Times are tough.
Healthcare organizations, like other industries, are taking a hard
look at their expenses.
Executive search is one of the many service providers under the
expense reduction microscope. Search firms reported significant declines
in revenue in 2009 due in part to a reduction in executive hiring and a shift
by some systems to rely on internal recruiting.
Historically, search firms won new business based solely on
relationships and the reputation of the company. Today, hospital CEOs are
asking questions: At what price the relationship? At what price the
accountability? At what price the quality? At what price the value? These are fair questions
regardless of the economic climate, and clients deserve clear answers.
Discounting fees is the scourge of professional service
firms. If your fee is below the industry standard, the conventional
wisdom says, you must not be as good as the larger, name brand recruiting
companies. Right? Wrong, there is a new breed of search
firms exploring ways to change the approach.
Most of the larger search firms operate with a business model that
is more than 50-years- old. It is a transactional model. Their
marketing pitch reads something like this: Hire us. We are
big. We do a lot of searches. We know everyone. We can do a
better job. We have access to the best candidates. Then, when they
present the recommended candidates, the accountability shifts to the client.
In this new economy, with hospital CEOs facing pressures to
improve performance and demands more increased accountability perhaps clients
should consider asking their search consultants to back up their claims
regarding quality with a 36-month placement guarantee. "If you are
really that good, a three-year placement guarantee for C-suite engagements
should not be much of a risk at all," seems to be a reasonable
observation. But the major firms shy away from this level of
accountability. In the transactional model, they see their role as
identifying a client’s needs and requirements and filling the order with a
panel of qualified candidates. It is up to the client to select the
candidate and most of the responsibility shifts from the firm to the client in
the process. Most major search firms will provide a 12-month guarantee, a
fairly safe bet when you consider that most of the risk of candidate failure
does not emerge until the second year.
Forty percent of all candidates recruited from outside the
organization leave, are forced out, or quit within 18 months. Heidrick
& Struggles, the world’s second largest search firm, disclosed that rather
embarrassing “stick” rate following a review of 20,000 of their
senior level searches. Major job boards and human capital organizations who
monitor executive turnover have confirmed this rate of failure. “It is
the dirty little secret of our industry,” said a prominent search firm partner
who specializes in healthcare.
The rate of failure is embarrassing. But it does not have to
be that way.
Transformational Recruitment, a true partnership with
the client where financial risks are shared, is the way forward.
Through value innovation, search firms are embracing the
risk-model and incorporating proven onboarding strategies into their
performance model and in the process are challenging the seemingly wrong-headed
conventional wisdom of the outdated transactional model.
Value innovation is NOT about discounting fees and cutting corners. It is about search consultants, with a passion for their client's success, identifying
and recommending candidates and then standing behind their performance. It is about innovation that allows them to offer more services for lower costs.
Some agencies are cutting corners to reduce costs and preserve
The value innovation search firms are offering more for less.
© 2010 John Gregory. Self