What Are the Greatest Myths of Search Firm Selection?
Search firm selection is tricky business. Over the years, retained search firms have provided guidance to prospective clients on how to select a search firm. That guidance is a one way they market their services. The search firm selection document recommends using search firms that resemble the search firm offering the guidance. Yet a number of their assertions have been adopted as the gospel truth, when that simply isn’t the case.
Moreover, the track record of traditional retained search firms is underwhelming. 40% of retained searches fail-to-complete. An estimated 40-50% the executives who are recruited don’t make it past their first year. Clearly, something needs to change. A good way to begin is by exposing some of the myths regarding what an employer should look for in selecting an executive search firm. To search smarter, we must begin to challenge old assumptions and to think for ourselves.
Myth #1: You need to Specialize in our Industry
On the face of it, specialization seems to be a reasonable criteria in search firm selection. Clearly, you want a firm that understands your business and its players. But beware. Industry specialization sets up client blockage. A search firm, particularly the larger firms, will not be able to recruit from all your favorite target companies. The reason? A number of those companies are already clients of the firm.
Of course, the search firm will promise to tell you whenever there is a conflict. But why should you believe them? If they base their fees on a percentage of compensation, they already have demonstrated they are comfortable with conflicts-of-interest. The best way to avoid client blockage is to do business with boutique search firms.
Myth #2: 30% Fee is Acceptable
Retained search firms, on average, charge 30% of annual first year total compensation of the candidate they place plus expenses. While it isn’t technically price-fixing, don’t you find it strange so many retained search firms charge exactly the same percentage? Moreover, percentage fee sets up an inherent conflict-of-interest. It rewards any firm that artificially inflates the salary of the candidate they recruit. That conflict could be avoided entirely with a fixed fee. When selecting a search firm, don’t assume the standard search firm fee is right for you.
Myth #3: Find a Search Partner who Knows All the Best Candidates.
If a retained search partner tells you they know “all the best candidates”, that simply is not true. Great retained search partners work their sources the way a great reporter does. (As a former award-winning investigative reporter, I know a great deal about the care and feeding of sources.) But there is a theoretical limit to the number of people with whom we can have a social relationship. Dunbar’s Number. We humans top out at about 150 people and that includes teachers from schools and family members. Moreover, just because a retained search partner knows an executive does not mean he can recruit that person. Executives do not accept jobs just because a golfing-buddy headhunter told him. Conversely, do not assume that a candidate will refuse to engage just because they’re hearing from a recruiter for the first time. Gifted headhunters have ways of getting their calls returned, regardless. In light of the many ways we can reach out and touch a candidate, what seems to matter most is the ability to uncover all viable candidates. You usually don’t do that work from the 19th hole.
To learn more about search firm selection, check out our blog post on How to Build Your Own Top Executive Search Firm List and 3 idiotic Questions Not To Ask Executive Search Firms.