We have not been a party
to a collective bargaining agreement and consider our relations with our
employees to be good. Korn/Ferry International is an equal opportunity
employer.
In executive search, senior associates, associates and researchers support
the efforts of our consultants with candidate sourcing and identification,
but do not generally lead an assignment. We have extensive training and
professional development programs. Promotion to senior client partner is
based on a variety of factors, including demonstrated superior execution and
business development skills, the ability to identify solutions to complex
issues, personal and professional ethics, a thorough understanding of the
market, the ability to develop, and the ability to help build effective
teams. In addition, we have a program for recruiting experienced
professionals into our firm.
ticker: KFY
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