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3 March, 2020 Posted by John G. Self Posted in Career Coaching, Career Transition/Outplacement, Recruiting
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Understanding How Executive Search Firms Work

Posted March 3rd, 2020 | Author: John G. Self

We all take things for granted.  We assume that job applicants know how the recruiting process works.    

But it just ain’t necessarily so.

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One of my favorite quotes, attributed to Mark Twain, but that ain’t so either, goes like this:

            It is not what we don’t know that gets us into trouble. 

            It is what we know for sure that just ain’t so.

In 25 years of running two executive search firms, I was always amazed at what clients and candidates did not know about how this “inside game” works.  Here are five points about which employers or candidates are frequently unaware:

  1. Professional Fees:  Clients know this side of the deal but candidates often less so.   Search firms use a percentage of the first-year cash compensation to calculate their invoices for a given search assignment — not the base salary but the total cash compensation, including base salary, signing bonus, housing allowance, and end-of-the-year incentive performance payments.  Most retained firms charge 30 to 35 percent of this amount.  Some national firms also have an administrative overhead fee that is 13 to 15 percent  of the total on a floating basis, meaning the overhead fee uses the total case compensation amount as well.   
  2. Dual Submission: The major firms will not consider an executive for more than one search at a time.  If a major national firm has three engagements that a particular executive would like to consider, the firm will only submit them for one position.  It is unethical for a search firm to shop candidates to their various clients at the same time. It is not fair to their clients.  Some contingency firms dual submit on a regular basis but they rarely handle the senior executive positions and their revenue model is totally different.
  3. Lock-Up List/Do Not Contact List:  Major search firms operate with a code of conduct that precludes them from poaching a current or recent client’s talent.  If a major national firm has done work for a company in the last 12 months (some search consultancies honor a 24-month period), they cannot/should not recruit an employee from that organization for 12 months following the completion of the most recent search.   If you are an employee of a company that has used a particular recruiting firm, it is usually a waste of time to pursue consideration for any of their current listings unless permission is granted by the employer for such contact.  Some firms have played fast and loose with this rule but when they are caught, it can be expensive: they generally lose all future business.  This behavior can get an offending search partner fired.
  4. Risk Management:  Search firm partners maintain their partnership status by bringing in new business as well as adding new projects from existing clients.  They may be great recruiters but they live or die on their ability to generate new revenue. This is called rainmaking.  CEO search engagements can be particularly lucrative because the new CEO, feeling a sense of loyalty or obligation, will assign what is called “thank you” or “payback” assignments to the firm that recruited them.   I once handled eight additional executive searches for an organization where I led the CEO search.  So, search firm partners are obsessed with maintaining the confidence of the client.  They look for “safe” candidates, qualified people without baggage that they will have to be explained.  Currently a number of national firms will not present candidates who are in transition or who left their previous assignments under a cloud, even if it was through no fault of their own.  For candidates trying to break through and be considered, the recruiting firm’s practices seem more about risk management than finding the right candidate. (FYI, some of my most successful searches included candidates who were in transition).
  5. Search Firms Are Not the Only Game in Town:  Many candidates sit and wait for recruiting firms to call.  There is this mistaken belief that search firms handle the majority of executive recruiting assignments, including CEO searches.  Actually, only about 30 to 35 percent of the top executives are recruited by firms.  Increasingly, these assignments are being handled by internal talent acquisition teams.  Moreover, a significant number of top jobs are never posted and are instead filled internally are on the basis of a referral.  That is why not investing in developing your  professional network is a bad career choice.   

If you have additional questions about how executive search firms operate, the search process or your job search strategy, contact us. We are happy to answer your questions. Email: careertransitions@JohnGSelf.Com. We are here to help.

© 2020 John Gregory Self

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