“Hiring is your most important task,” said the late Steve Jobs.
Considering a wrong hiring decision can be extremely expensive to
repair, let’s look at some recruiting options.
Ideally,
a succession plan will have an internal candidate ready for promotion:
advancing a rising star’s career and providing continuity with minimum
controversy and a positive message to the workforce that capable
people who do well will be recognized and rewarded.
Often,
however, hiring from outside is required. If the company has a
competent HR recruiting function, direct ads and in-house screening may
be effective for lower and some midlevel positions.
For
more important midlevel management or specialist positions, outside
assistance may be needed. There are many recruiting companies. By going
to any networking event, it is hard not to collect business cards from
such firms.
Most recruitment firms offer contingency
searches. Usually the process begins with interviewing the hiring
managers and agreeing on a job description and compensation range. The
recruiter ideally provides a long list of candidates and works with the
client in coming up with a short list. In reality, the contingency
recruiter usually relies on names from their database, or active job
seekers. The recruiter may do some fundamental reference and credential
checking before the final offer is made. The success fee is normally
in the range of 20 to 30 percent of the first year compensation,
including regular bonuses.
For lower-level positions
the contingency approach is preferred, since a wrong hire is not likely
to be a strategic setback. However, a hire of the wrong senior manager
can be costly in terms of negative impact on the organization and lost
time.
Some recruiting companies claim they do both
retained and contingency searches. In reality, these are contingency
recruiters that are thrilled to be paid up front - but still deliver a
contingency-class service.
There is also a small
number of retainer-only search consultancies that focus on identifying,
evaluating and attracting “C-suite” executives (CEO, head of region or
country and positions reporting directly to the region/country head) -
and sometimes accept engagements one level lower. These senior
professionals partner with the client in a consultative process aimed at
selecting organizational leaders. Success in these partnerships
depends upon a shared focus built on trust, candor and responsiveness
throughout the process.
The search is conducted
through an exclusive engagement with fees billed at the start and
throughout the process. Consultant and client collaborate in
determining leadership needs and defining executive positions. The
consultant leads in identifying well-qualified individuals, selecting
those best suited through a comprehensive evaluation process, and
convincing them that the company/opportunity is a proper step in their
career progression. Meanwhile, retained search consultants provide
employers regular, detailed progress briefings.
This
methodology proves to be the wisest option for senior leadership and
other strategically critical hires. Some employers avoid retainer
search due to the perceived costs, although in reality the total amount
is not significantly higher than a contingency fee, and the risk of
lost opportunity cost or reputation damage is greatly reduced. Most
retained search firms are paid the equivalent to 33 to 35 percent of
the total annual compensation, or in some cases a fixed fee not linked
to compensation.
According to the Association of
Executive Search Consultants, “Retained executive search consulting is a
specialized form of management consulting. In addition to locating
high-quality candidates, the retained search firm should provide
information and feedback that not only helps direct the client’s search
for executive talent but can also be used to run the client’s business
more effectively. This feedback may include general market research
regarding how the client’s organization is perceived in the market,
competitive intelligence, and what kind of recruiting strategies may or
may not be working at any given point in time.”
Retained searches most commonly take place when one or more of the following conditions apply:
Replacement
of incumbent: There are times when a very high level of
confidentiality must be maintained. As with other professional services
firms - attorneys, accountants and strategic consultants - disciplined
senior executive search professionals fully understand how to work
with total discretion.
Difficult to find individual:
Access to high-level executives who are not on the job market is
fundamental, as is capability to invest time and resources thoroughly
researching the target universe to identify key players.
Difficult
internal promotion: Shareholder compliance (or internal debate) may
necessitate a thorough look at external candidates in conjunction with
independent evaluation of internal candidates.
The
retained consultant will invest much more time than a contingency firm
in understanding the client’s corporate culture, key executive
personalities, vision, strategy and business objectives, and will be
able to communicate this effectively to qualified individuals. Out of
this process may emerge the “compelling story” critical to attracting a
star executive.
A retained search firm will
rigorously conduct reference checks with a broader range of people than
those suggested by the candidate. It is in the best interest of the
consultant as well as the client to flag concerns before an offer is
finalized.
Most companies say “people are our most
important asset,” yet often default to hiring friends of friends,
applicants from newspaper or Internet ads, or resumes thrown at them
from many sources. This may work for lower/midlevel positions, but
tossing the dice when filling any key leadership role isn’t acceptable
in today’s corporate environment.
In summary, there
are a broad range of situations requiring different hiring strategies.
The hiring executive has several options, and one recruiting strategy
rarely fits all needs.
by Tom Coyner. Senior Advisor, IPG Legal.
_____
SeanHayes@ipglegal.com
IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.
www.ipglegal.com
