AN INSIDER’S GUIDE TO EXECUTIVE SEARCH

As a corporate CHRO for 25+ years, I bring three different perspectives to this guide: 1) I hired executive search firms when we needed a purple & pink zebra; 2) I was successfully recruited by them multiple times in my career; and 3) in my post corporate career, I have 10 years of experience providing Executive Search Consulting services.

WHAT COMPETENCIES/EXPERTISE SHOULD AN SEARCH FIRM HAVE?

1. Extensive Market Knowledge: An executive search company should have a deep understanding of the industry and the talent landscape. It should be knowledgeable about the current trends, market dynamics, and relevant candidate pools.
2. Comprehensive Search Process: The search firm should conduct a thorough and systematic search process to identify and evaluate potential candidates. This typically includes defining the position requirements, developing a search strategy, sourcing candidates, screening and assessing applicants, conducting interviews, and presenting a shortlist of qualified candidates.
3. Access to Top Talent: One of the primary advantages of engaging an executive search company is their ability to tap into their extensive network and access high-caliber candidates who may not be actively seeking new opportunities. It should have connections and relationships with executives in various industries and be skilled at identifying and attracting the right talent.
   1. “Almost anyone can find a black and white zebra. As The HR Godfather^TM, I find purple and pink ones.”
4. Confidentiality and Discretion: It must understand the importance of maintaining total confidentiality throughout the search process. They should handle sensitive information with utmost care and ensure that candidates’ privacy is respected. This is particularly crucial when conducting searches for senior-level or executive positions.
   1. For any search that a client company wants to be done on a confidential basis, the search firm should utilize a Non-Disclosure Agreement for signing by candidates prior to revealing the client company’s name.
5. Customized Approach: The firm should be able to tailor its strategy and process to meet the specific needs of the company. It should take the time to understand the company’s culture, values, and unique requirements for the role. This helps to ensure that the candidates presented align with the organization’s goals and fit the desired leadership profile.
   1. As part of this step, the search firm should create a customized Organization and Position Summary as to provide information about the opportunity for potential candidates. The Summary is typically three to six pages, and serves as a valuable marketing tool.
6. Rigorous Evaluation and Assessment: The firm should employ robust assessment methods to evaluate candidates thoroughly. In addition to in-depth interviews to assess competencies, experiences, and other requirements for success, it should have the capability to provide client companies with various psychometric assessments. These include behavioral style such as DISC^TM, emotional intelligence and cognitive aptitude in order to provide comprehensive insights into each candidate in order to help predict performance success.
7. Negotiation and Hiring Support: Once suitable candidates have been identified, the search firm can facilitate the negotiation process between the company and the candidate, including the compensation package, relocation assistance, and other contractual matters. They should also provide guidance and support throughout the final stages of the hiring process, such as offer of employment letters with applicable restrictive covenants.
8. Post-Placement Follow-Up: A good executive search firm doesn’t consider their job done once a candidate is hired. They should maintain contact with both the company and the candidate to ensure a smooth transition and integration into the organization. They may provide support during onboarding and address any concerns or challenges that arise.

WHAT SHOULD AN EXECUTIVE SEARCH FIRM’S ULTIMATE DELIVERABLE BE?

An initial pool & of fully vetted candidates (with additional ones as desired) who meet or exceed your specifications, including factors such as:

1. Non-Compete Agreement: None exists or one exists but is not applicable.
2. Geographic Location & Travel: Reside where you want them to and, if applicable, ability to travel.
3. Total Cash Compensation*: Candidate expectation is in line with the range you have indicated, with the specific total being dependent upon your assessment of the candidate of choice

   *Defined as salary + variable compensation (e.g., performance-based bonus) + signing bonus if applicable (inclusion or exclusion of this third component may vary from search firm to search firm)

   1. From my experience I am skeptical of candidates who say they are open to a reduction in their Total Cash Compensation. The search’s goal is to identify outstanding candidates whose current compensation plus an expected increase is within the client’s targeted compensation.

4. Skills, Competencies, and Attributes & Experience: Meet or exceed these

5. Education: Meet or exceed, including professional certification if applicable (e.g., CPA or CMA)

6. Cultural Fit: Compatible with yours, including in candidate’s leadership style

WHAT IS THE LENGTH OF TIME FOR AN EXECUTIVE SEARCH TO BE COMPLETED?

The timeline for hiring an executive search firm to selecting the candidate of your choice (excluding the candidate’s resignation notice to their existing employer) can vary widely depending on multiple factors. Here are some key dynamics that can impact the duration:

1. Position Complexity: The more specialized or senior the position is, the longer the search process may take.
2. Industry and Function: Some industries or functions may have a smaller pool of qualified candidates, leading to a longer search process.
3. Search Firm: Its approach and effectiveness in sourcing, screening & interviewing impacts the timeline.
4. Interview Scheduling Hurdles: It can take time to coordinate interviews with qualified candidates, (especially since most we be currently employed and their responsibilities to their employer can limit their time for interviews).
5. Client Decision Making: The time it takes for the hiring organization to review candidate profiles, conduct interviews, and make a final decision can vary based on internal processes and decision making structures.
6. Time of Year: The process takes longer during the Summer when candidates and clients may be on vacation. Also, no candidate desires to leave their current company when the payment of a performance bonus is pending (commonly, after the company’s books have been closed and the financial results have been verified/audit).

Considering these factors, the entire process can take anywhere from six weeks to several months. It’s essential to have realistic expectations and open communication with the search firm to ensure the process runs as smoothly as possible.

Once the search strategy is in place, the executive search firm begins actively sourcing and identifying potential candidates. They may leverage their extensive network, utilize databases and and conduct direct outreach to individuals who fit the desired profile.

• This includes reaching into companies the client explicitly identifies as of special interest as a candidate source (e.g., a competitor or a company known for its talent in a given function).
• With regard to reaching into a competitor’s organization as a source of talent, it much less antagonistic for this to be done by a search consultant rather directly by your company.

WHAT IS THE TYPICAL FEE CHARGED BY AN EXECUTIVE SEARCH FIRM?

The fees charged by executive search firms can vary widely depending on several factors, including the complexity of the search and/or the level of the position being filled. Typically, an executive search firm’s fee is a percentage of the candidate’s first-year total cash compensation as their fee. This percentage can range from 25% to 35%, with the specific percentage being slightly lower for clients who warrant a “volume discount”. For searches where the total cash compensation is above a certain annual dollar amount, it is possible to negotiate a fixed dollar fee.

Additionally, executive search firms may charge additional expenses related to the search process, such as travel expenses, candidate assessment fees, or advertising costs. These expenses are usually separate from the fee.

WHAT IS THE NORMAL FEE PAYMENT SCHEDULE?

By far the most common schedule is 1/3 at each of the following three steps in the process: 1) signing of the search contract by the parties; 2) submission of the firm of an appropriate number of qualified candidates; and 3) start of employment by the candidate who has been hired.

WHAT HAPPENS IF THE CLIENT SUSPENDS OR CANCELS THE SEARCH PRIOR TO ITS SUCCESSFUL CONCLUSION?

In this event, the client is expected to pay for services performed by the search firm up to such time. For example, if the client does so after having be given the initial pool of candidates, it is typically obligated by the search agreement to pay the 2^nd fee amount.

WHAT IS THE TYPICAL REPLACEMENT GUARANTEE?

A search firm typically guarantees to replace the candidate hired at no additional fee if the employment separation for a period of 90 calendar days to 180 calendar days from the start date of the candidate’s employment. This in part related to the position type and/or level.

• It is not unusual for there to be a correlation between the negotiated fee and the length of the replacement guarantee.
• For example, a search firm may agree to reduce its typical fee based on the quid pro quo being that the replacement length is also to be reduced.

Also, a firm may stipulate that its guarantee has conditions, such as it will replace the employee at no additional fee to the client in the event that the candidate/employee:

1. Voluntarily resigns UNLESS the resignation is due to circumstances such has:
   1. 1) The employer directs the employee to take an action that is unlawful
   2. 2) The employer’s failure to fulfill a compensation, benefit or other requirement as contained in the offer letter or in a subsequent written agreement between the employer and the employee
2. Is terminated for reason other than FOR CAUSE
   1. NOTE: Even if the person is an at will employee, it is nonetheless a sound HR practice to have FOR CAUSE defined in an employee handbook, policy or some or company document.

Author: Salvatore LoDico

   The HR Godfather ^TM