Choosing a Search Firm
The following is a guide for decision-makers at corporations, universities and large nonprofit organizations who are considering engaging a search firm to attract and recruit experienced executives for an important management position.
Choosing a Search Firm Checklist:
- Professional function specialty (such as finance, corporate communications) or Specialty Industry (such as retail, energy)
- Level of positions the firm typically manages (senior-level, mid-level)
- Average length of time to present the finalist candidate
- Candidate performance guarantee
- “Off-limits” restrictions – a reputable firm will never recruit away the candidate they placed with a client organization, and will not approach other individuals at that organization for one year or more after the conclusion of the last search conducted
Important Questions to Consider:
- Do the executives and associates at the firm have career experience in the professional function for which the search is being conducted, as opposed to experience solely in recruiting?
- Who does the work? Are senior-level managing consultants involved throughout the search, or is the work done by junior associates?
- How many assignments is each search consultant currently managing?
- Is the research done in-house or out-sourced?
- What is the firm’s diversity track record?
- What is the firm’s reference-checking process?
- What companies are currently on the firm’s off-limits list?
Retained vs. Contingency:
The most significant difference in methodology between retained and contingency search firms is how each type of firm approaches candidate recruitment. Retained search firms conduct original research and aggressive outreach to find the most qualified candidates for a position, and will work on a search for as long as it takes to find the right person.
Retained firms proactively attract and recruit top executives who are satisfied in their current positions and must be approached and enticed to consider another opportunity. Retained firms typically handle more senior positions and present only the best-qualified candidates who have been interviewed in person and vetted.
Contingency firms primarily review resumes from their existing database of people who are looking for work, and provide those resumes to organizations that might be a match, or utilize job postings to attract job-seekers. Contingency firms are often best called upon when an organization needs to make a hire on short notice and is content that most of the candidates presented will be active job-seekers. Often the hiring organization does the in-depth interviews themselves to determine pertinent qualifications.
Firm Compensation:
Retained search firms are paid a professional services fee, calculated as a percentage, typically one-third, of the total first-year cash compensation for the position, including base, target bonus and sign-on bonus. The retained fee is split into three increments and paid over the first three months while the search process is underway. Contingency firms receive a percentage of first-year compensation as a flat fee when the selected candidate is hired—the fee is contingent upon placement of a candidate.
Exclusivity:
Retained search firms generally manage mid-to-senior-level positions, while contingency firms handle low-to-mid-level positions. Retained firms work on an exclusive contract basis with their client organizations, meaning they are the only firm working to fill a specific position. Contingency firms generally do not have an exclusive contract with their clients, and may compete with other contingency firms to fill a position.
Performance Guarantee:
A retained search firm commits to successful completion of the search no matter how long it may take to find the best executive for that specific position. A retained firm will typically guarantee a candidate’s performance for six months to one year—or replace that executive at no additional fee. A contingency firm is under no obligation to complete the search and often does not guarantee the placed candidate’s performance.
