Between the effectiveness of today’s job boards and internal employee networks, there are many searches where organizations wonder if they should do the search themselves and save the expense of using an outside firm. Some organizations will only do high level searches externally and do the rest internally. However, this is short-sighted and doesn’t take into account the real considerations for when it is appropriate to outsource to an executive recruiting firm.
To answer the question of when it’s appropriate to hire an executive search firm, organizations need to consider both the strength of their organization and the specific role they’re hiring for.
There are three company-related factors and two role-related factors to consider. The company factors are: (1) resource availability; (2) search experience; and (3) need for confidentiality. The role-related factors are: (4) relative importance of the role vs. frequency of hiring; and (5) scarcity of acceptable candidates. If your organization is insufficient in any of these five factors, your performance is likely to be more effective using a credible search firm. On average, you’ll generate more (and better) candidates, be more effective in evaluating the candidates, and end up hiring a candidate who is a better fit for the role.
Following are a dozen reasons that signal the need to work with retained executive search firms to ensure optimal results, beginning with the core five mentioned above.
Five Role or Organizational Challenges to Overcome
1. Limited Internal Resources Available
Conducting an effective search and recruiting talent requires a significant time investment: from defining the role, to sourcing and evaluating candidates, to facilitating the evaluation and hiring process. There’s a misunderstanding among many hiring managers who underestimate the actual time it takes to perform a search within the implicit requirements of their organization. If your organization lacks dedicated resources for recruiting, it often makes more sense to engage an executive recruiting firm.
2. Limited Internal Search Experience
Regardless of resource availability, organizations may not have sufficient experience in recruiting, including for higher-level executive roles that aren’t often vacant. As is the case when outsourcing any service, engaging search firms focused entirely on executive acquisition is more effective than starting from scratch internally. The fee paid to a reputable search firm is offset by a more comprehensive search, better productively, and an eventual hire who’s fit for the role—all in a shorter time frame than if undertaken by internal recruiters.
3. Need for Confidentiality
High-level hires often demand a level of confidentiality due to the sensitive nature of executive positions and their bearing on the organization. There are several situations when a third-party is necessary to facilitate an executive search:
- When an underperforming executive is being replaced without their knowledge. This also safeguards against the default to prematurely promote from within. Not only could using underqualified team members result in similar struggles, it can disrupt internal teams.
- When an organization is making a strategic move and doesn’t want competition, suppliers, or partners to know about it (e.g., entering a new territory, business, or vertically integrating).
- When an organization is in the midst of a transaction (e.g., Merger, Acquisition, IPO, etc.) and it’s critical that the search and hire is not made public until the position has been filled with top talent.
- When an organization is making major changes and wants to manage the timing of the communication to the current employees. This can reduce potential employee turnover and reinforce confidence among internal staff, as well as other prospects.
In these situations, it’s a necessity for companies to engage a third-party executive search firm that is experienced in confidential searches. The executive recruiter can operate under its own name and mask the identity of the hiring company until absolutely necessary. There’s virtually no other way to execute a confidential search effectively.
4. Importance and Experience of “Getting the Hire Right”
The importance of getting the hire right and the ability to follow through on company criteria are dependent on two influencing factors.
- The role’s importance, determined by the impact a marginally better hire will make.
- The ability to get the position right, determined by experience hiring for that role.
If the position is highly important for the business and if the organization has had limited experience making the same hire, it makes more sense to hire an executive recruiting firm. Conversely, if the role is not paramount to the business and the organization has made the same hire many times, it’s appropriate to have internal resources work on the hire.
The following matrix describes how the role can determine when and when not to use an executive recruiting firm.
5. Scarcity Of Available Candidates
Scarcity is a consideration independent of the experience a company has with hiring and the importance of the hire. When available candidates for the role are scarce, it’s a good opportunity to use executive recruiters. Conversely, when there’s a large supply of potential candidates it’s more cost-effective to perform the search internally.
The number of available candidates is partly driven by the “supply” (unemployment rate) for the role and partly driven by the requirements of the organization as it defines the role. In many hiring situations, the company has unique requirements for candidates that reduce the number of qualified professionals. Following are examples of characteristics that make candidates scarce:
- Specific competency, skill, and experience requirements (e.g., led ERP implementation)
- Relocation requirements (e.g., companies in remote or unfavorable locations)
- Educational background
- Age, “runway,” and succession planning requirements
- Compensation requirements
- Industry and company size experience requirements
- Cultural fit requirements
- Candidates of certain areas of expertise being more risk averse or unwilling to change (e.g., R&D and engineering professionals)
The scarcer a position becomes through requirements or economic availability, the more likely it is that the right candidates will be passive (i.e., working and not looking for a new job). A labor intensive, proactive approach of reaching out through various methods is required to create a strong candidate pool. Using an executive search firm can be very valuable in this instance.
There is a misconception in some organizations that the candidate supply of senior-level positions is less than lower-level positions. This is not the case. For example, recruiting mid-level engineers with a specific degree and credentialing, and requiring relocation to an unfavorable location is a very difficult search with a scarce candidate pool. Whereas, recruiting a CFO who doesn’t require industry experience is often a plentiful situation.
If there are no significant issues in any of these five areas, it’s more cost effective to keep the search in-house. However, if any of these role or organizational issues exist, it’s money well-spent to engage an executive search firm. The cost of making a bad hire can be highly significant and cost far more to remedy than paying for the strategic advantage search firms offer.
Seven Additional Reasons to Hire Executive Search Firms
The remaining reasons to hire an executive search firm revolve around their differentiated value proposition relative to executing a search internally.
There’s a misconception in many organizations that you hire an executive recruiter only to leverage a network of candidates. In reality, the key reason to hire an executive recruiting firm is to help the organization execute on a “best practice” process to hire the best professional for the role. The following capabilities distinguish executive recruiters’ ability to identify and place senior executives with in-depth knowledge of need, expectation, and criteria.
6. Defining the Role
Organizations typically have a very good sense of hiring need from a bandwidth perspective and from a knowledge and expertise perspective. However, they often make mistakes in defining the exact role required. This is particularly an issue when companies hire for a new or previously undefined role.
When defining the role, hiring criteria and expectations need to make sense for the company and also for professionals seeking to advance their career path. Since executive recruiters work across many companies, hiring many similar roles, they have knowledge of how to define positions in a way that attracts qualified talent. They also have knowledge about compensation for similar roles that can be useful in defining salary ranges.
Most executive recruiters will work with your organization to develop the job description and define the role in more detail, and in a way that’s attractive to potential candidates. Some executive search firms will provide ancillary consulting to work with organizations and help them define their specific leadership needs from a resource perspective.
When hiring a role that is new to the organization, using an executive search firm that also places people for interim or fractional roles can be beneficial. Starting by hiring an interim leader prior to defining the full-time role is often very effective, and using an executive recruiting firm that does both hires and interim roles can help you through that process.
7. Defining the Requirements of the Ideal Candidate
A job description is just the starting point for defining the characteristics of an ideal candidate. A reputable executive search firm provides significant value in providing a framework for defining and evaluating the capabilities of great talent, and eventually hire top performers.
There are four areas to consider when defining the requirements of a candidate or a position:
- Competency Fit. Do they have the business expertise or skillset that enables them to demonstrate competency in a given role?
- Cultural Fit. Will they fill the position in a way that meshes with the current company culture? Cultural fit could also mean finding candidates willing to lead a needed change, to operate differently and more effectively than the current climate.
- Intelligence. Intelligence makes a significant difference in dynamic situations and goes beyond gauging business expertise. Hiring for intelligence involves assessing both intellectual and social-emotional intelligence.
- Organization- and Job-Specific Considerations. Compensation, career runway, relationships, willingness to relocate, and numerous other considerations factor into the ability of a company to attract candidates for an executive position.
Reputable executive search firms will have a framework for helping clients define the exact fit for the role encompassing these four key areas. A rigorous process to define requirements beyond a job description enables more efficient sourcing and creates a framework for objectively evaluating candidates.
8. Selling the Company / Position
Some organizations aren’t effective at describing the employment opportunity with their company in a way that’s enticing to potential hires. Ineffective messaging severely limits success in the recruiting process. Executive recruiters are constantly interacting and “selling” to candidates, and have a good understanding of what professionals are looking for from a company. Organizations can sometimes forget that the best candidates have a variety of choices and without the proper messaging to attract them, organizations are left with a sub-optimal pool.
It’s also important to consider that employees of the organization are generally not as credible when it comes to selling the company as third-party executive recruiters might be. It’s often more believable to candidates to have an executive recruiter share with them what a wonderful company and role it is than if the hiring manager did the same. It’s human nature. Executive search firms can provide significant value throughout the search process as they develop trust and rapport with candidates.
9. Comprehensive Sourcing
Most organizations understand that sourcing candidates is the key value proposition of executive recruiters. However, they typically assess this value proposition by looking at the quality and timing of the final candidates presented, without regard to the comprehensive effort the firm exerted to source candidates. When companies keep searches internal, they often generate a few good candidates. As a result, when looking at the sourcing value proposition vs. an executive search firm, they may not recognize the true value.
It's quite often that the best candidates occupy existing roles, and only a percentage of these strong candidates are willing to make a job change at any particular time. To get the attention of passive candidates requires significant effort: from effectively identifying and targeting the candidates, to a massive outreach to qualified professionals, to effective selling of the company and position. An effective search should involve proactive outreach to between 100 and 500 targeted candidates, depending on the search. This should result in 20 to 50 candidates that have interest. The effort required to do this right is substantial and most companies doing searches internally do not make this level of effort, instead focusing on producing the first three or four good candidates (typically from job postings).
Executing on a comprehensive sourcing process is a key component of an executive search firm’s value. Executive recruiters have the experience, staff, and necessary outreach tools to execute on this process efficiently and productively.
10. Candidate Evaluation & Selection
As previously mentioned, there are four general areas for defining requirements of candidates or fit. Executive search firms will gauge candidates for competency fit, cultural fit, intelligence, and organization- and job-specific considerations. Operating within these parameters, search firms can narrow even a broad pool of quality talent down to a few top candidates. A reputable executive recruiter will have a framework and associated tools for evaluating candidates as a key part of its value proposition.
There are many organizations that lack an approach for evaluating candidates and as a result, “go by the gut” of the decision-makers. While this can work if you have decision-makers who are skilled in evaluating people, it often can lead to ineffective hiring decisions. Additionally, when there are multiple decision-makers involved in the hiring process, the lack of an objective evaluation framework will lead to disagreement—and potentially, sub-optimal hiring decisions.
Evaluating the cultural fit of candidates for the role and the organization is a critical part of a search firm’s value proposition. One of the most common reasons for hires not being successful is cultural fit. Executive recruiting firms that provide an approach to evaluate culture fit can add significant value to the evaluation process.
11. Negotiation / Closing the Deal
Having an agent to support the negotiation of compensation and benefits with a prospect can be very valuable. While the executive recruiting firm represents and is paid by the client, it typically develops strong relationships with the candidates while supporting them through the hiring process.
The executive search firm should know what the individual is making in their current role and what it will take to get them to accept a new position. This information, when reported to the client, is critical in constructing the right offer. The executive recruiter also should know any internal constraints the client has in terms of their salary and benefit structure. When the candidate is considering countering proposals, they will often ask advice from the executive recruiter, who can help them understand what areas of their counter can work for the organization and which cannot. This allows the executive search firm to steer the negotiation to conclusion quickly.
Without an intermediary like this in the process, things can break down and either side can be offended. The result can be losing the hire or worse, a protracted hiring process that comes with some angst.
12. Executive Integration
Integration ensures the smooth transition from an external candidate to a top job opening within the company. Search firms are instrumental in facilitating this process.
A top performer may have the right competencies and cultural fit for the company, and be quite capable in the job. However, in many cases, a professional isn’t skilled or does not take the time upfront to build the right relationships, understand various nuances of the organization, or effectively integrate themselves into the c-suite in a seamless way. Operating as an outsider can put early stress on the situation and lead to conflict—or worse, a failed hire. Some executive search firms offer executive integration services to companies as part of the search fee, to avoid this from happening. This can be a significant aspect of the executive recruiter’s value proposition.
Executive integration services provide a coach to the hired professional that helps them build a plan for effectively building relationships and integrating themselves into the organization. It can help close the knowledge gap and finesse the adjustment that accompanies changes in senior positions.
The Best Search Firms Pay for Themselves
Ultimately, hiring an executive search firm is a cost-efficient decision for many companies as they seek to find talent and fill essential high-level positions. From candidate sourcing, to vetting and placement, the cost of even the best search firms far outweighs the expense that accompanies poor hiring choices. Surety of success and peace of mind are far and away the most compelling reasons to hire an executive search firm.
There are numerous reasons to hire an executive search firm, even beyond the dozen listed above. Whether you lack internal bench strength or want to start an original search for the best talent, employers typically see the results they desire when they put executive search into the hands of a well-qualified company.