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Heidrick & Struggles (nasdaq: HSII - news - people ), the other large, public executive search company, has also moved into the leadership coaching space, though less aggressively than its competitor. Heidrick's "leadership consulting" division brought in about $9 million in 2002, and this year it expects that to grow to $15 million, or 3% of revenue, according to Eileen Kamerick, the company's chief financial officer. The trend 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 going to be a real premium for companies to try to retain talent," says Mark Marcon, an analyst with Robert. W. Baird. "And the talent out there to replace the people retiring is going to be scarcer and scarcer." Meanwhile, India and China 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." Leadership coaches aren't just for executives who are struggling to get the job done, says Cashman. Those overlooked middle-managers, in fact, might be prime candidates. Leadership coaches often work with managers who have been highly successful, but see barriers preventing them from reaching the C-suite. Some are technical whizzes who 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 sessions. As the demand for leadership coaching grows, the boutique firms that dominate the industry will have a hard time serving larger companies. Multinational corporations, Cashman says, don't want a different leadership coach with a different method in every port. The industry is ripe for consolidation, and both Heidrick & Struggles and Korn/Ferry are open to more acquisitions. "The boutiques will not be able to serve global companies with quality and reach," Cashman says.
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