Author: Salvatore LoDico

  The HR Godfather ^TM 

  Founder & CEO, Trinity HR Consulting, Inc

“ALMOST ANYONE CAN FIND BLACK & WHITE ZEBRAS. WE FIND PURPLE & PINK ONES!”

It is highly unusual for an organization to pay a bonus to an otherwise bonus-eligible individual who is no longer an employee at the time of pay out. Also, it is unlikely that a new organization will be willing keep the new employee 100% whole. However, they may, in some but certainly not in the majority of instances, take part of the amount of the forfeited bonus into account in making its compensation offer.

As we approach year-end, a lot of companies are wrapping up their final job offers for 2023.

• Companies recruiting for talent (whether themselves or through an executive search firm) need to be aware that candidates may be reluctant to accept an offer of employment without first receiving their 2023 performance bonus.
• Candidates on the receiving end on an offer of employment should know their current organization’s policy related to payments of performance bonuses.

Here’s why it is an important matter which requires early, clear & transparent communication between the parties.

• Most companies (especially publicly traded ones, plus many private ones) do not pay out annual performance bonuses at year-end.
• Instead, they do so after their year-end financial statements have been verified or audited. This commonly occurs around the end of the 1st quarter of the new year.

A good executive search consultant show learn about a candidate’s bonus situation early on in the relationship. In turn, they should communicate with the client company about it. This enables the company to make a decision up front about its interest in the candidate.

• By the parties all being aware, it can avoid an unanticipated snafu being experienced by the three parties involved, resulting in an undesired outcome for everyone.

Research shows that only about 1 in 5 new hires is considered to be unequivocal successes. This is an alarming low rate of success for a process that is essential to an organization’s success!

Why does the hiring process have such a poor success rate? Some key reasons are:

1. Overreliance on what the candidate’s resume states
   • Failing to properly take into account that a resume is a candidate’s self-created advertisement about themselves & therefore may contain:
     • • Elevated job title
       • Embellished skill set
       • Overstated responsibilities
       • Incorrect dates of employment to cover up gaps
       • Unclear or overstated educational credentials
2. Interviewing & evaluating candidates is not a core competency of hiring managers, and thus they do not know how to effectively:
   • Pose questions that produce revealing answers & important insights
   • Ask probing follow-up questions to drill down past an initial answer
   • Conduct behavioral interviews related to the key elements of past performance that need to be carefully & comprehensively evaluated include:
   • Fully assess soft skills, such as professionalism & interpersonal skills
   • Determine leadership skills & style, collaboration & teamwork
3. Disregarding the old adage that “past performance is the best predictor of future performance” is as true today as ever!
   • Assessing a candidate’s past performance requires looking past the accomplishments on their resume by knowing how to probe deeply
4. Most companies do not have the internal resources (talent & time) to most effectively:
   • Market the opportunity
   • Mine for candidates
   • Evaluate candidates
   • Present a pool of fully qualified candidates to the hiring executive

THE SECRETS TO MAKING BETTER HIRES

1. Have a well written job description, which means it not only describes the role’s functions & responsibilities, but also the skills, attributes, & experience needed to be successful
   • Review the prior & current job holders to pinpoint what made them successful or caused them to fail.
2. Identify a large number of potential candidates – not merely candidates who are actively in the job market, but also those candidates who are receptive despite not actively looking (“passive candidates”)
   • In conducting searches for clients, I typically identify a minimum of 50 potential candidates with whom to do an initial screen, & often go through 100 before having determined the slate of candidates to present for client interviews.
3. Thoroughly evaluate candidates to determine which ones best match your specifications, including:
   • • Competencies
     • Cultural compatibility
     • Character
     • Compensation
     • NOTE: From my experience, an alarming number of those involved in the process lack the skills needed to effectively evaluate candidates. In great part, this is due to their:
       • 1) Never having been properly taught how to do so
       • 2) Having limited experience in the interview & selection process
4. Whenever possible, have multiple individuals participate in the interview & assessment process
   • Include individuals from the company functions with which the position most interacts.
   • Consider having 2 (or 3 at the most) interviewers do the interview together, which has multiple benefits.
5. Have a standardized evaluation tool for completion by each interviewer
   • Do so even for those who will not be included in the final selection step.
6. Have an open, candid group discussion of candidates (especially those being considered for an employment offer) with all of the appropriate individuals whose input is needed
   • Ideally, one individual should serve as the facilitator.
7. Utilize assessment tools to improve the selection decision making.
   • Examples include those that assess specific competencies, behavioral styles & emotional intelligence.
8. Do not end the process until you have a candidate about whom you are excited.
   • Hiring mistakes are costly in multiple ways.

Author: Salvatore LoDico

The HR Godfather ^TM 

Senior Partner, Spuhler Associates/Founder & CEO, Trinity HR Consulting, Inc

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

The question of counter-offers is certainly not a new one. However, in today’s labor market it is worth looking at through a different lens. This includes looking through the eyes both of employers and candidates of employers and candidates who are offer recipients.

• The perspectives I bring to this issue are based on a career of experience as a CHRO & for the last 10 years as a Search/HR Management Consultant.

Let’s look first at an employer’s lens. At some point, almost every employer has experienced or will experience a highly valuable person submitting their resignation. Too often, this occurs with the employer being surprised.

• One way to avoid (or at least minimize) being blindsided is to do conduct “stay” interviews. Think of them as checking the barn door before a valuable racehorse gets out of the stall & stable, whereas exit interviews identify how to possibly prevent it happening with other valuable racehorses.

THREE COMMON REASONS WHY COMPANIES MAKE COUNTER-OFFERS

1. In general, companies do not like to be “fired” by an employee, which, in effect, is what a resignation equates to or is perceived as.
2. They realize the individual is more valuable than they have demonstrated
   • Including pay, which is the common currency in business (along with title) to convey worth
3. They recognize they have failed to provide an employee with the appropriate reasons to stay, including:
   • Supervisors/managers/executives who understand and practice good leadership skills, including:
     • Trust (being trusted & trusting), communications, teambuilding, collaboration
   • Career/professional development
     • Today’s individuals (especially millennials) are accused of not being as loyal as prior generations. Actually, they have a high degree of loyalty to their careers & to those companies which satisfy their desire for professional development
     • Remember they saw or heard about their parents or grandparents losing their jobs after years of service as part of a reduction in force
   • Work-life balance, including schedule flexibility
     • Research shows many in today’s workforce will trade dollars for time off!
   • Pay & Benefits
     • This needs to be viewed as merely as “the price of admission to the employment game”.

HOW DOES AN EMPLOYEE WHO HAS ACCEPTED AN OFFER REACT TO A COUNTER-OFFER?

• YOU MAY THINK IT’S AN OFFER THEY CANNOT REFUSE…BUT

HERE ARE THE TYPICAL REACTIONS:

1. No thank you because:
   • “I have made a commitment to this new company & I keep my commitments.”
   • “My decision to leave is about more than just my compensation.”
   • “It’s too little too late.”
   • Or
   • Without saying it, they are concerned that going forward the company will purposely or sub-consciously view them less positively, & this will have an adverse impact on their career with it.
     • This is not necessarily an unfounded concern. It is not uncommon for a company to decide to ensure it will not be got off guard again by: a) developing someone to be ready to take over or b) starting a confidential search to find a replacement for that employee.
2. Yes, I’ll stay because I really did not want to leave.
3. Don’t smile yet! Here are statistics for employees who accept a counter-offer to stay:
   • Within 60 days, 50% of employees are actively looking again.
   • In 6 months or less, more than 50% of them will end up leaving – usually for the same reason(s) they initially were going to.
   • Only 15% will stay for at least 2 years afterward.

Author: Salvatore LoDico (The HR Godfather ^TM) 

Senior Partner, Spuhler Associates/Founder & CEO, Trinity HR Consulting, Inc