It’s tough to play well without knowing the rules. The employment game is no different: jobs may not always go to the best, but rather the best who know how to play the game. For those people who are in roles where positions are usually filled by companies using search firms, knowing how "executive search" works, particularly knowing what to do and what to avoid, can propel you throughout your career.
Why is this important to you?
In the world of employment search there are rules and common practices as well: knowing what they are, how things usually get done, and the pitfalls to avoid can assist you in being the best candidate you can be – and avoiding being the proverbial candidate from hell. Knowing how search firms work can also tip you off to how enthusiastic and serious, or how ho-hum, to opportunities that come your way.
In an earlier piece Ten Secrets Headhunters (Usually) Don’t Tell You many of the hidden or unsaid parts of the search firm – candidate world were outlined. This piece, and a following post, cover information that’s known if you’re in the business, not generally known if you are not.
Following that post, here are the key things you should know BEFORE a headhunter calls. As always, take these observations with an 80 / 20 grain of salt and note that these practices apply to the United States. Employment firm practices vary around the world, and the local practice may be different. In the UK, for example, historically all candidate referrals came through some sort of personnel / search firm agency. While that practice is changing, it’s still a different legacy than the direct hire AND search firm model used in the USA.
Two types of search firms
There are two basic flavors of search firms that get paid to find people to fill positions (and repeat from that earlier post: search firms do not get paid to help people like you find jobs, they get paid to find people like you who can fill the jobs the search firms are working) and they are not “good” and “bad.”
Those two types of search firms are retained firms, and contingent firms. The differences between the two can be great or minor depending on the search firm, the search executive(s), how the employers uses search firms, and the nature of the role. [Note: there are hybrids as well, such as “container” firms.]
Retained firms (hence the name) are paid a fee by employers to fill a position regardless of whether the search firm actually places a candidate for the role. Standard fees – sort of like hotel room "rack" rates – are typically 33.3% of first year’s total compensation (base and any bonus, and sometimes base and no bonus) of the candidate they place. Fees are sometimes discounted to anywhere from 30% to 25% depending on things like the volume of work done with a client, how well the employer negotiates, or how "eager" the search firm is to get someone’s business. At the higher compensation levels fees may be capped to search firms: a $2M candidate placement generates the same fee as a $3M placement.
Retained fees today are typically paid at 1/3rd of estimated total fee at commission of a search, 1/3rd around 30 days later, and 1/3rd around 60 days after commission of the search engagement. Administrative and office fees, frequently as a small percent of the engagement fee, may be added into the mix as well.
The larger national / international retained firms such as Heidrick & Struggles and Korn & Ferry are “leveraged ”: senior staff have junior and/or less experienced staff working for them to help on searches. These junior staffers typically handle initial sourcing working (talking with people who might be or might be a source to surface candidates) and talking to and qualifying potential candidates for referral to their senior associates for further screening.
At a senior level the sourcing (initial identification of possible candidates) tends to be more refined, and may be done mostly by the senior associates frequently with titles like "partner", "managing director", etc. Junior staff tends to be titled “associates”, and intermediate staff something like “senior associate” or “principals.”
A couple of the other international blue chips like Russell Reynolds and Spencer Stuart are a little less leveraged and senior staff may do more of the initial sourcing and screening. For senior searches (CEOs, EVPs, Presidents, etc.), even in more leveraged firms, senior staff tend to handle most of the heavy lifting and candidate screening.
Small boutiques have far fewer staff and the legwork of sourcing and screening typically falls upon the principal(s) rather than junior staff since any junior staff may be far and few between.
Retained search firms, after some preliminary screening, typically work with employers to sort through, based on their initial screening, who should be further vetted by in person interviews by the search firm. These vetting / biography recap summaries typically provide employers academic and work background information, and a high level sense of a potential candidates work history. Contingent search firms rarely take this step: the nature of the fee arrangement incents contingent firms to put as little up front time and money as possible since there is no known pay-off.
After the vetting conversation(s) with the client employer, search (again: almost always retained) firms interviews those candidate(s) identify as worth speaking to in person. Those interviews typically involve the search person traveling to visit the candidate, though I’ve had first hand experience where I’ve been flown in as a candidate to see the search firm exec.
A second vetting review between the employer and search firm, usually complete with a more detailed and personalized candidate work-up including salary history, job background with accomplishments and challenges, and a read on candidate personality, occurs and decisions are made as to which candidates appear to merit interviewing with the employer, and potentially in which order candidates should be seen.
A common experience at a firms like Barclays Global Investors, in part based on travel schedule and availability, was for the hiring manager and someone like a senior recruiter managing the search to interview candidates – usually in person but sometimes over the phone – as a first employer screen following search firm vetting. If candidates merited further interviews, they get scheduled to be interviewed at a later date by more company managers, and seen again by the hiring manager and perhaps someone like that same senior staffing person. (The most times I knew of someone be interviewed at BGI was 28 interviews over multiple visits, and the candidate – who was from Tacoma – ended up declining an offer, claiming their spouse was not ready to move to the San Francisco Bay area.)
Retained and contingent firms will frequently have "no touch " provisions with prior clients: these "I won’t solicit, recruit, or interview anyone from your firm" agreements can be as broad as an entire company or limited to specific divisions or even functions within divisions. These no touch arrangements can also be based on the quantity of search work done for a firm. If you’re a great candidate, but you’re in a company covered by a no touch, you are unlikely to ever be brought up for consideration unless the employer engages with the client employer directly.
One reason why some firms choose multiple search firms is so they can work around restrictions their preferred firm might have with targeted companies. Another reason why some firms, such as when I was with McKesson in the 1990′s, use more than one search firm is to try to build up "no touch" positions with multiple search firms, in essence "moating " their employees from being contacted for searches. In general it would be considered unprofessional and unethical for retained search firms to recruit from current clients.
Contingent firms may have fewer constraints on their sourcing. Retained firms usually work on an exclusive basis (e.g. no other firm has been engaged on the search). From rare time to rare time you may see firms partnering with other search firms on a search, usually at a senior level, and usually as a way to work around no touch provisions.
Contingent search firms have some similarities and some key differences from retained firms. The most significant is that contingent firms get paid when and if they place a candidate (hence the name contingent). While there is no hard and fast rules, contingent firms tend to be involved with positions ranging from $50,000 to somewhere in the neighborhood of $150,000-$200,000. Retained firms generally are working in the space of approximately $150,000 and north to millions of dollars.
Contingent fees tend to be structured differently than retained search firms: more fees in the range of 20-25% rather than the higher ranges generally of retained firms. A search for a roles where contingent firms are involved is frequently commissioned to multiple search firms, and it’s not unusual (note I didn’t say effective) to direct two or three firms to handle get commissioned for a search and add others if there is not movement on the search. While many employers discourage the practice, some contingent recruiters will send in uninvited resumes for positions – open or not. Should a candidate interview and be placed there can be a scramble for who actually brought the candidate forward. Not your (the candidate’s) problem but a pain in the bottom for employers.
It’s also not unheard of for a contingent recruiters to “resume trolling ” – collecting resumes to stockpile from candidates when no search is actually involved.
As noted earlier in this post, way fees are structured generally incent contingent firms to spend less time on a search than retained firms since time spent on searches – which may go nowhere – because it means greater cost with no return. While contingent firms have a bad rap as “paper mills”, sending candidates resumes in for any job for which they might be qualified, there is a bias in the way most employers work with contingent firms (engaging multiple search firms at the same time) to encourage that sort of resume mill behavior.
While it would be rare (I can’t think of a single incident in 30 years in the people business) of a retained firm not interviewing a candidate before sending over their paperwork to an employer, many contingent firms engage in that practice.
Cut to the chase
Retained firms generally move slower, are more thorough in candidate interviewing and sourcing, and command greater fees than contingent firms. Staff tends to be longer tenured, and on average more professional.
Contingent firms tend to be more nimble, will generally have a less depthful sense of the candidates they’re submitting, and will perform far less handholding service (bios, candidates summaries) for the employer. They can also frequently be more nimble, turning around searches quickly but not having the longer endurance (one the candidate pool is gone, it’s gone) of a retained firm.
Next: What to Do WHEN the Headhunter Calls