Executive or retained search firms work with companies that are in need of executive level talent. They typically focus at the VP, C-suite, and Board level. Retained recruiters are also better able to reach passive candidates. Thus improving the chances of finding a perfect fit for the opening. These searches are often kept private to protect both the executive search firm’s clients as well as the candidates.
There are three ways companies typically go about filling an open role. The first is to use their in-house HR team. The second is to use a contingency firm. Many companies will use both of these avenues in conjunction. The third is to use a retained or executive search firm.
In-house searches are fully managed by the company. They will create the job listing, post it on their website, social media, and job listing sites. They then filter through all of the applications and determine who they should follow up with for interviews. After the interviews, they run background checks, contact references, and negotiate the offer to a final candidate. This method is time consuming, can take focus off of other human resources projects, and is typically used for entry level to middle management roles.
A contingency recruiter works with companies to fill specific roles or within specific verticals where they have an expertise. These recruiters have a network they can tap into to identify higher quality candidates than the company would be able to find or attract on their own. As the name implies, they work on contingency. They don’t get paid unless they place the candidate. If they do place the candidate, they typically earn 20% of the candidates first year salary. Of note, once they present their candidates, the rest of the hiring process still resides with human resources. Contingency recruiters are most often hired to manage middle management searches.
Executive search firms operate very differently from the other two methods. As noted above, executive search firms are brought in by companies that have executive leadership openings at the VP, C-suite, and Board level. In some larger organizations, they may also be asked to find Director level candidates or to fill specialty roles.
Executive search firms are paid at the outset of a search and are working exclusively on behalf of their client to fill that search. Hiring an executive search firm is a serious decision for a company. In effect they are bringing on a true strategic partner. The recruiter will work closely with their client to craft the job description, understand the company culture, and develop a process that ensures their expectations are being fully met.
Executive recruiters have built extensive networks of top candidates. Some recruiters won’t accept a candidate that isn’t passed along to them through an existing contact. These references are how they are able to continue to build their “rolodex” with confidence. The other key to an executive recruiter’s network is the passive nature of most executives. At this level, there are fewer open positions and fewer executives actively looking. Most candidates are employed and only open to a change if it meets their personal criteria. This could be title, responsibilities, compensation, or location among many other factors.
The best executive search firms also work with clients beyond the offer being accepted. They will work with the candidate through an onboarding period, typically 90 days. This helps ensure the newly hired leader is able to assimilate into the new culture they are joining.
Working with an executive search firm is an investment. A single search can be in the six figures in total compensation. Companies are willing to make this investment as it saves them significant internal resources, and the cost of making a poor hire can be 10x as much in lost productivity, employee turnover, and conducting a new search.