Six Misconceptions About Executive Search Firms

Executive search firms play a critical role in shaping organizations. But it can sometimes be misunderstood what they really do and why they are hired. A new report from The McCormick Group lays out the misconceptions that clients may express when deciding to hire a search firm.

July 19, 2022 – Perhaps no industry is as misunderstood as executive search. For many senior executives, their understanding of the industry is based on only one or two experiences, often with large, brand name firms. But a new report from The McCormick Group’s Stephen Nelson notes that the world of executive search is much more extensive and diverse. Mr. Nelson lays out the misconceptions that potential clients often express.

1. Search Firms are Uniformly Classified as Retained or Contingent.

“It is true that some firms strictly work on a retained basis, while others most often work on a contingency basis,” said Mr. Nelson. “In fact, there are many search firms, often called hybrids that charge only a partial retainer or will work with no retainer up front in certain situations, such as for regular clients or on searches in which an eventual hire is largely assured. The most important factor in evaluating a firm is the commitment of the firm, not how its services are priced.”

2. Search Fees are Uniformly Expensive

Some firms, while charging fees amounting to as much as one-third of the first-year projected compensation, also add charges for administrative overhead, which can amount to thousands of dollars per month. Other firms offer more flexibility, based on a variety of factors including the complexity of the search, the financial status of the employer, and the extent of the client relationship. “Few of those firms charge for expenses apart from reimbursement of those such as travel for candidates or search consultants,” said Mr. Nelson. “Additionally, many firms will consider flat fees based on the amount of work as opposed to the compensation of the position to allow clients to better budget the cost of a search.”

3. Searches for Senior Management and Executive Positions Require Six Months or More to Complete.

Many firms feel the need to justify the fee by selling a process, often including an overemphasis on research and the creation of an extensive pre-search report, before engaging with the market, according to Mr. Nelson. “Yet the key to success are search professionals who understand how to engage leaders in the specific field and can comprehensively canvas the market to develop high-quality candidate pools,” he said. “This can be done in substantially less time, even for the most important or sensitive positions. Given the hyper-competitive market for talent today, clients can’t afford an unnecessarily extended process that may cost them the most attractive candidates.”

4. Larger Firms Are Better Equipped to Handle C-Level Searches.

Clients often think that firms touting a large network of candidates and an extensive database are best equipped to handle high-level searches. “While a network may be an initial advantage, too often firms limit their outreach to their network believing it will produce a sufficient pool of candidates,” said Mr. Nelson. “Moreover, the more established a firm is in a particular market segment, the more likely they will have hands-off policies that prevent them from accessing leading potential candidates for a particular assignment.”

As a former attorney, and after 17 years in legal journalism and publishing, Steve Nelson serves as a business advisor to both employers and candidates, using his significant knowledge of the legal field to solve employment challenges. In addition to being a senior member in the McCormick Group law & government affairs practice, he coordinates the activities of the law firm management team. The group handles high-level administrative placements at law firms; encompassing those with responsibility over operations, finance, innovation and value, marketing and business development, talent management, and diversity and inclusion. Mr. Nelson also helped establish the Lateral Partner Recruiting Roundtable, in which he leads the discussion of critical legal recruiting issues with nearly 100 law firm participants.

The importance of propriety databases is largely overrated today, according to Mr. Nelson. “Publicly available databases, such as LinkedIn and Leadership Connect, have largely obviated proprietary databases, which quickly become outdated in any case,” he said. “Compounding the problem is that many larger firms use junior recruiters to make the initial contacts based on the database research. Those junior recruiters, having limited contact with the client, are less knowledgeable about the opportunity and, consequently, less effective in presenting it. Recruiting firms where more senior professionals handle even the initial contact can be more effective in engaging both sources and potential candidates in more productive conversations.”

Related: 12 Reasons Why Companies Hire Executive Search Firms

5. Executive Search Firms Only Work on C-Level Positions.

This is based on the premise that only C-level positions are critical for companies, reinforced by the practice of some firms to set a mandatory minimum fee for the search. Mr. Nelson notes that middle managers and executives are the strategic hires that enable a company to realize its objectives. “Smaller and boutique search firms more willing to commit senior recruiters are often better-able to handle such searches,” he said.

6. Using Multiple Firms Assures Better Market Coverage.

Engaging several placement agencies working on a contingency basis may be a practical and effective solution when the need is for multiple hires or adequate is enough and there is a larger pool of potentially qualified candidates, according to Mr. Nelson. “Agencies continually mine and build databases of active candidates, so they may quickly be able to produce candidates that fit a set of requirements,” he said. “The downside is that, realizing they’re in competition, they don’t push beyond their database and initial outreach to approach passive candidates who aren’t in a database and aren’t scanning job boards.”

In other words, no one agency feels the responsibility for filling the position. Mr. Nelson says that when a company’s success depends on having the best possible person in a critical role, the imperative is for a firm that has the commitment and methodology to surface the top candidates in the market rather than simply those who “are on the market.”

Founded in 1974 by Bill McCormick, The McCormick Group provides executive search services to associations, corporate government affairs offices and law firms, among others. The firm offers clients a full range of human capital services, including recruitment, human resources strategic planning and consulting, compensation studies and surveys, management succession consulting and restructuring, and outplacement consulting.

Related: When and Why to Hire an Executive Search Firm

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media

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