Many organizations have completed their strategy and budgeting processes for the next cycle and have likely established ambitious goals. However, research by McKinsey & Company indicates that most strategies fail to deliver expected results and that, 9 times out of 10, there is no fatal flaw in the strategy but rather the organization lacked the skill and/or will required for successful implementation.
Ask yourself the following questions about your talent:
- Have we identified the “pivotal roles” responsible and accountable for implementing key business strategies?
- Do we know and understand the knowledge, skills and competencies necessary for success in those pivotal roles?
- Do we have the right people with the right skills, the right knowledge and the right experience in the right places now – and for the next 3 to 5 years?
- Do we have the time to develop the necessary talent internally?
- What will it cost if the requisite talent is not in place?
BETTER TALENT IS WORTH FIGHTING FOR. At senior levels of an organization, the ability to adapt, to make decisions quickly in situations of high uncertainty, and to steer through wrenching change is critical. But at a time when the need for superior talent is increasing, big US companies are finding it difficult to attract and retain good people. Executives and experts point to a severe and worsening shortage of the people needed to run divisions and manage critical functions, let alone lead companies. Everyone knows organizations where key jobs go begging, business objectives languish, and compensation packages skyrocket… [Read the Full Article]
Choosing a professional service firm – whether accountants, lawyers, management consultants or executive search consultants – with whom to work is a difficult decision and one fraught with risk. These firms are often retained when critical steps are needed and the client lacks the specialized knowledge and capability that they offer. But it’s difficult to judge the outcome of the consultant’s previous work, with external factors like quality of execution, management transition, the passage of time and the economy impacting heavily on results.
What’s more, professional services tend to be somewhat opaque, in that solutions are created in “black boxes” with little client understanding of process. As a result, clients rely on brand, reputation and the eloquence and demeanor of the consultant. And then there’s the issue of price, which is often seen as a proxy for quality, typically buoying the fees charged by name-brand firms.
As an executive search consultant, I regularly meet with organizations who are looking to hire a firm for an important assignment. Most ask the standard questions about overall experience, fees, etc. but few make inquiries that would provide valuable insight into a search firm’s ability to perform. These missed opportunities could prove critical.
Here are some questions that thoughtful companies should be asking:
What organizations are “off limits” to your firm? If a search firm cannot access candidates in organizations in which the skills, knowledge and competencies you need are likely to be found, their effectiveness will be reduced.
What is your experience as a search consultant? How many assignments have you completed, for what companies and what roles? Search firms often reference the overall firm’s experience. But, while a consultant has access to the firm’s knowledge, their personal experience is what is important if they’re leading the search.
What is your assessment process for candidates? Who interviews candidates? Do you use behavioural interviews? Inexperienced interviewers can exclude strong candidates. Assessment processes should include skill/knowledge as well as competency focused interviews. Behavioral interviews are generally recognized as the most effective interviewing technique to assess competencies and cultural fit but many don’t employ them as they should.
Who else from your firm will be directly involved in this assignment? What is their role? What is their experience and how many assignments have they completed, for what companies and roles? Many search firms utilize a leverage model in which junior researchers contact potential candidates and complete the initial screening. This often presents challenges in engaging senior candidates as the researcher does not fully understand the requirements for the role and is unable to answer questions and build rapport. In addition, junior researchers lack the judgment to make decisions so strong candidates are frequently eliminated while weak ones are included.
What information do you provide on the progress of the search and with what frequency? Regular and frequent (weekly) progress reviews detailing candidate information (name, organization, role, interest level) provides an important accounting of the search strategy, its progress, level of effort and any issues that may have arisen, keeping the search firm focused – and healthy communication with the client at an optimum level.
How does your fee structure align client/search consultant goals, create a true partnership and equitably share risk/reward? If the fee structure does not align with your mutual goals and is unable to create a true partnership that fairly balances risk/reward, a successful outcome will be challenging.
In the past three years, what is the median time to presentation of candidates? Executive searches are frequently triggered by a resignation, promotion or termination and, in some cases, a business opportunity. There is often an urgent need to fill a key role as an important team lacks leadership and/or revenue opportunities are missed.
In the past three years, what is the average number of candidates presented before an offer of employment is presented? In most cases, one or two candidates will not provide insight into the talent pool. However, too many candidates means the search consultant really doesn’t understand the requirements and culture of the organization and is consuming valuable client resources.
What percentage of candidates presented come from the firm’s database versus original research? Candidates from the firm’s database (the “usual suspects”) have typically been unsuccessful in other, albeit different, searches and are low cost for the search firm. Candidates from original research and new talent pools can offer benefits, but require an investment.
What percentage of clients’ “first choice” candidates have been hired? Clients want their first choice candidate to accept the offer but it doesn’t always happen, often as a result of misaligned expectations. Expectations of both clients and candidates should be effectively managed through the process so there are no last-minute surprises.
What percentage of your assignments in the past three years has resulted in hires? Research indicates that approximately 40% of retained search assignments do not result in a hire. The typical retained search fee model is not based on success and there is a risk that there could be no return on investment. Unless a client cancels a search, they should expect a 100% completion rate.
It would behoove anyone looking to hire a search firm to do their due diligence. After all, going through a new hire is challenging enough as it is. Asking – and securing – satisfactory answers to the preceding questions will help you retain a search firm likely to meet your unique requirements, giving you the edge you need to move forward.
The AESC’s (Association of Executive Search Consultants) 2011 report Senior Executive Recruitment Survey indicates that the vast majority of search firm clients are not well served.
If my clients felt this way about they way I served them I would be out of business!
Here is a synopsis of their findings.
Percentage of clients indicating that they were “Highly Satisfied” on the following dimensions:
Cost/Fee Structure 5%
Speed to First Slate 19%
Diversified Slate 20%
Market Intelligence 20%
Broad Slate of Candidates 24%
Dedication to Client 28%
Quality Slate 33%
High Professionalism 34%
Geographic Reach 36%
Assessment and Consulting 36%
You can download the full report here……AESC2011HRSurveyReport
1. The typical search firm “leverage model” does not serve clients or candidates well.
Most search firms use some version of a “leverage model.” Partners get the business and interact with clients, while junior researchers contact candidates who are then screened by consultants. This model is fundamentally flawed.
Typically, researchers do not attend client briefing sessions and therefore, their knowledge of the organization and its needs depends on the information provided by the partner. If the researcher does not understand the organization and the nature of the business problem, then the probability of developing a solution is remote. Even if the researcher attends the client briefing, he or she frequently lacks the expertise, experience and judgement to really understand the business problem.
In the research process, junior researchers are often unable to engage senior, high-potential candidates, present the opportunity in a compelling manner and, answer even basic candidate questions. In addition, the client’s image within the marketplace can be tarnished by the way in which the search firm represents the client in the field.
2. The search firm’s economic model drives professional fees higher and extends time frames.
Expensive real estate and infrastructure create significant overhead burden for executive search firms. Firms are compelled, by their economics, to generate a revenue stream adequate to cover their fixed costs as well as make a profit, which drives the necessity for both elevated fees and high assignment flows.
Search firm resources are often overextended, which can delay the completion of assignments. Researchers and consultants are often managing six or eight assignments simultaneously, with each project receiving less than one full day’s focus per week.
3. Retainer fees neither balance risk nor contribute to building a true partnership.
Retainer fees force the client to accept all of the financial and performance risk in a search project. It is fundamentally unfair to require the client to pay one-third of professional fees on contracting, and the balance before a hire is made, particularly if a hire is not ultimately made.
The retainer-fee structure does not contribute to building a partnership. A better model reflects the fundamental value behind any partnership, the sharing of risk and rewards.
4. Compensation-based professional fees are unrelated to the complexity of a search assignment, drive fees up and create a conflict of interest.
Basing professional fees on the compensation of the successful candidate does not reflect the complexity or difficulty of the search assignment. In addition, including signing bonuses and other similar payments in the calculation of search fees defies both logic and fairness. Converting fees to an estimated hourly rate results in a charge rate that exceeds that of senior partners in even the most expensive law firms.
Basing professional fees of the search firm on the compensation of the successful candidate creates a potential conflict of interest. Pure economics could foster the promotion of the most expensive candidate, regardless of the availability of comparable or superior candidates at a lower compensation level.
There are innumerable estimates and theories regarding the real costs of a mis-hire – a hire that does not achieve key business goals, is terminated for performance reasons, resigns etc. I came across this work sheet developed by Sales Benchmark Index which draws on work done by Topgrading.
I do not agree with all the inclusions – i.e., “Maintaining the person in job” as those costs would be incurred for a highly successful hire. The cost of “Mistakes/Failures…” is also difficult to calculate. I think it is more interesting to think of the opportunity costs incurred. Research by McKinsey indicates that:
High performers deliver significantly better results than do average performers ―
- 67% increased revenue in sales roles,
- 49% increased profit in general management roles, and
- 40% increased productivity in operations roles.
Hence the opportunity cost of a mis-hire in a sales role is 67% etc.
I hope you find the worksheet interesting and of valud.
Access the worksheet….
The war for management talent is intensifying dramatically. Last year, McKinsey updated a 1997 study in which researchers surveyed 6,900 managers (including 4,500 senior managers and corporate officers) at 56 large and midsize US companies. The update found that 89 percent of those surveyed thought it is more difficult to attract talented people now than it was three years ago, and 90 percent thought it is now more difficult to retain them. Just 7 percent of the survey’s respondents strongly agreed that their companies had enough talented managers to pursue all or most promising business opportunities… [Read the Full Article]
Typical practice in the executive search industry is for search firms to provide a 6 or 12 month guarantee on the candidate hired. If the individual hired is terminated for performance reasons or resigns within the guarantee period the search firm is usually obligated to replace the individual at no additional fee. In essence, the search firm bears all of the performance risk.
However, the client is the ultimate decision maker and has the right/abilty to reject candidates and require the search firm to continue presenting candidates. Is it equitable, in this situation, for the search firm to bear all of the risk?
What about a situation in which the search firm presents a slate of candidates all of whom meet the requirements for the role. The firm believes that one of the candidates is superior and recommends that the client hire that candidate however, the client hires one of the others. Should the guarantee apply?
We recently successfully completed an executive search assignment for a Partner for a mid-size law firm. In the course of this assignment we spoke to approximately 250 candidates whose backgrounds, competencies and experiences matched the requirements for the role before we found an outstanding individual with whom the firm’s Employee Value Proposition resonated.
The challenge was that the value proposition, while robust and attractive, appealed to candidates’ longer term career interests, motivations and the culture in which they desired to work.
These drivers can be inferred based on current roles – individuals with mid-sized, collegial, entrepreneurial firms offering a good work/life balance are presumably there because that is what they want. In other cases, it cannot – where someone is may not reflect where they want to be. You don’t know what you don’t know.
Similar experience in other executive search assignments reinforces the conclusion that, in all likelihood, there are excellent candidates for every role and situation – it sometimes takes a lot of work to find them.
One of the key steps in any recruiting process is the development an “Employee Value Proposition” –an ‘EVP’– that answers the question “Why would a talented individual be interested in this role and organization?” for candidates. Think of this as the “pitch” presented to engage candidates in the recruiting process.
Why do you need this? Because top caliber candidates are not usually drawn to opportunities that do not offer clear benefits that resonate with them. In addition, combined with the competencies already defined, the EVP is an integral component in the development of recruiting tactics.
Different types of opportunities appeal to different people:
1. “Go with a leader” candidates seek opportunities with a recognized industry leader;
2. “Big risk, big reward” candidates are risk takers and seek above average returns;
3. “Make a difference” candidates seek an inspiring mission and exciting challenges; and,
4. “Lifestyle” candidates want a balanced lifestyle, convenient geography and compatibility with their boss and team.
A start-up likely won’t appeal to groups 1 and 4 and you probably wouldn’t want the 4s anyway.
Group 2s are likely early in their careers, don’t have significant financial responsibilities and can afford to take a risk in the short-term for long-term benefit. Group 3s may well be in their late careers, have financial security and are now looking for an opportunity to have an impact and make a difference. Group 2s and 3s are the ones you should go for to get your startup off to a strong start.
Research indicates that the top factors that motivate talent are:
• Values and culture;
• Leadership quality/good team;
• Exciting challenges;
• Inspiring Mission;
• Freedom and autonomy; and,
• Career advancement and personal growth • Differentiated compensation
The EVP targets candidate segments and should address the above factors to motivate those people to join your startup.