How to Hunt Headhunters!

By Steve McKinney
President, McKinney Consulting, Inc.

"Secrets of Executive Search" Series In Getting What You Want , I wrote about digging deep to find out what you really want in a hire or in a career/job. This time, we’ll extend that idea to finding out how to take that new knowledge, once you have it, and go shopping for the right headhunter.

Executive search service models are designed for producing a specific product. The Retained Executive Search model provides one type of product while a Contingency Recruitment model provides another. Contrary to popular belief you don’t get the same results with the different models. Treating them both the same and hoping that they will produce the desired output just won’t work. Truly understanding what your needs are, and matching them to the kind of service your provider offers is crucial to getting the winning hire you desire.

Of the various shades of service flavors offered in the market, two opposites stand out – retained search and contingency search. These two service offerings are different enough that they can be called opposites. Like everything else in life, both have their advantages and disadvantages. Therefore, both types of services have a unique product and a unique customer that can benefit from them. The only problem comes when, by mistake or lack of knowledge, a retained search-type customer chooses a contingency-type service and vice versa. Buying one service and thinking you are getting the other one is a major mistake that will lead to sub-optimal results for your search. The main reason why mistakes of this type are made is because of lack of awareness that differences exist among services that providers offer, and just how deep and fundamental the differences are.

The differences go way beyond method, criteria, and timing of payment, though those are the first things that should tip a buyer of executive search services off to what kind of service he or she is buying. The method of payment has a lot to do with how the work will be done and the kind of results that should be expected. When a company hires a retained search consultant they are paying for the entire process of conducting a search, while a contingency recruiter does not get any money in advance and is not guaranteed any money at all. This is important because it determines just how the service provider can afford to attack the problem of finding your next leader.

Retained Search
Retained search services are generally for the very committed hirer. When a company knows it wants a leader of top quality and is ready to do whatever it takes to get one, it should go to a retained search service provider. Retained search consultants work on exclusive basis and pre-evaluate all candidates for a position.

Some of the key issues to be aware of include:

• The most qualified candidates are required and the company expects to have to fight for the best. There may be a war going on in the marketplace for scarce talent, with these particular skills. A lot of negotiation is going to be needed. A lot of advocacy on the client’s behalf. A lot of confidentiality and sensitivity to the candidates’ feelings.
• The organization wants a dedicated recruiter to conduct the search.
• The hiring organization wants an independent and objective third-party to search, and qualify candidates via face-to-face interviews before submitting the short list of candidates to them. It wants the recruiter to vouch for the candidates being recommended.
• The hiring organization wants to compare their internal candidates to those outside the company.
• The hiring company needs talent from another company, and may even know who that person is, but does not want to approach them directly themselves.
• The hiring organization wants professional recruiters skilled at and persuading talented leaders to consider their company. It wants the recruiter to go to bat for the company.
• The hiring company wants to build a close relationship with the recruiter as a strategic partner in the war for talent.  In retained search this becomes possible because the service provider is able to spend more time and energy on the client’s projects as there is no inherent financial danger in doing so.
• The hiring client wants to approach prospective candidates on a confidential basis.
• The hiring organization expects 6 months to 1 year guarantee on candidate placement and another search conducted for free except for approved expenses.
• The search fees globally range from 30% to 35% generally.
• Success rates are usually 90% plus.

Contingency Search
Contingency search emphasizes risk management, cost minimization, and speed. Because fees are only paid in the event of a success, contingency searches are less risky and allow for exploratory-search situations. Theoretically, because contingency search fees are only paid on success, the goals of the hiring company and he recruiter should be well aligned.  The client can employee more than one firm to search, therefore casting a wider net and enjoying greater power over candidate choices presented. Furthermore, the hiring client needn’t investigate the background of the service provider too much, since the risk of financial and business loss is low.

Unfortunately, the client’s increased power in hiring a contingency recruiter must be balanced somewhere else in the equation. This balancing usually occurs by a twisting of the recruiter’s incentives.  The incentive created is not to find a needle in a haystack, but to offer as many candidates as possible, as soon as possible, in the hopes one of them turns out to be jewel.  Commitment to finding a few great standout candidates early in the process is financially very risky.

If the risks of partnership for a client are zero, then necessarily the risks of partnership for the service provider are infinite. The contingency providers know this, and don’t see engagements as partnerships.

Issues to be aware of for contingency search services include:

• Usually several contingency firms receive the job spec, and therefore do not (can not) spend time getting to know the client organization.
• Non-exclusive and receives fees only if their candidate is placed.
• Fees range from 20 to 35% and candidates are more junior with salaries usually less than 75K.
• Usually focuses on active candidates seeking new jobs and only within their own database. Focus primarily on candidates actively in market & seeking new   employment.
• Works with a multitude of clients and positions so strategy is a shot gun approach in trying to forward as many resumes as possible as quickly as possible to many clients in hopes that one will hit and be hired. Typically conduct phone interviews only.
• Without a guarantee of payment for services performed, cannot afford to invest a lot of time.
• Requires considerably more client HR time in screening, interviewing and evaluating since contingency firm is under no obligation to produce results due to contingency fee structure.
• The client or the recruiter arranges interview meetings for select candidates.
• Compensation negotiations are usually done by the client directly with a candidate.
• Usually 30 to 90 days guarantee on candidate placement.
• Success rates are less than 50%.

Both types of services have their target customer, and both have their advantages and disadvantages. Find out what you need, and choose a recruiter with your eyes open. Happy hunting!

Steven B. McKinney is the founder and president of McKinney Consulting Inc., who has over 12 years of experience as an Executive Search Consultant & is a Certified Master Coach. He serves on several boards including the American Chamber of Commerce-Korea and was bestowed Honorary Citizen of Seoul in 2007. Prior to the establishment of McKinney Consulting he had over 10 years of senior leadership experience in athletic footwear company giants, Adidas, Reebok and Converse etc.

About McKinney Consulting: McKinney Consulting is an executive search firm (sometimes simplified as executive recruiters or headhunters) which has placed hundreds of bi-lingual middle-senior level executives for multinational companies in Korea & Asia and was established in 2001. McKinney Consulting is a member of the Association of Executive Search Consultants (AESC). In addition, McKinney Consulting provides behavioral-based coaching services with scientifically developed tools in coaching executives and businesses to excellence and success. McKinney Consulting coaches are members of the International Coaching Council. Also, McKinney offers Talent Management services such as the outsourcing of candidates and payroll services etc.