Why Use Executive Search Firms?
It is often said that senior-level executives can “make or break” a company. There is no doubt that in an organization, every employee holds importance. However, a bad CEO or other executive can quickly take the company off-track and send it into a tailspin, which is why it’s extremely important to select the right candidates for these positions.
Recruiting senior-level executives is a tough, labor-intensive process that requires a specific set of skills and expertise. For this reason, many companies tend to opt for executive search firms.
What Are Executive Search Firms?
As the term suggests, executive search firms are specialized recruitment firms that help other companies find the right candidate for executive, senior, or other highly specialized positions.
These firms utilize their wide range of personal contacts in different industries along with their comprehensive knowledge about these industries to help their clients select the right candidate for the job. They also conduct detailed interviews before presenting the short-listed candidates to their clients.
There are two types of executive search firms: retained and contingent.
Difference Between Retained and Contingent Executive Search Firms
Retained executive search firms work proactively on behalf of their clients. They are “retained” exclusively to search for and provide candidates for their client. Retained search firms are contractually bound by the terms and conditions set through mutual understanding and are expected to assist their clients throughout the recruitment process. Their work begins by creating an enticing job description that will attract the right individuals and ends with shortlisting the best candidates.
On the other hand, contingent search firms work reactively. Their main focus is around selecting the right candidates with the best CVs from a database or advert against certain keywords in the client’s job description. In other words, their work revolves around shortlisting the CVs that match the job description and forwarding them to the client. Contingent search firms are under no obligation to produce guaranteed results.
There is also a significant difference in the structure of payment for contingent and retained search agreements. Contingent search firms work on a “no placement, no fee” basis, whereas retained search firms are paid irrespective of how successful their search is. Similar to a CPA or a lawyer, retained search firms are paid an upfront retainer as compensation for research and due diligence.
Why You Should Use Executive Search Firms
Seattle executive search firms can charge as much as 33% of the annual compensation of the executive, which is quite a lot, given that there are many other cost-effective ways to hire. So why do companies use executive search firms in Seattle and other parts of the world?
For starters, the cost of a bad hire can be much more than executive search firms. According to estimates, the “cost of a bad hire” can equate to 2.5 times the salary of the executive. Since senior-level executives receive a good hiring package at onboarding, a bad hire at c-level (or any other strategic or senior position) can have a grave impact on the company’s direct costs.
And we’re not talking about financial costs only; bad hires can cost the company strategic, reputational, and cultural damage as well. Just a few months of bad leadership can make a company go from a boom to a slump. Thus, it can be said that bad hires are expensive – in both monetary and non-monetary terms. While no recruitment process can guarantee positive results, using an executive search firm can increase the chances of success significantly.
Usually, companies do not have the internal resources, a good network, or most importantly, the right evaluative skills to select the right candidate. In contrast, executive search firms are equipped with these tools which give them an edge. As a result, they can identify and select the right candidate for the position.
By using an executive search firm, the company does not only decrease the odds of making a wrong choice, but they can also focus on more important internal and external issues. Some companies may even use executive search firms to hire from their competitors indirectly, which they wouldn’t be able to do otherwise.
The Bottom Line
Be it a small or a large organization, using an executive search firm can reap positive results for both. If you’re planning to use an executive search firm, make sure you select the one that has experience in placing candidates in similar positions and contacts in the industry you’re operating in.