October 31, 2022 – The hard truth about talent, especially leadership talent, is that if you’ve got the wrong talent in place, it can quickly become your company’s Achilles heel. Alternatively, great leadership can serve as a business multiplier, and retaining top talent ranks as the top priority for CEOs and other C-suite executives globally. Quite simply, securing the right leadership talent is critical for business success, according to a new report from Caldwell. The most effective way to secure talent depends on the type of role to be filled.
The Caldwell report notes that there are a few basic search categories. “Job board services can work well for entry-level to middle management roles, especially when there is an abundance of qualified candidates,” the study said. “The availability of talent is important, as job boards only capture those actively seeking a new job.”
In-house recruitment also functions best when filling roles up to middle management, according to the Caldwell report. For senior executive roles, confidentiality becomes a significant concern. “Candidates may hesitate to speak openly about a potential new role when connecting directly with representatives of a competing company,” the report said. “This is just one situation in which the third-party role offered by an executive search consultant provides value. It is also worth noting that each year, about two-thirds of jobs are filled by passive candidates—individuals recruited into the role by a personal outreach.”
Technology-enabled research and sourcing firms, such as IQTalent Partners, a Caldwell business, help expand the reach of in-house recruiters. The on-demand model, with hourly billing, is designed to augment the work of in-house recruiters in broadly identifying potential candidates, using its database of more than 300 million global professionals. IQTalent also offers candidate assessment systems.
Contingent recruiters present specific candidates to a hiring company, from within the recruiter’s network of candidates. “The same candidate may be presented to multiple companies simultaneously,” the Caldwell report said. “The hiring company conducts the evaluation of the candidates. The recruiter is paid only when a placement is made, aligning them with any placement, not necessarily the best one.”
Retained executive search differs fundamentally from the other methods. Clients hire the search firm to conduct an exclusive search that is tailor-made to specific client requirements. Consultants leverage their established networks, research capabilities, and industry knowledge to present clients with a selection of high-quality candidates. “This greater access to passive candidates and a guaranteed placement offers clear advantages when filling senior roles,” the Caldwell report said. “In their third-party capacity, retained executive search consultants ensure the required confidentiality while smoothing negotiations and buffering both the client and candidate from any contentious issues.”
Elite candidates understand this too, which helps explain the higher rate of response from candidates to outreach from retained executive search consultants.
The Search Process, Briefly
In the launch phase of a retained executive search, the consultants get to know the client company and its needs and goals. The Caldwell report explains that this includes understanding overarching business goals, from strategic plans to organizational objectives such as increasing diversity. “The two parties will agree on the assignment deliverables and timelines, define the search strategy, and develop a carefully calibrated candidate profile,” Caldwell said. “Building a working mutual partnership tends to deliver the best outcomes. In the research phase, search consultants work within their networks of industry experts and relatable roles to identify potential candidates. Consultant outreach gauges candidate interest, and a longer list of prospective candidates is created.”
During the review phase, as recruiting continues, assessment tools are used, additional research is conducted on potential candidates, and both clients and consultants interview prospective candidates. A short list of candidates is created.
The Caldwell report explains that in the selection phase, references are checked for all finalists, key stakeholders participate in candidate interviews, compensation is negotiated, and the hiring decision is finalized. During the transition phase, the search consultant stays in touch with the new hire and supports the integration process, including by assisting in defining initial goals and objectives.
Psychometric testing, such as from Caldwell Analytics, contributes to the search and onboarding processes by leveraging scientifically proven, results-driven assessments that support selection of the best talent, in concert with the goals of building high-performing teams. The firm’s suite of diagnostics can reveal engagement levels and context that provide better understanding of talent as it relates to the company, team, individual, strategy, and culture.
The Cost of Retained Executive Search
The typical professional fee for retained executive search is one-third of the total first year compensation for the executive position. “This includes base salary, target bonus, and any signing bonuses. This fee is usually invoiced in three equal increments, on the start date of the engagement; 30 days after the start date; and 60 days after the start date,” the report said. “Upon completion of the engagement, estimated compensation is reconciled with actual compensation. Agreed upon expenses are billed at cost. The fee also includes a guarantee of the executive placement. If a recently placed executive leaves the company for any reason within a short period of time, the firm will repeat the search with no additional fee to the client.”
What Makes Retained Executive Search Worth the Investment?
Many features and benefits are unique to a retained executive search engagement. According the Caldwell report, the best access to passive candidates is the calling card of retained executive search. Senior level and C-suite executives overwhelmingly are passive candidates, and executive search consultants put in the effort to establish and foster networks of these leaders in their target industries.
“High-performing executives who are not actively looking for a new role will take the call from a well-connected executive search consultant,” the report said. “Executive search consultants are also innovative when thinking about new roles, often bringing an unconventional candidate to consideration, with the right skills coming from an unexpected location and/or background, ensuring candidates of diversity of background and thought.”
The report also notes that a third party between candidates and the hiring company can be useful in many circumstances, protecting the time and privacy of both sides, while at times absorbing some of the heat. “A third party is valuable when recruiting from a target company with which your company has good relations, replacing an underperforming executive that is still in the role, seeking an executive with skills not found in your network, or simply conducting negotiations,” the Caldwell report said.
Confidentiality and discretion are critical elements in any senior level or C-suite search. Caldwell also explains that top-tier executives who become candidates appropriately demand complete privacy during the search process.
Client representative. Search firms understand that they serve as an extension of the client’s brand and reputation during the search process and behave accordingly.
Competitive intelligence. In their regular course of business, executive search consultants become steeped in information about their industries, the competitors within those industries, and the job market. Clients often appreciate the knowledge shared by search consultants.
“Achieving the nuance of a cultural fit can be one of the most important aspects of a search,” the Caldwell report said. “Beyond matching skill-sets, the search consultant will bring an understanding of the hiring company’s culture, business needs, and historical context to the search.”
According to a Glassdoor survey on diversity and inclusion in the workplace, more than three in four employees and job seekers (76 percent) report a diverse workforce is an important factor when evaluating companies and job offers. Diversity is an incredibly important part of the search process and the right firm can help you ensure that your approach is inclusive from the start.
Onboarding support is provided by search firms to ensure a successful transition for the new hire. Among other areas of support, the consultant can help to “interpret” the company’s expectations and set early priorities for future success.
Recruitment doesn’t end when a new hire shows up for their first day. A study by BambooHR reveals the challenges of, and answers to, keeping new employees from abandoning ship.
There’s an old business adage that dates from the 1970s: “No one ever got fired for hiring IBM.” The phrase—never a tag line of IBM—referred to the tendency of those charged with hiring consultants to simply select the mega-firm in the industry. It was an act of self-defense, so if something went wrong with the project, it would not be the fault of the person who hired the consultants.
“But the executive search decision can turn this phrase on its head, the Caldwell report said. “As it turns out, there are compelling reasons to look beyond the largest firms when seeking an executive search partner.”
Off-limits refers to an agreement between a search firm and its clients to not recruit candidates from those client companies for a period of time following a completed search engagement. For larger firms that conduct more searches, that means many more companies are “off limits” when it comes to identifying candidates for the next client’s search, and the talent pool available for your search is severely reduced, says Caldwell.
Additionally, if the search firm is currently conducting, say, five CFO searches, then the 25 or so executives on those candidate slates would also be “off limits” to the client looking to launch the sixth CFO search. When firms layer on other consulting services beyond search, such as succession planning, board assessment, etc., additional off-limits restrictions may apply.
“The problem becomes evident,” the Caldwell report said. “The more business the search firm conducts, the more extensive the restrictions become and the more significant the reduction of the potential candidate pool becomes. Smaller firms, simply by virtue of conducting fewer searches, will be less constrained by off-limits restrictions, theoretically giving them clearer access to the broad talent pool when conducting the next search.”
In years past, the size of an executive search firm used to confer its access to talent and ability to conduct candidate research. “But in this globally connected age, the firms of all sizes can be active across the global marketplace, with unlimited research resources,” the Caldwell report said. “Today, more important than the number of office locations is finding search consultants with the knowledge, network and tenacity to secure the right leader.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media