Hiring an Executive Recruiter - The Value Proposition
August 2006
When companies seek to hire management and professional talent from outside their organization, they have several options. They can decide to manage the process themselves, using advertising, the Internet, and/or a contracted researcher to identify potential candidates; use contingency recruiters; or use a retained executive search consultant.
Choice of Internal or External Resource
Using the first option, the hiring executive or a human-resources executive makes an effort to find qualified applicants, typically by advertising the position in the print media or on the Internet, and then screens responses, interviews candidates and selects the person to be hired. The advantage here is that the company retains full control of the process.
The disadvantages are that many qualified candidates (including some of those most qualified) may not see or respond to an ad or post their resumes on the Internet; many unqualified candidates must be evaluated in order to discover those who are qualified; and, once qualified candidates have been identified, hiring authorities face complex, time-consuming and sensitive issues of negotiation and reference checking without the benefit of a third-party professional.
Therefore, many organizations prefer to use independent recruiters. But how do they decide whether to use a contingency recruiter or a retained executive search consultant
I'm considering using a search firm to locate midlevel managers and executives. Should I use a contingency or retained search firm, and how do they differ?
There are two main differences between contingency and retained search firms: how they look for job candidates and how they get paid.
Contingency firms are transaction oriented -- they get paid only if you hire a job candidate that they present to you. Typically, contingency firms maintain relationships with dozens of companies. When they find a top-notch job candidate, they present the hot prospect to as many firms as possible.
If your company is looking to fill a position quickly or to fill a midlevel position, using a contingency firm could be a good move. Contingency firms have a great "deal flow" of candidates, which means that they can meet short-term staffing needs. On the other hand, contingency firms rarely take the time to really get to know your company's needs. Your hiring manager may get contacted many times with a hard sell about a prospective candidate who may or may not be a great fit.
Retained search firms are consulting oriented -- they get the same fees no matter how long it takes to find the right job candidate. Retained search firms fill your company's vacancies by getting to know your company's needs and finding the person with the exact skills. They are generally best for senior-level management positions where there are fewer qualified candidates and the challenge is recruiting the talent from a competitor. Contingency firms typically charge less than retained firms do -- but both can charge anywhere from 20 percent to 33 percent of the prospective employee's first-year salary range.
Why not just hire several contingency search firms and let them compete for my business and the best candidates?
Contingency search firms measure themselves in resume volume and number of searches completed. They most often passively collect resumes from people out of work and looking for jobs. They often do simple keyword searches and may or may not have had a phone interview with the real person behind the resume they send. They hardly ever have face-to-face interviews with the candidates. Contingency search firms can waste your precious time with candidates, who may look OK on paper, but the chemistry fit with you and your team is all wrong.
The best candidates will not deal with contingency search firms. They are barraged with phone calls from recruiters, and will not spend the time it takes to meet with a contingency recruiter while not knowing whether they will actually have a chance to meet with their client. The best people are very conservative about where their resumes go and do not want them distributed without permission. Contingency firms simply do not have access to the resumes of these quality candidates.
What is the value proposition?
Nothing is more expensive for a company than hiring the wrong candidate. An excellent retained search firm will help minimize the risk of making costly mistakes such as assuming a successful big-company executive will automatically be successful leading a small startup, or giving in to a sense of urgency and making quick, expedient hires rather than strategic hires that will prove successful over time.
By retaining an executive search professional, a company will have access to the right professionals while maintaining control over the hiring process. Almost all executive searches come with a guarantee that if the chosen hire leaves within a certain time period, a new search will be initiated at no cost or at a nominal fee. Thus it is in everyone's best interest to take the time and effort to make the best hire possible the first time around.
How can I tell an excellent retained search firm from a not-so-great one?
Excellent retained search firms should be your intelligent filters. Since the search professionals in these firms are, in essence, establishing the caliber of your candidates, they should be high-caliber themselves. They should have strong educational backgrounds, successful backgrounds in the functional areas you are recruiting and be smart enough to understand the nuances of your strategic positioning, competition and business model. They will reinforce your hiring criteria if they believe it will lead to a successful hire. They will also respectfully challenge you if their experience and accumulated wisdom points towards a different path to success.
Excellent retained search firms should always meet with your existing management team to assess skill sets, not just titles, and develop a strong feel for team chemistry and company culture. They then find candidates with the right fit in skills and personality / character that will prove successful for your company. Personal chemistry is always important, but never more so than at a dynamic, high-intensity startup.
Excellent retained search firms are proactive. They go after quality executives who are doing well in their careers and are not necessarily looking to change. They know what motivates these entrepreneurs and can usually get them to take a serious look at your opportunity. They leverage their own extensive networks of known "A" players to get referrals to great candidates.
Excellent retained search firms take only a limited number of searches at one time. The fewer, the faster they can complete your project. They spend weeks looking for your best candidates, trying to find the right skill set, background match and personality fit for your company. They do not deal in resume or search volume, rather in people who they know and have tracked for several years, or quality referrals from these same people.
Most management and executive positions do not require a search to fill, however the time and effort spent to retain a professional search organization for those key, hard to find mix of skill sets and experience, is an investment in your organizations success.
