The Executive Search industry is highly fragmented providing a broad range of potential options for organisations that are needing to address critical positions, but how do you navigate these murky waters to find the right Firm who can deliver the best outcome for your needs?
If you have never engaged Executive Search firms, or Headhunters as they are sometimes referred to, here are some questions that will help guide you to the right partner.
What is the nature of the role that you are wanting to fill?
Choose an Executive Search Partner that operates at the right level.
It might be obvious, but you need to choose an Executive Search partner that has a track record of appointing the types of role(s) you are seeking to fill. Typically, Executive Search firms focus on Board, CEO, Group Executive (C-Suite) Business and also Functional Leadership roles, i.e. CFOs, HRDs, CTOs, CCOs, CMOs, COOs, etc. Each firm will have different areas of focus and strength which can also vary across different local offices.
Depending on the size and scale of your organisation and the strategic importance and level of the position you are looking to fill, Executive Search firms will also undertake executive roles reporting to the C-suite. Roles beneath this level, middle management and below, are generally not cost effective for Executive Search firms to undertake and are better executed by Recruitment Agencies or an internal team.
Generally Executive Search firms are best suited for senior roles where talent is hard to access (typically these are roles where most of the target candidates are not actively seeking a new role – i.e. an ‘illiquid’ pool of candidates) and the role is also complex or hard to define and requiring well developed leadership and influencing skills. These positions require a more consultative and sourcing-based approach. In comparison, Recruitment Agencies are often better suited to roles that are clearly defined, well understood and where access to talent is relatively easy (i.e. a sizable, or ‘liquid’, pool of similarly skilled candidates). In these situations, an advertised approach can also prove more efficient and cost effective.
How critical is sector and operating model experience to your choice of candidate?
Does your Executive Search Partner need to understand your industry and the part of the value chain you play in?
Again, most firms will have areas of focus or “spikes” of expertise. The deeper their domain knowledge, experience and networks in a market, the more familiar they are with the issues you are likely to confront and the talent that you may be able to attract and retain. If specific sector and operating model experience are critical for your successful candidate, the market knowledge and insight of your Search Partner should translate into quicker and more seamless execution.
Sheldon Harris has proven capabilities at the Board, CEO and Group Executive levels and a strong focus in financial services, industrial and technology sectors with functional capabilities in finance, risk, human resources, digital and technology. The firm also has a strong commitment to social purpose and has extensive experience working with Member, Not for Profit, Values and faith-based organisations.
Is this an ‘off-the-shelf’ role with clear priorities, or do you need to work through the key challenges the successful candidate will need to address?
Can your Executive Search Partner help you work through and define the critical business challenge or are they just order takers?
The typical challenges a business faces are generally well understood and articulated. Commonly, businesses are either looking to grow, organically or through acquisition, or are seeking to restructure/change the operating model to become more efficient/drive cost out or innovate/re-imagine themselves.
Translating these strategies into a concise and coherent role specification, with clearly identified priorities and success criteria, as well as the profile of the ideal candidate can be difficult.
Clarity in the role specification is critical to having a structured and focused conversation with candidates on what are the key success criteria and needs for the role. It therefore forms the basis of a robust analysis of candidate fit and supports decision making.
Pre-conceived ideas or traditional views on candidate profiles can also often serve to limit the universe of potential individuals who could be considered. Where the target solution is not clear or well understood, or a BAU off-the-shelf profile won’t do, you will need an advisor who can, in a structured and systematic way, explore the potential options and assist you in navigating the journey to the right outcome. In these cases, Executive Search firms whose consultants have strong consulting pedigrees and prior business leadership experience, and who are used to working with their clients to problem solve issues, may represent a more appropriate fit as a search partner.
Where is the role based?
Ensure your Executive Search Partner is able to execute in the market where you are hiring.
The location of the role will have a material bearing on which Executive Search firm you choose. From a broader industry perspective you will encounter three models of Search firm: those that have a narrow local footprint; international and multinational firms with offices across the globe; and national or regional firms that maintain or have access to a global network or alliances with other boutique firms (Alliance Partners) in various offshore locations.
Critically, if you are looking to appoint someone in a role in a different location to where your leadership team is usually based, you need to ensure that the selected Executive Search firm truly has strong capability and track record in that geography or a proven ability to deliver outside of their own location, and/or a demonstrated relationship with the relevant remote office or Alliance Partner in the desired location.
How do you like to work with your advisors/service providers?
Do you see an executive search as a straightforward, time bound, low-touch process with a defined outcome, or will you require a genuine and collaborative exchange of ideas around a business challenge in pursuit of the ideal solution?
In addition to your preferences for working with service providers, the criticality and level of the role will often also drive the nature of the engagement between the client and Executive Search firm.
If the role is well defined and the market relatively easy to map, then a more transactional approach might be suitable. In these cases, the Executive Search firm is engaged to identify the target pool of candidates and then present a list from which the client can select several individuals for interview.
However, if the challenge is complex, then a consultative approach to the search may be more appropriate. This situation can occur, for example, when a company is seeking to enter a new market or is facing major structural disruption, either brought about by new competitors, innovation or regulation. In these instances, thought needs to be given to not only how the company’s business model needs to change or evolve, but also the style of leadership that will be most successful in driving the needed change. Solving for appointments such as these requires a more iterative approach and possibly the use of calibration discussions prior to a long list to help better define and refine the target profiles of candidates sought. It may also require a broader and more complex evaluation approach involving a wider set of stakeholders. The Executive Search firm plays a core and central role in building the understanding of the market and potential solutions, advising and guiding the client to the best possible outcome.
In both situations, given the typical seniority of candidates involved, a strong, direct relationship between the hiring manager and executive search partner is often expedient and advantageous to achieving a strong outcome.
Contingent or Retained Search Models – Are you prepared to take risk with your Executive Search partner and their model of engagement?
Who do you see as responsible for achieving a successful outcome?
Again, the criticality and strategic importance of the appointment can often drive a hiring manager’s decision as to whether to engage contingent Headhunters or retained Executive Search Firms.
If a company is seeking to augment its existing capability, but does not have any specific plans, budgets or time frame constraints, and/or if the candidate pool is deep and the nature and level of a role well understood, then a more opportunistic approach may be preferred. In this instance a contingent fee model might be worth considering. Under this model the majority of risk lies with the Headhunter. Typically, 5 to 10% of the total fee is paid up front with the balance paid on completion, however if an internal candidate or candidate identified by the client is appointed, no further fee is usually paid.
In contrast, if an appointment is seen as very complex or strategic, i.e. driving the launch of a new business or succession for the Managing Director, or involves internal candidates, then a retained Executive Search firm may be a more appropriate partner. On these occasions the client often wants to not only understand what talent is available from the external market, but also how internal candidates benchmark. These exercises are more consultative throughout the process and also frequently used as talent development opportunities for internal candidates. Consequently, both the Executive Search firm and client are equally invested in the process. Under a retained model, Executive Search firms are often paid in 3 to 4 instalments based on agreed milestones, either time based, or with specific deliverables. A final fee is paid upon completion of the appointment and is paid regardless of how the candidate is sourced or whether it is an internal candidate.
Another important distinction between retained Executive Search firms and contingent Headhunters, is that retained firms are typically engaged on a fully exclusive basis whereas contingent Headhunters are commonly engaged on a non-exclusive basis.
Do you want to advertise the position?
Is the Executive Search firm able to access the most compelling candidates through its research and sourcing activities? Do you otherwise have an obligation to advertise?
Ordinarily, an Executive Search firm accesses potential candidates primarily through sourcing its existing networks supported by structured, targeted and methodical desktop research. This approach enables firms to relatively quickly, effectively and discretely triangulate the market to develop a pool of informally qualified individuals, many of whom will not have been actively looking for a new role.
However, if you have a need to advertise, or if discretion is less important and/or there are certain attributes/qualities or experiences you are seeking in the profile of the successful candidates that could come from a much wider pool, then advertising may be an appropriate addition to the search approach. Clients may also want to target those individuals who are strongly aligned with their values or philosophical views. For example, if a religious organisation wanted to appoint a CFO or Finance Director it may want the successful individual to not only have strong financial technical skills, but also a detailed knowledge of church and its unique operating environment. Similarly, other Not-For-Profits, e.g. in the disability sector, may also seek candidates with a strong affinity to their purpose. Sourcing for candidates with this specific skillset may get the result required, but advertising may enable you to tap more directly into a pipeline of appropriately qualified and values aligned individuals. The risk of this approach is that the quality of responses tends to be less targeted and voluminous which may prolong the search process.
Do you have strong views on the relationship between search fee and value or do you just want an outcome irrespective of cost?
Most Executive Search firms fee structures broadly equate to the time and effort spent on an engagement, but there are a range of fee models in the market.
Many Executive Search firms base their professional fees on a percentage of the compensation package paid to the successful executive. These fees typically range between 20% and 33%. Some firms base their fees on the Fixed Annual Remuneration (“FAR”) or Total Employment Cost (“TEC”), that is base salary plus superannuation, while others also include the Short-Term Incentive (“STI”) or apply a fee-base of total first year cash compensation. The difference in costs can therefore be quite significant. It also means that Headhunters that charge on a percentage basis are using a fee model that can see their fees uplifted when the successful candidates secure higher negotiated compensation packages. While fees can also be lower, it is important to be aware that there is the potential for a conflict of interest with such open-ended fee structures.
To avoid this potential conflict and be more aligned to their clients’ interests, some Executive Search firms fix their fees, based on an agreed compensation package and/or estimate of time and effort. If the package is higher (or lower), the client pays no more than the fixed fee.
While most Executive Search firms either use a percentage or fixed fee model there are a few Executive Search firms that have embraced a further variant of the fee model, adopting a time and materials approach. Under this structure, a fee cap is agreed and the Executive Search firm records time expended on an engagement. Upon completion, if the fee cap has been exceeded the client pays no more than the balance of the fee up to the cap. However, if the engagement is completed more quickly than anticipated, the final fee is adjusted to reflect the actual hours taken.
Sheldon Harris seeks to be compensated in a transparent manner and to provide our clients with objective, independent advice in order to facilitate an outstanding appointment, regardless of how a candidate is sourced. Accordingly, our professional fees are based on an estimation of time and fixed or capped in quantum reflecting the anticipated scale and complexity of the engagement.
Do you want to employ a shared work model with your in-house team?
Can the Executive Search firm adjust its approach to leverage your internal capabilities?
Most Headhunters and Executive Search firms only provide an “end to end” approach and typically also prefer to operate with exclusivity (i.e. they are the only firm representing your company in the market). However, there are times when it makes sense for the Executive Search firm to leverage a client’s internal capabilities for reasons of time, cost, quality or knowledge sharing.
One form of a shared work model is where clients may have undertaken their own research and identified and engaged a short list of candidates. In such a situation, the client may want an external opinion on the identified individuals and ask the Executive Search firm to undertake an evaluation only. A shared work model may also make sense in the context of talent appraisals, bringing internal perspective alongside an external search perspective to the evaluation of a company’s executives.
In comparison, an integrated, joint approach to execution of a search process is a more challenging proposition, with different candidate management systems (i.e. no shared view of candidates), approaches to sourcing, interviewing and evaluating. Candidate care and the role of an external partner as a ‘middle-man’, e.g. the ability to have open conversations during negotiations/discussing sensitive situations in their current roles, can also become more tricky to navigate with a mixed team.
Partnering can make sense, but in the right situation.
Are there additional unique qualities or attributes that you are seeking in your candidate pool that are also critical to the appointment?
Does your Executive Search Partner understand the nature of your business and your needs above and beyond the direct experience required by the role?
Diversity and inclusion, environmental sustainability, mindfulness, health and well-being are increasingly important issues for many organisations and are often reflected in expectations of their leaders. The specific nature of a company or institutional stakeholder group may also throw up unique challenges or requirements. For example, faith, member/mutual, family or not for profit organisations will often have different objectives to a “for profit” business and will seek not just strong candidate alignment with their organisation’s purpose, but also the ability of candidates to align themselves with those objectives.
The right Executive Search partner will understand these differences and have a track record of appointing individuals to meet specific organisational needs.
How do you intend to evaluate potential candidates, including internal candidates?
Does your Executive Search partner have a robust, statistically validated process and tools to ensure you identify the best person for your role?
Appointing a preferred candidate to a role needs to be a function of a considered and robust process that provides signposts or checkpoints along the way to ensure you are on the right path.
An Executive Search process comprises three core components; profiling the ideal candidate, target candidate evaluation and verification.
How do you intend to evaluate potential candidates, including internal candidates?
Does your provider offer a guarantee in the event that an appointment does not work out?Does your Executive Search Partner understand the nature of your business and your needs above and beyond the direct experience required by the role?
A true measure of the confidence an Executive Search firm has in its processes and the quality of its work is reflected in its preparedness to provide clients with a guarantee in the event that an appointment does not work. Typically, most Executive Search firms and Headhunters provide a guarantee of 6 months, with some providing up to 12 months, particularly for more senior roles.
How can you be confident that you have chosen the right Executive Search Partner?
What due diligence can you undertake before you appoint an Executive Search Partner?
Just as you would with a successful candidate, clients need to do their due diligence on an Executive Search firm ahead of appointing them, so they have confidence about the organisation’s ability to deliver a successful outcome.
Sheldon Harris works closely with our clients to acquire and build the right leadership capability to ensure they are well positioned for future success.