HR Magazine: Filling Spots at the Top

By Betty Sosnin Oct 1, 2007

HR Magazine: October 2007

Finding the best candidates for top jobs often starts with choosing the right executive search firm.

As millions of baby boomers retire during the next several years, HR professionals will come under increasing pressure to fill those job slots, particularly in the executive ranks. Although newcomers will move into the pipelines and many mid-level employees will move up as vacancies occur at the top, demographic trends forecast a shrinking supply of qualified candidates for leadership positions.

In fact, the supply is already tightening, according to indications from national surveys conducted this year by ExecuNet, an online executive job search and recruiting network based in Norwalk, Conn. In simultaneous surveys of 2,149 executives and 378 search-firm managers and corporate HR recruiters, two-thirds of both the executives and the search-firm managers said executive positions already outnumber qualified applicants. That's also the perception of 62 percent of the recruiters who responded.

For help in filling top positions, employers often hire search firms whose consultants can take on the entire process -- from assessing the company's executive needs to helping the newly hired executive become acclimated in the job.

An executive search firm's principal services for clients include identifying prospects, evaluating candidates, carrying out prescreening interviews, scheduling the client's interviews, and running reference and background checks. Search firms also can act as intermediaries between the employer and the candidate during negotiations on pay and benefits, and can provide valuable feedback from applicants.

Calculating Costs

Choosing the right search firm -- one that will come up with the best candidates -- remains vital. The employer's costs in losing a newly hired executive, often because the executive proves to be a poor fit with the company, are well-established. And search fees can be substantial.

Depending on the position, fees begin at about 20 percent of an executive hire's first year's annual cash compensation -- base plus potential bonuses. "But fees to place top-level executives start at 33 percent," says Wendy Murphy, managing partner of the Chief Human Resources Officers Practice in the New York office of Heidrick & Struggles, an international executive placement firm that specializes in top- and second-tier executive positions.

Executive searches are generally performed on a retainer basis, meaning HR contracts exclusively with one firm and pays a specified fee. Less common contingency arrangements require HR to contract with a firm and pay the fee only if the firm fills the position. In such instances, HR may use more than one firm.

Connected and Discreet

Hire an executive search firm to gain the benefits of its networks. While members of HR departments often are limited to their own professional and geographic networks, recruiters at search firms generally build and maintain broad networks and build specialized databases.

Chris Wilkins, director of recruiting for the North American operations of DSM, a chemical and pharmaceutical products manufacturer in Parsippany, N.J., says such networks number among the top reasons to use search firms. "Good search firms are so well-connected that they can tap into people with rare skills and talent," he says.

Network-building also applies to another aspect of search firms' processes -- checking references. Candidates generally list only references likely to provide strong recommendations, but search firms often maintain a network of high-level professional contacts on whom they rely when determining the reality of an applicant's past performance.

"Former employers are often more candid with recruiters than with corporate HR because they feel there's less liability," says Heather Counts, a senior financial recruiter with the Tews Co., a recruiting and placement organization in Orlando, Fla.

Confidentiality constitutes one reason to bring in an executive search firm. For example, HR may be replacing an executive unaware of the coming change, or the employer may want to extend its search to executives who work for competitors. "As consultants, search firms work outside the organizational structure and can deliver that confidentiality," Counts says. "They can also approach qualified candidates, regardless of their employment status, with discretion."

Initial Steps for HR

Begin your search early, experts advise, and make it a priority. "We can generally find good candidates within two weeks, but it may take up to four months to actually fill a position because it's often hard to arrange interviews," says Murphy. "One of HR's key roles during a search is to influence company leaders to free up time to meet with candidates."

From the outset, be specific about your needs. "In addition to the job description," Counts says, "tell your search consultant if you're looking for 10 years' experience in a particular industry, a certain type of advanced degree or someone with specific language skills. Don't worry that you're being too picky. Expressing your needs upfront saves time."

And be honest, Counts adds. Don't quote a lower salary than you actually intend to pay -- a tactic that might be used to reduce a salary-based search fee. "This limits the quality and number of candidates we can deliver."

Experts recommend that you choose a search firm as you would any consultant: after conducting a rigorous review. Interview several, and "be wary of firms that are not willing to spend time with your key stakeholders," Murphy says.

John J. Goldberg, lead executive searcher for the Coca-Cola Co. at its headquarters in Atlanta, says that when the company was looking for a director of public relations and communications in Japan, the search consultant from Heidrick & Struggles met with members of the management team. "Forging this close relationship let her understand our culture and leadership."

Knowing that the company was seeking "someone with a thorough knowledge of Japanese culture and media," Goldberg continues, the consultant presented "a well-qualified group of candidates, one of whom we hired."

An Unofficial Checklist

As you explore the prospects of engaging an executive search firm, experts say, you should take certain steps. For example, find out exactly who would be conducting your search, and make sure the person demonstrates the knowledge and professionalism necessary to represent your company to its prospective leaders.

Goldberg agrees: "Companies often make the mistake of selecting a firm on brand alone. It's more important to take a close look at the individual consultant and make sure he or she has completed a similar search in the last 12 to 18 months and is familiar with the functional area and pool of candidates."

Obtain a list of searches for similar positions that the consultant has conducted during the past few years, then interview several references before signing a contract. "Be sure to ask the references if they've ever had problems with anyone the firm placed," Counts says. "If so, ask how the firm responded. That's when trouble sometimes arises."

Among other steps:

  • Avoid conflicts of interest. Ask the consultant about business relationships that might affect the search. "Big firms may work with companies that compete with yours, and they can't tap into these resources," Wilkins says. "Ask your consultant about their off-limits list."

  • Study the fee structure. Make sure you understand the fees, possible extra charges and replacement policy. "Look for a contract that stipulates the firm will replace the employee if he or she leaves within 12 months for any reason, charging only for expenses," Murphy suggests.

  • Discuss background checks. Make certain you understand who will check candidates' qualifications, employment history, and civil and criminal records.

  • Ask about follow-up services. The consultant's responsibility does not end when the candidate is placed. "Onboarding is critical to the success of a new hire," Wilkins says. "I look for firms with resources and methods that help new hires assimilate, then expect the search consultant to provide feedback from new employees that can help us fine-tune our assimilation process."

  • Collaboration Is the Key. Even after you have identified a search firm and settled on a consultant, your role continues. Forge deep, ongoing partnerships with the firm and the person, Goldberg suggests. "A consultant who really understands your organization and its needs can represent your company with greater professionalism and execute searches more quickly and effectively."

    Following are some more suggestions from experts:

  • Discuss culture. "Search firms can find people who can do the job on paper," says Wilkins. "The real trick is finding someone who fits with your management and leadership team. DSM, for example, is a Dutch-based company with a strong sense of collaboration, civility and communications. Executives who bang their fists on the tables will not work in our culture."

  • Ask about the search strategy. "Some firms contract third parties to do their research and identify possible candidates," Wilkins says, "but I prefer to work with firms who do this in-house. That way, I can convey information directly to the person who's in charge of the search."

  • Make sure your consultant writes a clear and comprehensive job description. Ask all relevant parties to review and sign this document. Murphy says, "Our job descriptions include an outline of the position and expectations for it, leadership and behavioral competencies, and personal attributes."

  • Communicate. Agree in writing on how often and how your recruiter will report progress. "Make sure recruiters and hiring managers are available to answer questions and discuss findings with the search consultant," Wilkins says.

  • Refer internal candidates to the search firm for evaluation. This allows your consultant to put internal candidates through the same rigorous process as external ones and compare them with outside applicants.

    The Final Analysis

    "Executive searches can, at the very least, cost tens of thousands of dollars, and they can actually make or break a company," Goldberg says. So don't give this important task short shrift. Investing the time and effort to find and partner with the right search firm and consultant will pay big dividends for your company -- and your career.

    Betty Sosnin is a freelance writer based in Augusta, Ga.

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