Learning how to recognize great talent is the key to making amazing hires in executive search. While it is pretty easy to tell who’s good while seated courtside in Madison Square Garden watching the New York Knicks play, it is not so easy for Chief Executive Officers seated in the C-suite. At senior-executive level, candidates start to resemble one another. They often share similar academic credentials and similar career trajectories. They all meet the basic qualifications or they would not have made it this far. However, to hire senior executive talent that is truly game-changing, you must somehow discern the difference between two seemingly identical candidates. To make the right hire, you must develop the ability to figure out which candidate will outperform the rest. You must increase your powers of observation.
A Musical Analogy
Early in my marriage, I discovered my husband Crispin Cioe seated on the floor of the living room, completely engrossed in sorting saxophone reeds into separate piles. He’d hold up a reed against the light to examine the grain, wet it in his mouth, position the reed atop his mouthpiece, aligning the tip of the reed with tip of the mouthpiece just so. Next, he’d encircle the reed and mouthpiece with the ligature, and tighten its screws. With the reed locked in place, he’d raise the mouthpiece and blow. After sounding the note, Crispin then would unscrew the ligature, remove the reed, and place it on one of three piles.
I witnessed Crispin repeat the reed testing sequence a good dozen — maybe two dozen — times. As I watched on, I became utterly fascinated. I could not figure out for the life of me what each separate group was for, so I asked. Pointing to the first pile, Crispin replied, “Oh, these are for practicing.” Pointing to the adjacent group he added, “These are for performing. ” He paused, and in a reverential tone added, “And these are for recording sessions.”
The reeds were all from the same box. They all looked identical. My husband was insisting on sorting the reeds into different piles when there appeared to be absolutely no difference at all. Of course, the thought crossed my mind that I may have just married a man who had come unhinged. And so I sat down on the floor beside him and said, “Help me hear the difference.”
I closed my eyes and concentrated on the bleating and honking sounds that had been indistinguishable. The practice reed dutifully sounded a note when it vibrated. Yet when Crispin blew the same note on a performance reed, the note filled the room. It was not louder, but bigger. The very shape of the sound had morphed. Then when Crispin tested the recording reed, the note went some other place entirely. It transcended.
I frequently think of that day when I recruit senior executives. Exceptional talent transcends. Clearly, those that are counted among the best are gifted. But they achieve greatness by showing up and working hard in the relentless pursuit of excellence. The nuances that separate the extraordinary from the ordinary are often subtle, but there are patterns that in time you will come to recognize. Being fully present. Focusing. Listening. Doing those three things teaches you pattern recognition. It is how you identify top talent.
I learned that lesson purely by accident when my ability to recognize top performers took a quantum leap after I started attending a yoga class each day. The class devoted the last fifteen minutes to meditation. When you practice mindfulness you become capable of separating the signal from the noise. Paying attention to what matters enables you to identify top talent. You make connections and recognize patterns you previously would have missed. So quiet your mind: the answer will be revealed.
The executive search process varies little from retained executive search firm to retained search firm. In fact, the basic steps of the retained search process are described by the Association of Executive Search Consultants (AESC), an organization that represents retained search firms. Every time they conduct a senior-level executive search, executive recruiters seated at the largest search firms in the world — Spencer Stuart, Russell Reynolds, Heidrick & Struggles, or Korn Ferry — as well as at the leading boutique executive search firms follow the same basic retained search process.
Of course, since retained search process and pricing looks are pretty much the same at every traditional search firm, it can be challenging for executive search buyers to figure out which firm to select. We will have more on discerning the differences in another post. However, before we get into the nuances, you first must learn the basic steps of the retained search process.
Engaging the Retained Firm
Retained executives search firms work by retainer and exclusive contract. The standard retained search contract stipulates that the firm serves as the exclusive representative of the search for external and internal candidates. It also defines engagement timing, off-limits agreements, and other issues relevant to the particular assignment.
Holding Launch Meetings
The retained search firm meets with the hiring executive and relevant stakeholders to discuss the requirements of the role. The meetings often include key board members, members of the senior executive team, peers and subordinates. These meetings enable the search firm to gather important information about the requirements of the role. More important, the search partner witnesses first hand the management style and corporate culture, which are essential to understanding what makes someone successful at the company.
Creating Position and Candidate Specification
The retained search firm drafts a description of the position, detailing its reporting relationships, responsibilities, and objectives. The candidate specification details core competencies, preferred experience, and soft skills — the personal qualities that sought in the ideal candidate. The document serves as a touchstone, defining all the requirements of the role, preventing searches from veering off course. Once the client approves the document, it is used as a marketing tool with candidates.
Setting Research Strategy
The search team develops a strategy targeting companies most likely to yield a successful candidates, including the initial list of target companies agreed to in the launch meeting. The strategy considers the level and scope of comparable roles as well as other key data points: office location, corporate culture, and each company’s ranking. Companies that are off-limits are also delineated — companies out of which the firm will not recruit due to sensitive client relationships or because the firm has client blockage.
Conducting Original Research
Using the strategy as a blueprint, the search team conducts original research to identify and profile idea candidates, mapping the reporting relationships and often building out org charts of target teams. Traditional search firm usually do the most of the research online. The search firm will also query its own candidate database, proprietary information services, and social networks such as LinkedIn to yield prospective candidates.
Search firms sound their network of sources for candidate referrals and calibrations. Sources include journalists, professional associations, and other relevant groups. Prospects that meet the requirements of the role are added to the initial list of prospects.
The search team contacts prospective candidates to determine whether they meet the primary requirements of the role and gathers details on the candidates motivations — what it would take for that candidate to make a move to a new company. The search team reviews the list of qualified, interested prospects to determine whether more research is necessary or whether it is time to schedule in-depth interviews.
Interviewing and Pre-referencing Top Prospects
The search consultant interviews and evaluates top prospective candidates in a deep-dive interview that steps through the career history. The executive search partner evaluates the candidate against the candidate specification through in-depth, in-person or video-conference interviews. Taking great care not to jeopardize candidate confidentiality, search firms pre-reference candidates whenever possible to verify past performance and essential soft skills. Those who are not a fit are closed out.
Writing Candidate Profile
For those candidates the search firm presents to the client, they prepare a written Candidate Profile, a report that details the candidate’s education, career history, honors and awards as well as an analysis and appraisal of the candidate strengths and weaknesses and appropriateness for the position. The report also highlights any key motivators, issues, and deal-making details essential to closing the candidate.
Presenting Candidates and Tracking Progress
The search firm presents candidates at regular progress meetings. Working closely with the client, the list is refined to a slate of 3 to 6 strong contenders for the client to meet. Client-candidate meetings are then scheduled.
Scheduling Client Interviews
Client interviews of the candidates scheduled to winnow selection down the two or three finalists. Those that are eliminated are closed out.
The search team checks the candidates references, contacting the contacts provided by the candidate as well as other sources available to the firm. The team makes every effort to ensure discretion and confidentiality. Verification of employment and academic credentials is often performed by third party services. It is the consultant’s responsibility to ensure that such checks have been conducted.
Extending the Offer
When a final candidate is selected, the search consultant works closely with the client and candidate to position the offer with the candidate, and to negotiating a package that is agreeable to both parties.
Closing the Candidate and Search
The search team closes” the candidate when the executive accepts the offer, agreeing to join the company. The search firm then closes out the engagement by thanking those involved for a successful outcome.
Given the many steps involved in the retained search process, the recruitment of CEOs, CFOs, CMOs, CTOs, and CIOs requires an investment of time to do it well. However, the AESC states categorically that senior-level executive search is “a time consuming if it is to be done professionally. ” That is a point with which we respectfully disagree.
What executive search buyers object to is when retained searches take too long for no apparent reason. As a NYC area retained search firm that specializes in senior level executive search for some of the most powerful and successful companies in media and technology, we understand that their businesses move at the speed of light. We get deadlines. Over the years, we have experimented with different ways to close searches more rapidly for searches in video games, digital media, software, and advertising. With few exceptions, making search smarter yields faster, better hires.
If your company is experiencing dramatic growth or is in the midst of a corporate turn-around, chances are you need a executive search firm. The reason is simple: senior executive hires are simply too important. Hires at that level can make or break a company. Consequently, while the business landscape may change, the need for high-performing executives remains a constant.
What follows are the 12 signs you need an executive search firm.
1. You require a top performing senior executive.
If hiring the best talent available is important to your company, a search firm can help you do the rigorous work required for game changing hires.
2. You have a C-level leadership opening that must be filled.
If bad things will happen if the role is not filled, or if the cost in lost revenues and missed opportunities is too high, a search firm can mitigate the risk.
3. You have a senior executive position that is extremely nuanced.
If you are seeking an unusual blend of knowledge, skills, and abilities along with the requisite cultural fit, a search firm can help you thread the needle.
4. You have entered a new market or created a new senior executive position.
When an executive search falls outside your area of expertise, an executive search firm can plug the knowledge gap with their domain know-how.
5. You have an incumbent executive that you need to replace.
For companies that need to line up a replacement while the senior executive is still in the role, search firms offer a much-needed veil of secrecy.
6. You need to recruit from sensitive target companies.
If you need to recruit top executive talent from partner firms with which your company does business, the confidentiality that search firms offer helps avoid ruffling feathers.
7. Your senior leadership team lacks diversity.
Because women, Black and Latino candidates are not well-represented at the senior executive levels, search firms can help level the playing field by conducting original research to ensure equal opportunity for all candidates.
8. Your senior executive team could use some back-up.
If you sense a key executive might be on the verge of leaving or that you could benefit from top-grading, a succession bench help you tee up executive hires in advance of need.
9. You do not have the bandwidth to take on an executive search.
If you already have too much to do and too little time, taking on an important executive search can quickly become its own full time job. That is what search firms do.
10. You have tapped out your network for candidate referrals.
If you have exhausted your network of connections for possible referrals, it is time to access another network. Executive search consultants are among the most well-networked people in the business.
11. You have an important executive search that is taking too long.
Whenever a search takes to long, it is time to call in reinforcements to speed time-to-hire for challenging searches and those with compressed timelines.
12. You cannot provide concierge-candidate care.
If you lack the time or inclination to hold the executive candidate close through to hire, you risk losing the candidate to a competitor. Candidates often confide more in search consultants, enabling then to address concerns before they threaten a successful outcome.
As the dozen signs above suggest, identifying, profiling, and recruiting high-caliber senior-executive talent requires an investment be made by the employer and by the search firm. For executive search to be successful, it takes industry and functional insight, a rigorous process, and unrivaled access. The Good Search is a retained executive search firm in the Greater New York City area that does all that and more by making search smarter.
The lack of senior executive diversity at high tech companies in the Silicon Valley has been the subject of much debate. But because no serious research had been done, very little got accomplished by all that talk. The diversity dialogs devolved into the anecdotal. No one had hard data. No study had been conducted that could tell us just how bad the Bay Area bastion of tech maleness really was.
Dude, Where’s My Code?
Of course, any woman working in the tech industry has likely experienced the bias first hand. In fact, the male gender dominance has given rise to so-called ”bro” culture. If nerds with pocket protecters were not enough, women of the Silicon Valley have the growing ranks of brogrammers with which to contend.
According to the Urban Dictionary
A programmer who breaks the usual expectations of quiet nerdiness and opts instead for the usual trappings of a frat-boy: popped collars, bad beer, and calling everybody “bro”. Despised by everyone, especially other programmers.
Oh my god, John is talking about football and chicks again. That guy is such a brogrammer.
However, a recent study has scored an important victory in gender diversity — the study has proven that significant gender bias exists. The ground breaking study was conducted by the tech law practice of Fenwick & West and is entitled Gender Diversity in Silicon Valley: a Comparison of Silicon Valley Public Companies and Large Public Companies. In fact, the study finds that the paucity of gender diversity at the board level is likely worse than you thought. As Business Insider Reporter Lydia Dallett pointed out,
“In the 2013 proxy season, more than 80% of Silicon Valley 150 companies had only one woman director or none at all.”
In other words, Yahoo CEO Marissa Meyers and Facebook COO Sheryl Sandberg are the gender diversity exceptions and not the rule in Silicon Valley. According to the study, while women have made significant progress over the past dozen-and-a-half years, when you compare Silicon Valley public companies to large public companies not counted among the SV150, the difference is vast.
The law firm sifted through public filings for the proxy seasons from 1996 through 2013, tallying up the number of women serving on boards and executive teams of companies in the Silicon 150 index. As you can see below 43% of the companies have no women on their boards of directors and 40% have just one woman director.
The Silicon Valley tech companies are public companies, mind you, not tech startups. They each have, on average, 8500 employees. S&P 100 companies average 170,000 employees. However, when you compare the two, SV150 companies seem as immature as a school boy who punches a classmate in the arm to show her how much he likes her.
The facts are now indisputable: women are profoundly under-represented at the senior executive and board levels in Silicon Valley. Of course, the question becomes what do we do about that? At a minimum, the law firm Fenwick & West suggests the following:
As anyone who lives and works in the high technology and life sciences industries of Silicon Valley can readily attest, Silicon Valley is quite diverse in terms of ethnicity and culture as well as in many other ways, drawing talent from across the United States and around the world. And, as a general matter, Silicon Valley companies embrace open-mindedness and meritocracy as core values and are interested in attracting the best, most talented workforce possible, in the belief that it is essential to the success of their businesses. We hope that the information in this study . . . will spur and inform additional thought and discussion among the participants and leaders in the Silicon Valley ecosystem.
I’d like to believe that the study will prompt more evolved leaders in Silicon Valley to do more than talk. There are simple steps one can take to level the playing field. Our retained search practice The Good Search and our research practice Intellerati have done extensive work helping technology companies identify, profile, and cultivate relationships with the best and brightest diverse talent at the senior executive and board levels — well in advance of hiring needs. Proactively developing research can help uncover top diverse talent to ensure their light is not hidden under a bushel. Moreover, diversity talent pools also help to off-set the homogenous effect of employee referrals. To become truly diverse, we must reach beyond our own networks to include executives who do not resemble ourselves.
Recruiting top C-level senior executive talent takes time — often more than a CEO would like. In fact, for companies that really believe employees are their most valuable asset, the Founder and Chairman of Gilt Kevin Ryan has a “simple test” to make sure they walk the walk. In an article he wrote for Harvard Business Review, Mr. Ryan advises, “Ask the CEO if he or she spends more time on recruiting and managing people than on any other activity. For me, the answer has always been yes.”
In executive search, it is important to manage time effectively by quickly eliminating candidates that are not viable. Culling your long list of candidates down to a curated short list of contenders optimizes executive recruiting and talent acquisition as it speeds time-to-hire. Here at our retained search firm that specializes in NYC media and technology, we’ve learned to recognize the signs a candidate is not a contender. What follows is our list of the top 6 signs an executive candidate is a waste of time.
1. Money Fixation
As a retained search firm, we regularly negotiate annual compensation packages in excess of a million dollars with an opportunity for significant wealth creation. However, we grow concerned whenever a candidate fixates on money to the exclusion of more intrinsic motivations such as the pursuit of excellence, leadership, and creating real value. When a candidate cuts to the money early on in conversations and keeps returning to the topic — when they appear to be motivated by money alone — their values are flawed. Money-obsessed executives have trouble leading and inspiring teams to new heights. They become as fungible as money itself.
2. Dropped Balls
Executive recruiters often request that candidates forward a resume before a scheduled call. In addition to needing the information, executive headhunters use the resume as a litmus test to determine how serious a candidate is about exploratory discussions. Whenever candidates promise resumes that they then fail to provide, it is a warning sign. The executives may lack the executive ability to keep their word. They may also lack the necessary motivation to make a move to a new company. Another warning sign is when candidates repeatedly cancel appointments with little apology or reason. Their behavior is showing us who they really are and what to expect from them as a potential hire. For that reason, getting stood up by a candidate is reason enough to disconnect.
3. Dodgy Answers
Clearly, candidates are motivated to present themselves in the best possible light. However, the moment a candidate’s answers are intentionally evasive or misleading, they have crossed the line. Candidates that do not give a straight answer may lack the ability – to quote Oprah – to “stand in their own truth.” In a recent Harvard Business Review Blog Network article, the CEO of Banyan Family Business Advisors Rob Lachenauer reveals how impressed he was by a candidate who volunteered that she had a mental illness during her job interview. She explained that she had been on medications for a decade and had not had any episodes during that period of time. At the time, the CEO didn’t know what to say, but thanked her for her integrity. Ultimately, Mr. Lachenauer hired the candidate because she was qualified and because she had the courage and strength to reveal her vulnerability.
4. Radio Silence
Another warning sign is when candidates suddenly fall silent in their communications. An abrupt failure to respond to calls or emails is often an indicator that the executive may be engaged in discussions with another employer, or may have had second thoughts about the opportunity. I know of one candidate who actually accepted a formal job offer, then it was as if the executive fell off the face of the earth. She just stopped communicating, leaving the prospective employer first worried, then annoyed, and ultimately scratching their heads in disbelief. A week or two later, the candidate surface at another company, completely burning bridges with the company she had treated so disrespectfully. Some candidates fear openly admitting they are being pursued by another employer. However, being in demand is not a problem: being opaque about it is. Top performing executives are clear as to their intentions, and keep all interested parties informed as to their process.
5. Crippled Communications
Candidates whose answers lack organization or who fail to get to the point after so much blah-blah-blah most likely have problems leading. Most top performing executives have an exceptional command of the English language: they use it to their advantage to persuade and evangelize. While some typographical errors are inevitable in the thumb-typing, auto-correcting age in which we live. great leaders set themselves apart by in their communications. Whether they’re speaking off-the-cuff, in an email, text or tweet, their intelligence always comes through. In fact, as our collective attention span shrinks, as our emails are reduced to the size of tweets, top executives also display a mastery of the new haiku. Increasingly, great leaders must also be capable of distilling a message down it its shortest, purest form. Senior executives who lack a command of the written and spoken word are missing a critical skill set: walk on by.
Asking a candidate to give an example where they failed or “hit the wall” is often seen as a trick question. In fact, asking any candidate to share anything negative about themselves is seen as a kind of test for which there really is no right answer. However, there are wrong answers. Anytime a candidate asserts he or she has never failed is a red flag. It suggests either that the candidate is arrogant or is unable to lead an examined life. When asked about their greatest weakness, whenever a candidate serves up the cliche answer “I work too hard”, I groan silently on the inside. The answer conveys a smug self-reverence at having turned an imaginary negative into a positive, as if it deserves an immediate high-five. In a piece he wrote for the Harvard Business Review blog network, David Reese, the head of people and culture at Medallia, shares insight on why it is better to give a real answer: you don’t want to leave them wondering who you really are. At The Good Search, we concur. The employers we serve want to hire smart, capable, and forthright leaders who can speak the truth, not spin it.
What warning signs would you add to the list?
In the world of recruiting and executive recruitment, there are two kinds of search firms: retained and contingency. In order to select the right search firm, it is important to understand the difference between retained and contingency search firms.
To be clear, there are good and bad recruiters at retained executive search and contingency search firms. Some contingency recruiters, indeed, may be very thorough in their approach, while some retained executive recruiters may phone it in. The approach by each individual headhunter can vary, as can the approach of each individual search firm.
With that caveat, what follows are the general differences between the two search firm models:
The Good Search falls within the retained executive search firm category. We are a national executive recruiting practice headquartered in the Greater New York City Area. We specialize in advertising, media, games and all-things-Internet. For employers that would rather not go “out to search”, our research practice Intellerati offers month-at-a-time support for internal executive recruiting and talent acquisition teams.
If you are shopping for a search firm to conduct an important executive search, there are search firm selection questions not to ask. You’ll find the questions on the lists you can download from the Internet on what to ask a search firm you’re thinking of possibly using. However, the questions they suggest that you ask are not entirely objective. The search firm selection questions have been crafted by the retained search firms industry as marketing documents. They questions have been designed to lead you to choose a retained search firm. Even human resources associations and other seemingly independent organizations often get spoon fed the same questions by a friendly search partner or firm. In other words, retained search firms have cleverly marketed screening questions, that when answered, will lead you to their retained search firm doorstep.
Of course, The Good Search is a retained search firm so, one might wonder, “Who are we to talk?” That is a perfectly reasonable question. We actually stand to benefit from these biased lists of questions because they steer potential buyers to use retained search. However, we’re writing this post because we are consumer advocates and believe it is good business to help executive search buyer become more informed. Still, when you get right down to it, it doesn’t matter who we are or what we believe. What we are recommending is that you stop to think about the implications of the cooked questions. We are suggesting that you question the apparent intent of the biased lists of questions and think about better questions to ask.
- How many searches have you conducted for this kind of role in the few years?
The implied preferred answer is that the more executive searches a firm has done for similar role the better. That’s not necessarily the case. In retained executive search, the more identical searches a firm conducts, the more likely it is that they’ve done business with the companies you’d want to recruit out of for your engagement. However, because they’ve done business with the target company, that company is technically off-limits to them. When they can’t go there then you can’t go there. Too many identical searches are not a good thing. In fact, search firms that rattle off a long list of similar engagements should be screened out, not in.
- Will the executive search firm consultant I meet with actually be the one doing the work?
The implied preferred answer is “absolutely”, leaving the buyer with the impression that the parter is elbows deep in the engagement each and every day. However, every major retained search firm works on searches in conveyer belt fashion. First come researchers who identify candidates, then come junior associates who qualify the candidates, and then come the consultants and partners who do more in-depth interviews, assessments, and manage the engagement through its successful completion. Smaller firms and boutiques may cut out a layer or two, but teamwork in executive search is pretty standard practice. In our view, what’s more important is whether those working on the engagement offer serious research expertise, business acumen, and added reach — the ability to tap candidates out of the grasp of the other firm..
- What is your time-to-complete?
The most frequently measured metric cited by executive search clients is how long it takes to complete an engagement. But here, one must ask why that is. Without a doubt, finding, recruiting, and getting a top executive onboard in a timely fashion is tremendously important. Vacant executive positions exact a real cost in lost revenues, lost opportunities, overworked team members, poor morale, and increasing customer dissatisfaction. However, the metric also dominates because it is easy to capture, requiring little thought or analysis. Value is a much harder metric to measure because it is quantitative. Still it is the most important metric of all. Would you rather fill a role in six weeks with someone who is simply qualified or would you rather hire game changing talent capable of taking your company to a whole new level?
If knowledge is power, hiring your company’s first Chief Data Officer (CDO) may be the shortest path to a competitive advantage. According to a recent article in Harvard Business Review, you hire a Chief Data Officer in order to compete with data.
That Chief Data Officer will likely need data scientists, and eventually a data lab, and a data factory – respectively one place to do longer term, innovative, out-of-the box thinking, and the other place to do more process-focused data analytics aimed at more immediate results.
Hiring your first Chief Data Officer also involves significant change management. Your leadership, divisions, departments, and teams will need to be prepared to share their information. The walls of organizational silos must come down. In addition, when the Chief Data Officer serves up actionable intelligence, leadership must be prepared, after all, to act. That action can bring about seismic shifts as your company morphs into an entity that is more competitive.
The place to begin is by how you think about data: where it exists and how it might be used. Ask yourself what entities capture data specific to your business. In my former career as an investigative journalist, I learned that virtually every time a person interacts with the government, a record is created: that’s data. Today, virtually every time we interact with an electronic device, a record is created — every time we turn on our cell phone, send an email, visit a website, or scan in our credit card at the corner store. In addition to the data that your company captures, there are other data that are available for acquisition. Think about all the insights the data might hold. (More on this later.)
- Descriptive: Tell me what happened.
- Diagnostic: Don’t just tell me what happened, tell me why it happened.
- Predictive: Tell me what will happen.
- Prescriptive: Tell me how I can I make it happen.
But there is one last question that CEOs must ask themselves as they consider the implications of the tsunami of data that is now available.
Tell me what happens if one my top competitors hires a Chief Data Officer first?
Since knowledge is power, the answer is obvious. Your competitor will have gained a significant competitive advantage. That is why a growing number of CEOs are deciding the time for their first Chief Data Officer has come.
Search firm pricing is a top concern of executive search buyers. Whenever employers have an important board or senior-level opening to fill, it is reasonable to ask,”What does executive search cost?”
Of course, there is no easy answer: it all depends on how your company prefers to recruit and how important getting top talent is to your corporate strategy. The wide array executive search firms and recruiting services available means that executive search prices vary wildly.
However, I can give you a sense of what companies typically spend on an executive search by sharing common price ranges of various executive search services.
Going Out to Search Or Ordering In?
The first question a company needs to answer is whether it wants to hand off the executive search to a search firm or whether it wants to manage the engagement in-house. There are research companies that offer flexible unbundled search and recruiting research services, a trend that has grown in popularity in recent years. In fact, our own research division Intellerati offers services designed to support internal executive search teams.
Employers seeking full-service executive search services usually turn to a search firm. For companies that want to go “out to search” there are two traditional search firm models: retained search firms and contingency firms.
- Retained: Retained executive search firms are paid a retainer to do the work of executive search. The fee is not contingent upon making an actual placement. Retained firms focus on getting companies the best talent available for the job. As a result, they focus on recruiting gainfully employed and successful senior-level executives. They are passive candidates who are not actively looking for their next job. They invest more time in research and vetting candidates.
- Contingency: Contingency search firms are only paid when they make a placement. They tend to concentrate on recruiting candidates that are actively looking for their next jobs. The talent pool is not considered as high in quality, because it includes dysfunctional and disgruntled workers who have been fired or who have quit their jobs. While there is some cross over — mainly at the VP and Director levels — retained firms focus on executive searches, and contingency firms focus more on staffing level searches that are not at the senior-executive level.
Executive Search Pricing: Search Firms
The pricing model of traditional search firms typically does not give clients an opportunity to save. Employers pay a full fee regardless as to whether the search takes a week, a month, or half a year. That’s because the pricing is based on a percentage of annual compensation.
With percentage fees, the more a candidate is paid, the more a search firm makes. Some contend that is a conflict of interest. Percentage-based pricing provides financial incentive for search firms to negotiate higher salaries of the candidates they place, which is not in the best interest of the client.
- Retained search: 30-33% of total first year cash compensation of the candidate placed, plus expenses
- Contingency Search: 20-25% of first year base salary of the candidate placed
Flat Fee Pricing
A small percentage of search firms charge a flat fee, including Egon Zehnder, one of the leading retained firms in the world. (Full disclosure: The Good Search also offers retained services by flat fee.) Egon Zehnder maintains the pricing model enables the firm to be “completely unbiased” and to “facilitate hiring negotiations with no conflict of interest. Most fixed fees are similar in total amount to the percentage based fees.
While there will always be firms that charge less, and there were always be search engagements that enable a firm to charge more, most executive search fees fall within a basic range, regardless as to how the firm does the math.
Average Full-Service Executive Search Fee
$50,000 – $300,000
Executive Search Pricing:In-House Services
At large corporations, the do-it-yourself executive search model has grown in popularity. Large employers with at least a dozen-and-a-half executive openings per year are bringing executive search in-house. In doing so, they frequently turn to executive search research firms and vendors offering unbundled executive search services to augment their own efforts. Sometimes, all they want is a list of potential candidates for their own executive recruiters to call. Sometimes, they want interested, qualified candidates that they’ll usher through the interview process through to hire. Sometimes, they want a firm that flexes to serve as an extension of their own team.
Executive Search Research and Unbundled Services
Executive Search Research firms and search firms offering unbundled services typically charge by the hour, by the project/search, or by monthly retainer. Research firms offering name generation services also charge by-the-name. Name-gen research produces lists of target candidate names. Typically, the lists are comprised of information gathered from the Internet and from calling into companies.
The wide range in pricing depends on the services offered and on domain expertise, access to top talent, consultative abilities, and the stature and executive presence of the firm. The budget firms may produce candidates who are simply “willing to take a call”, without qualifying, interviewing and vetting the candidate with a more thorough assessment. Research firms typically do not position offers, assist in negotiations, and close the candidate.
Average By-the-Name Prices:
- $30 to $50 a name
Average By-the-Hour Prices:
- $90 to $150 an hour
Average By-The-Month Prices
- $20,000 – $40,000
Increasingly, in-house recruiting teams are turning to research firms that offer the expertise of retained search firms, but a much more flexible model. Frequently, theses firms work by monthly retainer as a natural extension the in-house executive recruiting team. Unlike the retained model, the monthly retainer gives companies a significant opportunity to save. In most cases, firms offering unbundled services are not responsible for the hire. However, research firms do make it a practice to guarantee the quality of their research.
The True Cost of Executive Search
Last, price is not the same as the total cost of a search, a figure that is the one that ultimately is the more accurate measure. It is a figure that also takes other factors into account, such as the cost of a position languishing unfilled, or of a cheaper, but bad hire. There is a reason that the most powerful and successful employers in the world continue to invest in quality executive search, whether through their own teams or in league with a trusted executive search partner.
Our latest The Good Search video asks a question that inspired us to found our next-generation retained executive search practice in New York more than a dozen years ago: ”What if . . . ?” It is a question that also has prompted entrepreneurs the world over to found startups and venture capitalists to invest and risk vast sums of money, knowing full well the likelihood of failure is high. The National Venture Capital Association reports that that 25% to 30% of venture-backed businesses fail. A story in the Wall Street Journal says the startup failure rate is more like three out of every four. Still, dreaming “what if” is how the Founder of Reddit identified a genuine need and set out of fill it.
“What if there were a better way?”
Imagining that there might be something better is a exercise in optimism and often naiveté. Newbie entrepreneurs sometimes forget to consider that somebody before them may have already tried their Big Idea only to discover no market for it existed. Still, asking “what if” makes the asker a contrarian for thinking zig when the vast majority zags. Daring to believe that there must be a better way than the way everyone else is doing it takes courage and a soupçon of crazy. Daring actually to do something about it requires full-on Kevin-Kostner Fields of Dreams crazy as in If you build it, he will come.
Nearly a dozen years ago, I came to the conclusion that the retained executive search model was upside down. Traditional search firms emphasized sales and worried too little about execution. At the time, 40% of retained executive searches failed to complete, a figure that was shockingly high and persists to this day. When nearly one-in-two executive searches results in failure, executive search buyers start longing for something better and they too start to wonder,“What if there were a better way?” It is why large corporations are standing up internal executive search teams, bringing executive search in-house. It is why LinkedIn is thriving. It is why The Good Search has seen a dramatic increase in our retained executive search business.