An Insider's Guide To Executive Search Firms
By Gary Kaplan© The Financial Manager. August/September 1999.
The greatest asset any company has is its people. Nowhere is that more important than in recruiting upper management who are the leaders of the troops and your company's future. However, just when you need them most, companies are keeping their executives close to the vest with guaranteed bonuses, stock options and compelling perks.
Given today's 4.2% unemployment rate, the lowest in 29 years, experienced, knowledgeable executives are increasingly difficult to pry loose from their current positions. The result - a limited pool of available talent in the market.
Yet, conventional wisdom says that the best recruit is someone who is already employed, and with good reason. Approximately 60-70% of executive placements are recruited from the ranks of the fully employed. High quality, seasoned executives have a known track record and an enviable record of accomplishment. With limited selection in a drum-tight labor market, what are the options available to a company with shoes to fill?
In-house company resources, such as referrals, personal contacts, current staff suitability, on-line job postings, and even, where they exist, the human resources department's own recruiting staff, have their limits. Reaching out to use these resources only extends as far as the company's grasp, particularly in securing upper management and the amount of time and patience available.
The opening may call for a person with higher level skills and experience than is known to you or the company, or you may prefer to approach a desired candidate through a third party to feel out interest, let alone to negotiate the deal effectively. Other signals that it is time to call in a search firm are:
- A need for information about the current executive employment market. A search firm's broad, continuing exposure fills you in on the larger picture of what is really out there these days.
- A need for confidentiality, especially in highly sensitive competitive fields or in making an overture to a competitor's specific executive, without tipping the company's hand.
- A history of high turnover (and accompanying costs) in your company. This indicates the company's recruiting and retention process is not getting and keeping attractive candidates.
Specialist or generalist firm?
Executive search firms generally come in two flavors - the specialist firm that concentrates on a particular industry or area of expertise and the generalist firm that ranges across a variety of industries and management levels.
Specialist firms have their advantages and drawbacks. Their in-depth familiarity with the language of their specialty area and the major players in the industry may make them aware of appropriate candidates immediately.
But be aware that they may tend to call on the same base of people frequently with little fresh research as to the up-and-comers. More important, potential candidates and companies within that industry and specialty may be "off limits" because of current client commitments and ethical considerations, severely limiting the depth and range of their reach.
Generalist firms, on the other hand, have a network of contacts across a broad range of industries and are ever watchful for candidates with transferable skills and complementary experience. Their expertise lies in search and research techniques to identify and secure high-demand candidates, without restriction.
Although they may not know all the nuances of a specialized field and may need to get up-to-speed on industry lingo and competitive players, the generalist firm relies on fresh research for each new search, thereby turning over all the stones in the field.
Retained vs. contingency?
Another important decision before implementing an external search is the issue of choosing a retained firm versus a contingency agency. That choice hinges on the particular position to be filled.
Best suited for hourly staff and lower to middle management searches, a contingency search agency generally has lower fees, partly from its limited service offerings. They only get paid when a candidate is placed and it is in their interest to send as many candidates as possible, often without too much pre-qualification or evaluation. All responsibility for verifying candidate credentials and determining compatibility lies with the company.
Companies are free to use as many contingency agencies as they want to, often resulting in producing from the various agencies, the same candidates who themselves may be unaware that they are under consideration.
For their part, contingency agencies, without a binding retainer, are free to give up the search at any time. Even more important to the safety of your search: a contingency firm is not bound to honor the "off limits" rule affecting recruitment. That means the contingency firm is able to raid the very executives you paid them to place in your firm.
Indeed, revolving executive placements are not unusual. One contingency firm re-recruited and placed the same executive in three different companies over the course of four years.
Retained search firms are a different breed. Most appropriate for upper level, executive and broad searches, retained search firms offer input to and assume responsibility for the search and placement process. They have a vested interest in producing attractive candidates for several reasons.
As good business, the retainer focuses their attention and commitment to stay with the search until a satisfactory conclusion; their reputation is at stake. Retained firms put a great deal of unique research effort and candidate development into their work.
Working with the company to define both the tangible and the intangibles of what is sought, they are also objective in evaluating potential candidates to present for the best fit. With their thorough coverage of the market and lengthy experience, their work in thorough reference and credential checking of candidates, along with insight into just what the position and the company requires minimizes the risk of presenting inappropriate, unprepared candidates.
Retained firms can also circumvent the potential landmines of the unexpected. For example, they uncover the candidates' hot buttons - relocation issues, compensation expectations, willingness to negotiate perks and other decision-makers and breakers in considering the position and the offer. With the client's best interests in mind, a retained firm's search intent is to leave nothing to chance or last-minute surprise for all involved.
A retained executive search fee is best viewed as a timesaving, cost-efficient investment. On the surface, the fee may look expensive, but a closer analysis reveals that the hidden costs easily out-pace the professional's bill.
Retaining an executive search firm eliminates the cost of advertising and screening, frees up internal administrative resources and can yield more viable candidates. The post will be filled unless it is unfillable - and that is valuable to know too.
And then there is the "intangible" in choosing a retained search firm. Upper management candidates know the difference between contingency and retained recruitment. Companies who retain a search firm to represent them to a candidate speak volumes about the importance of this position - and the value of the candidate to them. Call it panache or a status symbol - image counts in recruiting top talent.
What to expect
Regardless of the selection of the search firm, you should expect solid references, prompt responses to requests and questions, honesty, confidentiality and expert advice through the recruiting process. Any less, fire the firm and seek another.
Expect contingency agencies to produce resumes pre-screened for qualifications, although they may not be pre-interviewed before submission. They should assist you in scheduling company interviews, provide some insights into the candidate's expectations and help you negotiate the terms of an offer. A specialist contingency agency will also offer information on the available talent pool.
Hold retained firms to a higher standard, for, as collaborative partners, they add more value to recruitment activity. Beyond all of the above, a retained search firm should present only a manageable group of candidates thoroughly screened and evaluated for qualifications and character/corporate culture fit.
A qualified firm should perform market surveys, do complete background profiles, degree and employment verifications and reference checks. They've seen all the tricks of the trade and know where the bodies are buried, if any.
Experts in interviewing, they present objective recommendations of the candidates and submit periodic reports on the search's progress to keep you informed. By the time a candidate shows up for an interview, you can expect him or her to be the best available.
In this era of reluctant job-switchers, a good search firm will market the position at your company to a desirable candidate, positioning the company, the position and the offer as advantageous and responsive to the candidate's personal and/or career interests. It's one thing to find a terrific candidate; preparing him or her to actually accept a change to your company is the second half of the retained firm's task.
Finally, the hallmark of a really excellent search firm not only produces just what you are looking for, they also anticipate your needs before and during the search's progress.
What you should not encounter
Hiring recruiting expertise is important to your company's short and long term development. You want a responsive firm who returns phone calls promptly and produces results.
You also shouldn't have to suffer inundation with scores of candidates, even if they are qualified. Its up to the recruiting firm to be selective in its presentations. Be wary of recruiters who promise too much, too quickly; a typical search for quality candidates takes 60 to 90 days. Warning bells should go off if candidates say the recruiter didn't accurately describe the position or the company.
Maximizing recruiter effectiveness
Before calling in a recruiting firm, check internal readiness. Know early on who needs to see the candidate within the company, what steps are required to hiring and identify any potential hiring issues so the recruiter has the complete picture.
Engaging a recruiting firm is a two-way partnership transaction. Just as you have expectations from the recruiting firm, do your part by being thorough and candid about the company, corporate culture, history and details of the position and expectations for a candidate's education requirements, special skills, personality traits, salary guidelines and wiggle room. Share the company's current and future plans in confidence, including annual reports and collateral material with the recruiter and provide access to the hiring manager and other decision-makers.
As worthy as recruiting firms are as contributors to the company's progress, hiring does not happen in a vacuum. Take responsibility for managing the company interview process. Make sure company-side interviewers practice the finer points of current interviewing techniques, including the boundaries of legal questions, having ample time to interview candidates and communicating back any changes, feedback and recommendations to you and to the recruiter.
Similarly, be open to the recruiter's suggestions. It may be, given the parameters of the search, you have to lower expectations of the hiring manager and about the position itself.
Five years of experience may be just as useful as requiring ten years; a record of accomplishment can substitute for a degree from a top-tier business school. Be flexible in structuring the job offer - one size does not fit all today. One desirable candidate's decision point may be a highly attractive salary; another's may be willing to forgo a portion of the compensation for more vacation time or less travel.
With today's seller's market, be realistic and adjust accordingly. The exact executive you want may not exist, but there can be others with the right stuff who will grow into the position.
Should problems with the recruiting process arise, and they will, bring any issues up promptly, either with the recruiter or alert the managing partner of the search firm, to clear the air. A top-notch search firm will respond immediately; they want to preserve and deepen the relationship and be called back for your next search.
