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How to Choose an Executive Search Firm

Receive our 8 page “How to Choose an Executive Search Firm” brochure. Designed for companies seeking an executive search firm service.

Reaching out to an executive search firm often plays a key role in answering this question. Executive search firms are talent acquisition specialists who invest their entire careers focused on helping their clients identify, attract, and hire the most qualified individuals for their unique organizational needs. But how do you choose the right search firm for your organization?

The firm that you select will be a direct reflection of your company and brand. Get to know the principals, their level of professionalism, and to the degree possible their reputation in the business community at large. These issues will directly impact a search firm’s ability to gain access to high level professional and executive talent…not to mention encourage positive (or negative) branding for your company.

This is definitely not a “one size fits all” answer. The following 14 Questions are offered to help guide your decision making process:

What is the search firm’s process?

There are two main considerations here. First, how do they qualify the position in question? Do their methods demonstrate a clear ability to flesh out the complete nature of the position and the culture of the organization? Second, how do they manage the search process itself? How will they identify, access, and attract the most qualified candidates for the position? Will the search firm rely primarily on a database or job board advertising or will they actively recruit passive as well as active talent for your specific needs.

Will the search firm be a “credible ambassador” for your organization?

The firm that you select will be a direct reflection of your company and brand. Get to know the principals, their level of professionalism, and to the degree possible their reputation in the business community at large (ask for client references). These issues will directly impact a search firm’s ability to gain access to high level professional and executive talent…not to mention encourage positive (or negative) branding for your company.

Who will actually be handling your search?

Will your search be handled by the best people for your particular project and will your project be given a high level of priority? Will you have direct access to the recruiters handling your search? What are the professional credentials of these recruiters?

Do the consultants understand the real strategic, operational, and financial importance of the position and possess the skills and experience necessary to recruit for that opening?

Does the search firm demonstrate a knowledge of your organization, its business units, products and services, corporate strategies and outlook. Do they know the competitive forces that you face and the type of talent that would give you a competitive advantage in the marketplace?

Does the search firm have knowledge of the industry and type of position in question?

Knowledge of the industry and the skills and experience necessary to excel in a position are critical to search success. You will also want to know that the firm has the ability to leverage a well-established network of contacts.

Does the search firm offer qualified professionals who can objectively assess a candidate’s soft skills?

Research on 181 jobs at 121 organizations worldwide showed that two out of three abilities vital for on-the-job success were emotional competencies — self-awareness, social awareness, adaptability and a talent for collaboration (Goleman, 2002). A search firm should have individuals who are professionally trained to evaluate talent for the presence of these skills.

What are the firm’s metrics related to typical benchmarks for search projects?

Ask about the average time to compete a search, often referred to as “average time to fill.” How often can you expect progress reports? How long will it be before you can expect be begin interviewing the first candidates? What percentage of searches does the search firm actually complete? What is the search firm’s retention rate (stick rate) during the first twelve months following placement?

What kind of service can you expect after the completion of the search?

Post-hire integration of new hires into an organization is greatly facilitated when a search firm continues to follow-up on placed candidates. A good firm will stay in touch with placed candidates, helping to prevent and if necessary troubleshoot problems that often arise in the first 30 of starting a new position.

What is the “guarantee period” offered for new hires?

What happens if a new hire quits shortly after being hired? Most search firms offer a replacement guarantee if a new hire quits within a specified period of time following their employment. Also, how long does the search firm commit to work on a search?

What is the current search load of the firm’s consultants?

It is a rare recruiter that can work over 5 searches at a given time without the quality of their search work beginning to decline. Be sure that your consultant can give your search the time that it requires. Bear in mind that this is impacted by the level of service that you are buying. A retained search will be given a higher priority than a contingency search.

What are the fees and their policy on expense reimbursement?

Does the search firm offer a clear fee arrangement in writing? Which expenses will be billed separately? Are billed expenses really a hidden profit center for the company? While a search firms rates should be competitive, be wary of selecting a search consultant based solely on the quoted rate alone.

Does the company utilize any structured forms of retention-variable analysis to qualify potential candidates?

Professional search firms should not only qualify candidates based on skills and experience but also screen applicants using factors known to influence retention. Do they communicate regularly with the candidate during the post-hire integration phase to assist with retention? Research has found that the cost to replace an employee is normally 120-130% of that employee’s annual compensation. You want to avoid a candidate’s early departure if at all possible.

What “Off Limits” policies would the search firm face when seeking to recruit the talent that you seek?

Large search firms or those who are overly saturated in a singular industry often cannot freely source the talent that you seek because of their off-limit restrictions. Off limit policies simply means that it is unethical for the search firm to source candidates from existing clients. A good rule to be sure but too much exposure in a particular industry can limit their effectiveness if asked to recruit for your organization.

The Two Types of Executive Search Firms & Fee Structures

There are two types of executive search firms to consider when selecting a firm to fill a leadership position in your company — retained executive search firms and contingency search firms. The differences between contingency versus retained executive search firms lie in:

How they conduct their searches
The fee structure when conducting a search
The incentives behind what quality of candidates the search firm provides for you

Here we have outlined the two types of executive search firms and corresponding fee structures.

Contingency Search Firms

Contingency search firms are only paid once you hire a candidate they have presented to you. Thus, their pay is contingent on selecting candidates to fill positions as quickly and efficiently as possible. They also tend to take on as many clients as they can to maximize revenue. Therefore, contingency search firms typically direct their efforts towards mid- to lower-level positions.

These firms will charge roughly 20-30% of the candidate’s first year salary. But because they only get paid once the search is completed and the candidate is hired, companies must keep in constant contact with the search firm and express a strong desire to continue through the entire process.

Retained Executive Search Firms

Retained search firms work hands on with the company, developing a close relationship to conduct a focused search for a candidate over a specific period of time. Retained executive search firms usually:

Charge more than contingency or container firms
Specialize in placing upper-level management, C-suite positions, and roles with where deep, very specific qualifications (both professional and personality qualifications)
Invest valuable time into their client companies, making sure to align the company culture, values, and purpose with the best-fit candidate(s)

Generally, retained search firm fees are about 30 to 35% of the estimated first year salary for the candidate hired. With retained executive search firm fees, payments are typically made in three installments:

The first payment, one-third (1/3) of the total fee is paid to begin the search.
The second third is paid 60 days into the search.
The final third is paid once the chosen candidate is hired.

This retained search fee structure is typically optimal for both the client and the executive search firm because:

Both are fully committed to the process.
Both are in strong partnership to find the right leader for the company.

Conclusion

The two types of executive search firms exist to provide organizations with different needs for filling positions. Retained firms conduct higher level searches to find proven executive (VP, C-Suite) leaders that exemplify the cultural alignment and proven track record the business needs to drive results.

About Cowen Partners Executive Search

At Cowen Partners, we stand at the forefront of the executive search industry, empowering companies to thrive and excel in their growth, revenue, and market presence. We specialize in identifying exceptional leaders and placing them in key positions to drive success. Our team of seasoned executive recruiters collaborates with organizations of all sizes, encompassing both public and private enterprises, pre-IPO ventures, and non-profit entities. Through a meticulous and discerning approach, we unite handpicked candidates, with companies in pursuit of the most exceptional executive talent, representing the top 1%. With the support of our experienced senior partners, we execute a diligent and efficient executive search process, ensuring leadership placements within a remarkable six-week timeframe.