The search for great talent for your business often requires more than Google.
To grow your business, you might need a special type of search expert -- an executive search firm -- to assist in attracting, interviewing, and hiring mid- to senior-level employees. Executive search firms have long been used by big businesses but more small and mid-sized firms are realizing that they can also benefit from paying these consultants to help draft accurate and enticing job descriptions, generate a pool of qualified candidates for top-level jobs, vet references, and speed the hiring process.
While the economic slowdown saw the executive search industry lose about one third of its revenues, dropping from $11 billion in 2008 to $7.4 billion in 2009, business has started to pick up again in 2010 as many business sectors are recovering and hiring again.
'When you engage and retain an executive search firm, it is not a matter of just putting ad in the paper and seeing who the best person is that applies. At the senior executive level, it's very crucial to find the best person you can,' says Peter Felix, president of the Association of Executive Search Consultants (AESC). 'The whole purpose of proactive recruitment is to bring into consideration candidates that might not be otherwise identifiable in the market. They may not respond to an advertisement. It opens up a whole range of candidates who might not have been aware of or shown interest in your appointment.'
The cost of a bad hire can be considerable. It can cost your firm time and money and its competitive edge in the marketplace. Tackling an executive search on your own can also distract your senior staff from managing and growing the business while they search for the right hires.
The following pages will detail the different types of executive search firms, how to find the right search firm for your business, and how to best work with your recruiter to find and hire the right candidate.
How to Work with an Executive Search Firm: Types of Executive Search Firms and Fees
When it comes to filling a critical position that effects the strategic direction of a business, some executives may figure that they can save a bit of money by handling the search in-house. 'They may end up looking at a prospect list of five to 10 people,' says Craig Buffkin, CEO of The Buffkin Group, a boutique retained search firm with offices in Nashville, New York, and Stamford, Conn. 'An executive search firm that knows their space can help them look at a field of 150 qualified candidates.'
In addition to sourcing job candidates, search firms can help a business narrow down what type of candidate with what type of qualifications they need, write a job description that is accurate and appealing, and ultimately deliver qualified candidates who can pass a rigorous hiring process, Buffkin says.
Before looking for an executive search firm to help you fill key positions, you need to understand that the different types of search firms and how they structure fees. There are typically three types of search firms:
- Contingency Firms. Contingency firms are transaction-oriented -- they are paid only if you hire a candidate they present to you, and generally focus on mid- to lower-level positions. Contingency firms work on a percentage (typically 20-30 percent) of the candidate's first year total cash compensation. 'Hiring managers must provide timely feedback to contingency firms, thus illustrating your firm's commitment to hire a candidate,' says Timothy J. Augustine, principal of Atwell LLC, a national land development consulting firm, and author of How Hard Are You Knocking? The Job Seekers Guide to Opening Career Doors. 'As with any service-based business, contingency firms will focus their efforts based on the real potential to generate revenue and will prioritize their time and energy on realistic opportunities.'
- Retained Firms. A retained search firm typically has an exclusive relationship with the employer and is hired for a specific period of time to find a candidate. Retained firms are paid a higher percentage (typically 30–35 percent) of the estimated first year compensation regardless of whether a candidate is hired. 'Most assignments are paid in three installments, typically one-third of the total fee to initiate the search, one-third when quality candidates are presented and interviewed, and one-third when the position is filled,' Augustine says. 'Retained search firms are often more focused on a consultative relationship, and invest the appropriate time to learn about your company, the details of the position and the characteristics of the right candidate, and provide a research team with various resources to assist you with the search.' Retained firms are best-suited for senior-level management positions where there are fewer qualified candidates.
- Container Firm. A container firm blends the fee structure of contingent and retained services. Container firms are paid an upfront fee, typically $5,000 - $8,000 to initiate the search and require a percentage (typically 20-25 percent) of the candidate's first year compensation once the position is filled, Augustine says.
How to Work with an Executive Search Firm: Selecting the Right Firm
Once you have identified the type of firm you need, it's time to find the right firm for your business needs. There are a variety of criteria you should consider in selecting firms to consider, such as knowledge of your sector, personal references, and where they are located.
'You should use a firm that has experience placing candidates in positions similar to your open position in your industry,' Augustine says. 'As you interview different firms, look for industry experience, recruitment strategies, network and reach. In addition, find a firm that will represent you and your firm's culture in an ethical and honest way.'
Buffkin adds that it's important to find a firm that understands your business or the position you are seeking to fill. Some firms specialize in placing chief executive officers or chief marketing officers or chief financial officers. Ask the company what relevant searches they have conducted in the past two years for similar positions and see how that matches the job you are seeking to fill. Another factor to consider is the chemistry you have with the person who will be conducting the search, Buffkin says.
Here are other factors to consider:
After you find firms, it's important to check their references. 'Contact corporate clients to understand the quality of candidates presented, integrity, competency, timely feedback and representation that the recruiter provided to the market,' Augustine says. 'Contact a few candidates that were placed by the search firm to better understand the candidates' perception, how the opportunity was presented, the representation of the firm and offer, and the recruiter's business acumen and honesty.'
Understand Efficiency Metrics
Recruitment firms use various metrics for benchmarking purposes. Augustine recommends the following as some of the best recruiting metrics to use:
- Days to first submittal
- Days to fill a position
- Submittal to interview efficiency ratio
- Interview to offer efficiency ratio
- Offer to close efficiency ratio
- Diversity ratio
- Retention percentage
- Average salary of filled positions
Make Sure the Recruiter Understands Your Needs
Ensure the recruiter clearly understands the position you are trying to fill. 'The recruiter must clearly understand the role, responsibilities, qualifications and appropriate experience needed for the position,' Augustine says. In demonstrating this, the recruiter should dedicate time to gather information about your company, and understand the key selling features of the employer, business culture, and employees. The recruiter should be willing to spend time discussing with you the problem that the company faces, the culture, and develop an understanding of the specific personality, skills, knowledge, and education desired in a potential candidate, Felix says.
How to Work with an Executive Search Firm: Getting Started with the Search Process
The first order of business when you decide to hire an executive search firm is to get in writing a report that shows your consultant understands the level and type of experience you need in a job candidates, the background and technical skills necessary, responsibilities of the job, and any interpersonal skills you seek, Felix says. The consultant should help you take this information and write a formal job description that both helps market your firm to potential candidates and is honest about what the job entails. The recruiter will also help you determine salary and other compensation you need to attract the right candidate.
Understanding How the Search Firm Works
Different recruiters may find their candidates in different locations or screen them in different ways. You need to understand these differences and make sure that they meet your company's criteria in vetting job candidates. Here are factors to consider:
- Sourcing. The recruiter's sourcing strategy and the resources they utilize to locate candidates is critical. 'The recruitment firm should leverage an extensive resource network that includes industry research, internal research teams, candidate databases, industry information, competition, and Internet tools to help them identify the target market,' Augustine says. Felix adds that a firm should also consult with the business' executives to see if they have preferences -- for example, if they want to consider candidates currently employed by competitors or not. Provide a list of companies you want them to approach. Chances are you know your competition better than they do.
- Screening. The firm must be able to qualify potential candidates after conducting a number of telephone and face-to-face interviews, which should allow them to present a more defined list to the employer, Augustine says. In addition, some recruitment firms utilize selection assessment tools that are benchmarked against your firm's criteria.
- Interviewing. The recruiter should present you with a short list of the best candidates for face-to-face interviews with your firm. These candidates should have already been thoroughly assessed and interview and your recruiter should be able to discuss each candidate's resume, qualifications, personal strengths and motivation. It is critical to meet candidates so that your interview team can compare and select the best person for the position. But the recruiter should help you prepare for the interviews. 'Prior to scheduling interviews, the recruiter should present and review any interview notes, the candidates' qualifications, and expectations for the firm and position,' Augustine says.
- Evaluation and selection. Once the interviews are complete, review your notes with the recruiter and discuss the strengths and weaknesses so that you can zero in on the right candidate. Sometimes it's obvious. Sometimes you may need to broaden the search. 'Follow-up communication is critical to a solid relationship with a recruiter,' Augustine says. 'Many firms maintain agreements which establish specific parameters of communication and conduct, such as response time and evaluation within 48 hours of resume receipt or interviews, and clear evaluations and expectations from the hiring manager. A strong partnership cultivates open feedback about your company such as competitiveness of your salary structure, incentive programs, market share within a certain geographic area, new competitors, and market perception.'
Before making an offer to a candidate, the search firm can help you conduct background checks, checking educational and employment references although many will farm out criminal and civil background checks to third parties that specialize in this work, Felix says. If you have narrowed the list down, you should participate in some of the reference checks, he adds. 'Work with the recruiter to determine who will present and close the offer,' Augustine says. 'This process should include notes from the interviews and a solid closing strategy to address financial questions and expectations, opportunities within the firm and the outlook of their career growth.'
The most fruitful search firm partnerships are founded on trust, open communication, and a commitment from each party. Cultivating a true partnership with a recruiter will enable you to attract, hire, and retain the best people in your industry. 'Remember to realize that these are consultants in human capital and strategic issues as well as being recruiters for a particular position,' Felix says.
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The 4 hiring Practices of Highly Successful Organization
Finding the right person for the right job fuels success.
Includes an online recruiter directory by industry and location.
National Personnel Associates
Resources for employers including 'Find a Recruiter' and articles.
Links to salary and compensation information.
The Association of Executive Search Consultants
Links to free resources for employers, recruiters, and job hunters.
A free service for HR and line managers run by AESC to provides access to search industry news and reports, and executive recruitment training and services.