Former Los Angeles Mayor Dick Riordan used to say, “You don’t have to get serious about business until you turn 40.”

Well this weekend, I turn 40, so watch out.  If this week is any indication, this recession will continue to power continued growth at Chen Partners. This week, we completed a VP Sales search at a portfolio company of a private-equity client who bought the company intending to create value by upgrading its sales function. And, at another company, the CEO signed us up to find a strategic new VP Human Resources to replace an administrative type.

That our firm is growing in this recession comes as a surprise to many. That’s because of all the news headlines blaring these half-truths:

1. It’s a brutal job market out there.
2. The recruiting industry is getting decimated.

Certainly, the recession is radically reshaping how companies are hiring. But here’s the whole truth:

1. It’s a brutal job market out there IF you’re a job-seeker. But for employers, the market has never been better.

Hidden in all the layoff reports is the fact that companies have been taking advantage of the chance to dismiss the low-performers and cherry-picking from the many good people out there. But the expanded talent pool means that there’s more work involved to find the best.

If you’re hiring, take care to avoid these seven common hiring pitfalls. In the future, I’ll blog more on how to recruit the best. Meanwhile if you like, click on “recruitment process” in the tag cloud at right.

2.  The retained-search recruiting firms are in trouble. That’s because the total recruiting pie has shrunk, and with their remaining recruiting dollars, companies are reevaluating longterm vendor relationships in search of results and efficiency.

It is indeed true that the retained search industry has shriveled in this recession. My old firm, global executive search firm Heidrick & Struggles, was trading at $52 in July 07, and is now at $18, a 65% decline versus a 33% decline in the Dow in the same period. The other publicly-traded retained search firm, Korn/Ferry, has similarly shrunk. But the decline in the industry has a lot to do with the retained search business model. Retained-search firms collect their fee up front, regardless of whether or not they ultimately deliver a viable candidate. The industry’s average completion rate is only 60%, and search firms do not return fees for uncompleted searches.

The retained-fee structure creates a conflict of interest between clients and shareholders, since revenues come from selling new searches, but the resources to work on those searches are booked as costs. That these firms are publicly-traded creates inexorable pressure to continually increase revenue by selling more searches, while at the same time reduce expenses by cutting the resources needed to complete those searches.

The retained-search business model has remained unchanged since the search industry was created in the 1950s. And, as the shareholder value destruction in this industry attests, the model is increasingly out of step with the increased transparency and value demanded by companies in this recession.

Two years ago, we established our firm with the intent to align our success with the building of our clients’ businesses. We accept only those assignments we feel confident we can complete. Then we dedicate the resources to complete each one.  We strive for excellence in all our work. And we back up our pledge with a pay-for-performance fee structure.

This recession has brought wrenching change for all businesses, but surviving companies will see lasting benefits. First, having cut to the bone and backfilled some of those cuts with better talent, they are leaner and more focused. Second, having reevaluated all their expenses, they are driving for greater efficiency and effectiveness in their recruiting value chain. Both these trends will continue to fuel the expansion of our work.

I’ll honor Mayor Riordan’s advice about turning 40 with a renewed commitment to helping our clients take advantage of this recession by priming their companies for renewed growth.

To all our clients, thank you for your trust and partnership. It’s by helping you build your businesses that we grow ours.