When companies are looking to hire new executives, collaborating with a talent search firm offers a number of benefits. Companies must understand how to make the most of their relationship with the firm. Particularly at the executive level, placing advertisements online does not attract the best candidates. An executive search firm can connect companies to some truly excellent candidates that traditional acquisition strategies would not have found. A bad hire at the executive level can be devastating to a company in terms of both finances and morale. The following tips can help ensure that companies engage search firms effectively and make the best hiring decisions:
Research how different firms work.
Before hiring a search firm, companies need to understand exactly how it operates and its fee structure. Several different types of firm exist, and decision makers should have a clear idea about the differences between each of them. Perhaps the most popular choice is the retained search firm. This type of search firm has an exclusive relationship with the company, and it is hired for a specified period of time. Generally, the fee is about 30 to 35 percent of the estimated first-year compensation for the candidate, whether or not he or she is actually brought on board. Most often, the fee is paid in three installments: the first one-third to initiate the search, the second when several quality candidates are presented, and the third when the position is filled. Typically, retained search firms act like consultants. They put in time to learn details about the company and the position in order to bring in the best possible candidates.
Another option is a contingency firm, which is only paid if a company makes a hire. Companies usually use a contingency firm for mid-level hires rather than executive searches. Since a contingency firm only makes money if a hire is made, it will prioritize deals that it thinks will actually happen. The fee is typically about 20 to 30 percent of the expected first-year income.
Some companies may require a container firm. Usually, a container firm asks for about $5,000 to $8,000 to initiate a search, and then after the position is filled it requires a fee of 20 to 25 percent of the candidate’s first-year compensation. The container firm structure falls between the retained and contingency firm frameworks.
Do due diligence on the firm.
Not all search firms are created equal. Before engaging a firm, companies should check references. Contacting corporate clients to ask about the quality of candidates presented is not uncommon. Individuals may also want to ask about integrity, competency, and feedback, as well as any other qualities that they find particularly important. Due diligence involves contacting a few client companies, as well as a few candidates that were placed by the firm. The candidate’s perspective can provide a lot of great information about how the firm operates and treats talent.
Another important question to ask involves metrics. Each search firm will likely use different metrics to benchmark performance, so it is critical to understand how the firm maintains accountability. Some metrics that a company may want to ask for include the average number of days to fill a position, offer-to-close efficiency ratio, and interview-to-offer efficiency ratio. Companies may also be interested in the average salaries of the filled positions, retention percentage, and diversity ratio if the firm keeps track of these metrics. The fact that a firm may not track this information also says a lot about its approach to recruitment.
Companies should avoid seeking out the “best” search firms when they are looking for an executive. Firms have different focuses and specialties. Companies should look for firms with a lot of experience in their industry rather than those that are best overall. Paying attention to niches is extremely important when looking at a particular firm’s reputation. Even if a search firm is highly rated, a tech company should not hire one if it does not have a strong history of placing tech executives.
Ensure the firm understands the company’s needs.
Recruiters must have a thorough understanding of the position being filled. Understanding the position involves more than knowledge of the desired history and general responsibilities. Recruiters should take time to understand what drives the company and what aspects of its culture are most distinctive. Only when a recruiter understands what kinds of employees best fit into the company culture and what impact the empty position has on the rest of the company can a recruiter make wise decisions.
Each search firm has a different approach to recruiting. Just as a recruiter needs to take time to understand a company, the company must pay attention to the search firm’s recruiting process. This need becomes especially important if the company has any specific vetting processes for its candidates. The company must ensure that the search firm respects these processes and integrates them into their own process.
Communication about expectations should also be very open. If the company has a certain timeline, it should be laid out to the recruiter to avoid potential problems down the line. Company representatives may also want to ask about the recruiter’s anticipated timeline and when it is appropriate to make contact for updates. Both the company and the recruiter should be on the same page about how often it is appropriate to check in so that neither side builds resentment about contact that is too frequent or too occasional.