7 Warning Signs You Really Need a Retained Executive Search Firm
We just wrote a blog post about how to avoid using search firms whenever possible. That strategy makes sense for virtually every business because retained search is expensive. It represents a significant investment.
So how do you know when you really need a retained executive search firm?
Check Your Gut
The first advice I would offer is to check your gut.
Do you have a growing sense of unease or, worse, of impending doom that your search for an executive may not end well?
Are you concerned or worried? I would say those are pretty strong indicators that you could use some help.
Top Warning Signs
1. You Are Rapidly Scaling Your Company
Venture capital-backed startups have their eyes on the prize: a hockey-stick growth curve. When they get to the inflection point, usually at their Series B or C round, they need to grow . . . and fast.
Any delay in bringing the necessary leadership onboard means they are crippled in that area: sales, marketing, production, engineering . . . you name it. You lose opportunities you may never get back. Profitability suffers, as does morale.
Not to put too fine a point on it, but failing to fill executive positions is a recipe for disaster. It affects your ability to raise subsequent rounds of capital. No capital and you run out of runway. You’re done.
If you’re actively scaling a VC-backed company, that is a warning sign that you really need a retained executive search firm. Retained search firms are essential partners as companies scale. They enable leadership to focus on rapid growth, which is always one of the most exciting, but challenging times for a company.
2. You Suspect You May Be Losing a Key Executive
If you have a star executive, you can assume that they are being courted by the competition. So, as you work to ensure your brilliant executive is more than satisfied with the scope of their job, career path, compensation, and work-life balance, you need a back-up plan.
If you suspect a top executive may pack up and leave, that’s a warning sign that you could really use a retained executive search firm. It makes sense to develop a bench of succession talent. Succession searches are executive searches that are conducted in advance of a possible opening. If the executive takes off, you’ve got a slate of viable replacements, ready to go.
However, succession searches are not easily conducted by corporations themselves. When you have an incumbent, doing your own outreach risks your search getting back to your superstar. Not good.
Retained search firms regularly handle engagements that must be kept on the down-low. That’s what we’re here for. And, who knows, you might even discover that your walk-on-water executive is more run-of-the-mill than you thought. In fact, it may be a time for an upgrade.
3. Your Recruiting Team Has Not Yet Filled a Critical Opening
You have given your internal executive search team all the tools. They have premium licenses on LinkedIn, applicant tracking systems, and all the latest AI-driven apps. So how could they possibly come up empty for an important executive search?
It happens more than you would think.
When companies come to us with that problem, it is clear those teams have worked incredibly hard. Frequently, their list of potential candidates numbers in the hundreds. By the time they get to us, the sourcers and recruiters are growing frustrated. More importantly, the hiring executive is starting to lose patience. If you’re noticing these warning signs, now would be a good time to turn to a retained search firm.
Since your search is already in critical condition, your selection of the right firm matters more. Make sure you trust that the search firm is capable of finding your hire when your internal team did not. Any firm that asserts that they personally know all top candidates are, well, lying to your face. Seriously. (Check out Dunbar’s Number.) That’s a red flag and disqualifying.
Searches that hit the wall need a firm with the deep research expertise to surface candidates that your team has missed or were unable to engage. Sad to say, few retained search firms have hired expert research talent. In fact, many of the leading firms have laid off research support as they tighten their belts, focusing primarily on sales. Be wary of firms that are not obsessively focused on execution — how they’d find you your person.
You also need a firm that is capable of finding your hire within weeks, not months. So, while you are at it, assess their ability to move at lightning speed.
4. Filling the Executive Opening is Politically-Charged
Do you sense you may be thrown under the bus if you fail to deliver the rockstar executive that the hiring executive demands? Do you sense this is a search that is impossible to fill? Are you being set up? Or if you are the hiring executive, do you fear repercussions up the chain of command? Those are indicators that you could really used a retained executive search firm.
These kinds of office politics happen. They are not trivial. An executive search creates opportunities to those involved to earn respect and admiration from the company — but only if the search is successful. If the search fails, it may affect your ability to rise.
Retained search firms understand that office politics are a given. Executive searches can bring out the best and worst in people. That’s okay. We got your back. When you go out to a retained search firm, it is now up to the firm to deliver the hire. You transfer any potential blame — if there is any — to the firm.
5. You Are a Small Company with a C-Level Opening
We just heard from one such company today. A profitable, family-owned business requires a COO because their Chief Operating Officer is retiring. The small business does not have internal recruiters available to conduct the search. Moreover, this search may be challenging because they’re not a startup offering options as an opportunity for wealth creation.
They’re not located on either coast (but their location is growing in popularity). Their compensation is not the highest or the lowest (which suggests it may be just right.)
It is clear the owner has built a successful business that cares about its employees. They enjoy a work-life balance better than what you’d find at most of the leading companies. They may be small, but they are mighty in that way.
If you lead a small, family-owned companies in need of a C-level executive, that’s a warning sign you really need a retained executive search firm. However, many of the larger, multinational firms will not take on these searches. That’s because their fees usually start at $100-thousand. So if you’re a small company in need of a C-Level executive, you will do better to focus on boutique search firms to get the support you need.
6. You’ve Just Become a Private Equity Turnaround
Your company has not been thriving, but you’ve got a plan. Better yet, you’ve taken Private Equity investment, which is testimony to your company’s viability. You have an action-plan for righting the ship — only it involves making significant change in executive leadership. The timeline is aggressive.
If you’ve taken private equity investment, that’s a sign you need a trusted retained executive search partner because competition for top talent is on the rise.
Bloomberg reports that “Private equity firms are ready to pounce in 2020, armed with a record level of cash. Firms led by Blackstone Group Inc. and Carlyle Group LP have amassed almost $1.5 trillion in unspent capital, the highest year-end total on record . . .While last year saw roughly $450 billion worth of private equity deals, M&A activity this year could be on a scale not seen since the financial crisis.”
To provide value for their investors, private equity firms and their portfolio companies are looking to top talent more than ever before. In fact, finding the best-of-the-best leaders for portfolio companies is not just important—it is imperative.
The demand is expected to increase this year with all the “dry powder” reported by Preqin. It’s a warning sign that it is time to lock-in your retainer search partners.
7. You Suspect a Top Executive is Mentally Unfit
Executives fail, for a lot of reasons. Executives regularly send their corporation off in completely the wrong direction. They make fundamental errors in the way they perceive the opportunities and problems their business faces. Sometimes, it is because they have personal problems.
Often, those problems can be addressed with therapy, rehab, or executive coaching. But sometimes, an executive demonstrates that he is incapable of change. His behavior speaks to who he really is.
Narcissism and psychopathy are personality disorders that are common in the executive suite. According to the American Psychiatric Association, “A personality disorder is a way of thinking, feeling and behaving that deviates from the expectations of the culture, causes distress or problems functioning, and lasts over time.” In other words, personality disorders are unlikely to get better.
The C-suite attracts narcissists because narcissistic leaders have a grandiose sense of importance that they must satisfy. In fact, narcissistic leadership is so prevalent, it has its own Wikipedia page. Equally concerning are estimates of the number of psychopaths who are CEOs. One study highlighted by the Washington Post pegged that estimate at 21-percent.
But here’s the thing: when you have a malignant narcissist or a psychopath, your company is at significant risk of running off the rails. Alarms should be going off: ding, ding, ding, ding, ding.
So, as a best practice, check to see whether you have an executive who has zero empathy for others, who lies, who finds it easy to bend rules and break laws, or seems dangerous or violent. Those are massive warning signs you could really use a retained search firm to find a replacement.
But while you’re at it, please do safety planning. We do want everyone to stay safe.