Executive Search Firms

The Comprehensive Guide to Executive Recruiting and Staffing

 

 

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what is an executive search firm?

An Executive Search Firm is a company that recruits CEO, COO, CFO and executive level candidates for companies of all size. An executive search firm is typically hired by a company to fill a key, executive level position.  Often the positions they fill are considered c-level or c-suite positions.  Some of these titles may include Chief Executive Officer or CEO, Chief Operating Officer or COO, Chief Financial Officer or CFO and many others.  Often a search firm is hired to fill positions at the VP level, such VP of Human Resources, VP of Marketing, VP of Sales or other Vice President positions.  Basically any position considered critical or essential is often filled by an Executive Recruiting Firm.  There are literally thousands of executive search firms out there working in every industry and with companies of all size to fill executive level  senior management level positions.

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what does an executive search firm do?

An Executive Search fills executive level positions.  They fill CEO, COO and CFO roles among many others.  Their primary focus is typically on higher level c-suite or c-level roles, although there are search firms that fill just about every level position out there.  Typically the larger retained firms are the ones filling the highest level executive position and oftentimes lower level roles are filled by contingency based firms specializing in accounting or finance, technology, sales and marketing or any other specific niche.  There are also firms that specialize by industry.  Some firms will recruit candidates for all positions within a particular industry such as – oil and gas, technology, healthcare, manufacturing, defense, retail, construction or any other specific industry.

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what industries does a search firm recruit in?

Executive Recruiting Firms recruit in every industry imaginable.  From healthcare to construction, from technology to retail and from biotech to financial services.  There is an executive recruiting firm that specializes in virtually every industry and many firms specialize in all industries.  Generally speaking, the large retained firms handle the vast majority of industries while a lot of smaller niche firms typically specialize in one or a few different industries.  Even staffing firms have been known to employ other staffing firms to find a key level executive.  The only industry that might not utilize executive search firms to the extent that other industries do would be the non-profit industry.  Generally speaking, many non-profits don’t have the budget or funds available to pay for an executive level search.

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what fees does an Executive search firm charge?

An executive search firm typically charges a percentage of a candidate’s first year annual salary.  A search firm may charge different fees based on a number of factors.  Large retained search firms have been known to charge fees as high as 50% depending on the position and how difficult and time consuming they think it will be to fill.  The average retained search fee is probably closer to around 35% again depending on the position.  Contingency search firm fees are generally a little bit less.  Contingency fees range from about 20% on up to about 35%.  Some of the extremely small, mom and pop type shop recruiting firms have been known to charge fees as low as 15-18% and will sometimes charge a flat fee based on a specific amount instead of a percentage of the candidate’s first year starting salary.

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what positions do executive recruiters fill?

Executive recruiters fill positions ranging from Chairman of the board to CEO, COO and CFO roles.  They also fill senior management positions, middle management positions on down to professional level staff positions.  In other words – just about all of them!  Traditionally, Executive Search Firms are usually called to fill higher level roles that are critical to the organization’s success but there is a search firm out there for just about every level.  Larger retained firms are often called to fill Board or C-Suite positions, while national staffing firms are often called to fill middle management roles in the fields of technology, accounting and finance, and sales and marketing.  The lease likely positions to be filled by recruiting firms would be non-degreed positions typically referred to as clerk, technical or non-professional.

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what types of executive staffing firms are there?

There are several different types of executive recruiting firms.  When it comes to high level Board roles and C-Level positions such as CEO, COO and CFO, a retained search firm is commonly utilized.  Retained search firms typically specialize by industry and are focused on higher level executive positions.  Contingency search firms are often employed on management and individual contributor roles.  Some of the positions a contingency firm might would work could include: Accounting Manager, Senior Financial Analyst, HR Manager, HR Generalist, IT Manager, Programmer, Engineer, Operations Manager, Office Manager and many other professional positions.

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international, national or local staffing firm?

Large, publicly traded search firms are often international in scope and size.  They often have hundreds of offices around the world and operate in many different countries.  Other firms operate in one particular country and may have several locations within that country.  Smaller firms sometimes only operate within a particular metropolitan area.  There’s probably a place for every firm.   For example a lower level accounting role in a particular could be best handled by a smaller firm local to that area who specializes in nothing but accounting and finance type positions.  On the other, when it comes to an executive level with publicly traded company it probably makes the most sense to go with a nationwide firm or international firm that can present as many highly qualified candidates as possible regardless of their current location.  Generally speaking the more critical the nature of the position, oftentimes it the larger the geographic area of search.

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who works at executive search firms?

That depends on what type of firm it is.  A larger national executive search firm will have offices throughout a particular country.  In each office, there will typically be several executive recruiters focused on permanent placement positions.  These recruiters typically have college degrees and often their business background aligns with the positions that they recruit on.  This is a job that is relatively unsupervised in the sense that if the executive recruiter is making money and their billing dollars are high enough they are generally left alone by management and allowed to work freely.  You will then often have staffing managers that are more focused on lower level positions and often temporary and temp-perm type roles.  They may also be involved in contract type positions.  Staffing managers are sometimes degreed and other times not as it does not seem to be as hard and fast a requirement as it is for the higher level executive recruiters.  There will typically be an administrative worker who answers the phones and assists the other recruiters within the office.  In additional to local roles, a national staffing firm will typically have several layers of management.  On the permanent placement side, they will usually have a Regional Perm Director, a National Perm Director and then various Vice Presidents who are over both the permanent and temp side of the business.  Most larger firms have Vice Presidents or Directors who are in more of training position who assist new recruiters in learning the business.

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why do some executive recruiters get a bad rap?

Some deserve it!  The recruiting profession is just like any other profession.  There are outstanding recruiters who operate with integrity and there are some who don’t!  Typically the ones that don’t do not stay in the industry very long.  Professional educated recruiters who operate with integrity and treat others with respect are the ones who make it in this industry.  Typically those who have had bad experiences with a recruiter have dealt with someone who was inexperienced and/or was in the business for the wrong reasons.

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how to choose an executive recruiting firm?

When choosing an executive recruiting firm it is important to pick one that has experience doing what you need done!  if your company needs to hire a CEO, COO or CFO it would be excellent idea to choose a firm that specializes exclusively in higher level executive positions.  A recruiter who is accustomed to working with lower level candidates will simply not have the expertise or professionalism to deal effectively with senior level c-suite candidates.  On the hand for example if you need to hire a Senior Accountant, by all means call up your local accounting and finance staffing agency.  Just focus on experience and the firm’s primary specialization.  A good firm will be able to tell you about many of their recent searches and their experience in the field.

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retained vs. contingency executive search firms?

Retained search firms and contingency recruiting firms share some similarities as well as some major differences.  The way most contingency search firms operate is fairly straight forward.  Essentially if the position is not filled, the client or company is responsible for nothing.  The client does not pay a fee unless a candidate is hired into the position.  This is the business model that most companies prefer as there no risk or financial obligation.  If a candidate is not hired, a fee is not due.  On the hand with retained executive search firms a fee will be due regardless of whether the position is filled or not.  The way a retained search firm typically operates is that they charge a fee up front which is typically equal to about one third of the total fee that will be assessed.  This portion of the fee is referred to as the retainer.  So, as an example if the total fee is expected be $90,000 then $30,000 would be the retainer.  This amount would be due up front before the search begins and it is typically non-refundable.  In other words this fee is lost regardless of whether or not the position is filled.  With retained search firms the rest of the total fee is broken down into two more payments – one being due at around the midpoint of the search and the last payment at the end of the search.  So, referring back to our example $30,000 would be due up front, $30,000 would be due at the midpoint of the search and finally the last $30,000 would be due upon successful completion of the search. Billing arrangements vary greatly among firms, but the common arrangement is that the retainer is non-refundable regardless of whether the position is filled or not.  With retained search firms sometimes the entire amount is due whether the position is filled or not, so obviously it is imperative to get all the details up front and make sure and read the fee agreement thoroughly to avoid potentially losing a large sum of money.

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why do companies work with executive recruiters?

Companies typically utilize executive search firms when they have a high level or critical executive position to fill. Board positions, c-level positions and senior executive management roles are the ones that most companies utilize recruiters to fill.  A good executive search firm can locate candidates that most companies cannot.  They have substantial contacts in the industry and good ones have become experts at networking and building a giant network of exceptional candidates wtihin their wheelhouse.  They are often also much better at selling and presenting the position to a prospective candidate than the company’s human resource department is.  Instead of posting a job description on the internet, experienced search firms will contact exceptionally well qualified “passive” candidates and present the opportunity to them highlighting why it might make sense for them to take a look.  Passive candidates are those that are currently employed but open to hearing about an outstanding opportunity that might make sense for them to consider.

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what does it take to be a successful executive recruiter?

It takes a whole lot of effort and hard work.  Most new recruiters don’t make it more than about 3-6 months and many still get out of the business somewhere between year 1 and 2.  It is a career that not many can handle from a psychological perspective.  Many of the issues that recruiters face are beyond their control and dealing with the loss of a very large paycheck can be psychologically brutal.  Successful executive recruiters are driven, disciplined, hardworking professionals that enjoy working with people and accomplishing tasks.  They enjoy the thrill of the chase and the allure of a big day at the end.  The also are able to somehow separate themselves from their day to day emotions and continue on in spite major financial loss.  You can work on a potential placement for many months and then at the last moment something goes wrong and you end up with nothing instead of earning a substantial fee.

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why do people become executive recruiters?

People from all different industries and professions go into executive recruiting, so there are many different reasons why a person might choose to do so.  Oftentimes, executive recruiters were once successful business owners, executives or professionals in a particular industry who after spending many years learning that industry decided to branch out into recruiting.  Having an industry background in the field that you are recruiting in can be extremely helpful.  Most successful recruiters also tend to be money motivated and enjoy working with their clients and candidates to accomplish a common goal.  That goal may be to fill a particular executive positions for a company or it may be to work with a candidate of theirs and to help them find their next great opportunity.

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how do executive search firms find candidates?

Any way that they can!  Executive search firms utilize many different techniques for finding candidates.  Some executive search firms and less experienced will post ads on the internet.  This is not a method that has proved to be highly successful in identifying the most qualified candidate, but nevertheless some search firms continue to do it.  More experience search firms and recruiters will utilize what’s referred to as direct recruiting.  This is a method that takes time to master and inexperienced recruiters often have a difficult time with it.  Direct recruiting is basically the act of calling into a company and speaking directly with the potential person that you are trying to recruit.  Done correctly, this technique has been know to produce the most highly qualified and exceptional candidates primarily because they are not unemployed and applying to internet job ads!  Some of the other methods include networking events, referrals from other candidates and utilizing social networking sites such as Facebook, Twitter or LinkedIn.  Good recruiters build a network of candidates within their niche over time and the longer a recruiter has been industry the more diverse his or her network could potentially be.  Some executive search firms will purchase email lists and phone number lists from marketing companies that collect consumer information.  This is yet one more method that is sometimes employed.

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how does an executive search firm screen candidates?

When an executive recruiter does a quick screen with a candidate prior to conducting a full interview, there are just a few things that they often look for.  These vary from one recruiter to the next and from one staffing firm to another.  Please see the section below for a more thorough response, but succinctly put a recruiter will look at a few quick things prior to conducting the interview.  Some of these may include:

1. Can the candidate do the job?  Do they have the basic background and experience to do the job and do they meet the employers requirements for the job?
2. Can the candidate do the job at this company?  Do they have the industry background necessary and will they fit in well with the company’s culture, environment and management team?
3. Can the candidate start now?  Is the candidate available now and is there anything that would hinder them from taking the job?
4. Does the candidates compensation expectations line up? Does the desired compensation package of the candidate align well with the compensation package offered by the company?
5. Is the candidate interested?  No matter how perfect the candidate’s background aligns with the position description and/or the company’s desired qualifications, none of it matters if the candidate is not interested in the position!

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what are some of the things recruiters look for?

There are a lot of things that executive recruiters look for in a candidate.  Obviously the candidate must have the basic qualifications for the job.  If it’s a CEO position, then the candidate needs to have experience as a CEO.  If it’s a COO position, then the candidate needs to have experience as a COO.  The same can be said for every other position out there.  This may be seem obvious, but it’s the essential starting point for an experienced executive recruiter.  Without having the basic skill and experience for the position, the client will not pay a fee. 

Building upon the obvious, experienced recruiters look for an executive with extremely strong communication skills.  The candidate should have an executive presence, be very polished and present information in a clear and concise manner.  Personality is important.  Experienced recruiters look for candidates that know how to handle difficult questions and situations in a cool and collective manner.  Signs of anger or frustration do not make a good impression and much like politicians the candidate should know what to say at all the right times. 

When it comes to executive level roles, recruiters want to hear about results and they want to hear about how the experience of the candidate lines up with the desired experience of their client.  They want to be given specific examples of how the senior level executive transformed his or her company.  This is specifically important when the company is in a particular situation and a potential candidate has been in that situation before and come out on the other side successfully.

An executive search firm will look for candidates who have specific industry experience that is directly related to the position they are trying to fill.  Candidates often think that their skill set may transfer to another industry and while that may be true a client paying a large fee to fill a key executive role typically wants someone coming out of the exact same industry.

There are also specific things that an experienced recruiter will attempt to uncover in their screening process.  Some of the things include distance of the commute, availability to start a new position, gaps in their resume and/or conflict with previous managers.  A good recruiter will essentially look for any red flag or situation that could potentially derail the hiring process.  If the candidate will have to commute an hour and half each way, it’s probably not going to work out very long.  If a candidate has golden handcuffs on and will stand to lose a substantial sum of money or stock when leaving, then there’s a pretty chance that they won’t leave.

If the candidate being interviewed has gaps in their resume and/or very short stints at any particular employer that may indicate a problem.  A good executive recruiter will drill down and try to get to the bottom of what really took place and caused those issues.  A short stint at a company can sometime indicate an inability to adapt and get along with difficult personalities and having large gaps in the resume could potentially indicate that the candidate has had a difficulty finding a new position and the very best candidates at the top of their simply don’t have this problem.

When an executive search firm or an experienced executive recruiter interviews a candidate they often have a checklist of items in their mind.  if one were to put this on paper it might look something like this:

Experience – candidate’s experience is the same as the experience required by the client

Credentials – the candidate has the required credentials – CPA, MBA, top school, etc.

Outstanding Communication – presentation and communication skills are exceptional

Executive Presence – candidate possess an executive presence consistent with the role

Work History – no major gaps, no problems with management, no problems with difficult circumstances

Compensation Package – candidate’s current comp is below targeted comp package

Commute – candidate’s commuting situation is reasonable and realistic

Availability – candidate available to start right away and no major incentives keeping him

Relocation – if relocation is involved candidate’s family is on board and the relocation makes sense

In an nutshell, an executive search firm or experienced executive recruiter will look for a candidate who has an exceptional background, strong credentials, the experience to do the job, the ability to communicate effectively, the ability to start the job now and the ability to continue doing the job with the company for a very long time.

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why don’t executive recruiters return phone calls?

Executive recruiters typically work closest to the money.  While it would certainly be best for every executive recruiter to return every phone call they receive, in practice it is simply not going to happen.  There a couple of things to consider with regard to this situation.  One is that most experienced recruiters receive more phone calls in a day than they are able to return.  Even if they wanted to they probably wouldn’t be able to. They have built their network to a point where they are only able to return the most pressing calls.  A second thing to consider is that they are only paid when they fill a position.  When an executive recruiter has a position that needs to be filled, they will in most cases only focus their attention on candidate’s who have the EXACT background that their client is looking for.  In most cases and during very busy times an experienced recruiter is probably not going to spend their time speaking with candidates who are not a potential fit for one of their openings.

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who do executive search firms work for?

Executive search firms work for the clients who pay their fee!  There is often a misconception among candidates that the executive recruiter works for them and helps them try to find a position.  This is not the case at all.  An executive recruiter works for the client (the company with the opening paying the fee) not the candidate.  This is an important point to remember and can save a lot of frustration.  Although most professional recruiters enjoys the relationships they forge with their candidates, ultimately their loyalty lies with the client who pays their bill.

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How do executive search firms pay their recruiters?

In most cases, executive search firms pay their executive recruiters on a commission basis.  They are paid a portion of their billing dollars which is the total amount of fees that they have billed year to date.  At larger staffing firms, the percentage is usually somewhere between 30 and 60% and can vary based on billing dollars to date.  Many of the national search firms will start out paying an executive recruiter around 30% of their billing dollars and then will increase that percentage as the executive recruiter bills more and more throughout the year.