Hunting down tomorrow’s business heads

In today’s cutthroat corporate world, firms cannot afford to wait for the right candidate to turn up on their doorstep. They need to be proactive in their recruitment and that often means using the services of an executive search firm – or ‘headhunter’ as they are affectionately known. If you lose your CEO, a headhunter will be able to scour their global web of contacts to identify and approach the right person to fill the void. Traditionally, headhunters haven’t exactly had a good press. The role is often perceived to be sneaky and underhand – a shadowy figure using a cloak-and-dagger approach to hunt down and prize C-level executives and managers away from their current roles. Today, international companies are seeking the new breed of multi-skilled and multi-lingual executive with the experience and drive to make a difference to their performance. Headhunters are able to bridge the gap, for a fee, between their client and a passive jobseeker. There is no denying that they help fuel the continuing merry-go-round of executive appointments.

Headhunting firms have been around since the post-war economic boom of the 1940s and 1950s. As companies have grown into internationally recognizable brands over the years, the fledgling executive search industry has developed into a global recruitment machine to meet the demand for top leadership talent. Merger and acquisition activity, combined with office growth, has been the catalyst for the internationalization of executive search firms too. Also, technology today has helped with their work. The advent of telecommunications, including videoconferencing and globally accessible databases, allows search executives in different offices to share information and research. It is this research – often across international boundaries and industries – that forms the backbone of any executive approach. The industry average for the time it takes for a search to begin to the point where a CEO is firmly ensconced in his new chair is between 100 and 150 days.

“The headhunting market has dramatically changed over the last 10 years, and even more so recently,” says Denise Figueiredo, President of the Board of Directors at the National Human Resources Association (NHRA). “The labor shortage has created a very tense environment, as talent is in high demand. Techniques for searching for specific individuals have reached fever pitch, which is helped along by e-mail access. Gone are the days of simply calling up a company and asking to speak to the Finance Director or the Marketing Director, for example. It's more calculated now, and e-mail does give outsiders access more easily. There is an aggressiveness now that was not as pronounced in the past.”

Bounty

For unearthing the right candidate, the headhunter is paid between 25 and 33 percent of the hire’s first year compensation, which may include a signing on bonus, base pay and estimated bonus or commission. While search firms can be hired to fill a whole host of managerial positions, it is the top-of-the-tree jobs that they are mostly after because the rewards are so lucrative. Finding an executive for a US$300,000-a-year boardroom position could land the executive search firm over US$90,000. Headhunters are paid by clients on a contingency or retained basis. The firms that take on contingency searches only get paid when the candidate has been found and appointed the job. Meanwhile, those companies that work on a retainer usually get the bulk of their fee before the search is complete. Contingency fees are generally for lower level positions, while retainers are generally for the top jobs filled by the high-caliber clients.

Along with stealth-like vigor, headhunters need to possess a variety of skills to succeed. They need to be able to maintain an exceptional research database to identify the right candidate for the role they have been asked to fill. And this will mean finding back-up candidates in case the first choice refuses to switch jobs. A headhunter also needs discretion when negotiating with an identified target. He or she will not want word to get out they are considering jumping ship to take up a job with another company – possibly a rival. Also, negotiations can be longwinded and get bogged down in contractual red tape, requiring dogged determination to snare the preferred candidate. Today’s executive search consultants, as they prefer to be known, are well-educated professionals – often to MBA-level. Some will concentrate on a certain industry such as retail, telecoms or healthcare in order to deliver a search tailored to identify only those with the desired skills and relevant experience.
Above all, headhunters need to be determined and focused on meeting the client’s request.

Marc Lewis, CEO of executive search firm Leadership Capital Group, says aggressiveness is strongly linked with executive search. “Aggressiveness is no doubt a hallmark of our industry. Since we ‘sell’ counsel, access and star-power talent, those who aren’t aggressive look like the firms that were founded in the 1950s and 1960s.” Lewis adds: “There is no doubt that the senior executive level retained search business has ‘institutionalized’, which is good in terms of consistency since pricing and what a client gets for that price tends to be more highly influenced by the market-driving largest firms. However, consistency should not be compared with excellence. McDonalds may have a higher degree of consistency in how long and how similar a burger tastes, but Peter Lugers or even a mid-sized chain like Morton’s can deliver a higher quality product than the largest restaurant chains.”

Global reach

In today’s highly competitive world of business, firms don’t want good leadership – they want the best. This is why when a company approaches a headhunter to track down a CEO or a VP their searches span the world and across industry sectors. Sometimes a headhunter will be forced to jump on a plane and travel half way round the world to negotiate face-to-face with a potential candidate. This is backed up by Wendy Murphy, Co-Head of Global HR at executive search company Heidrick & Struggles. ”I have three searches at the moment where they have asked us to look globally. This global reach means that I am interviewing people in Asia, UK and Latin America. We have fairly sophisticated information systems here in order to give us a competitive advantage but I track people constantly. Sometimes you have to get on a plane instead of using a videoconference.”

Lewis echoes this approach. “The higher the level, the greater preponderance of broadly geographically focused searches. At the director level in a very large company, which might be a US$200,000-300,000 job, you are more likely to do a regional or national search. But at the vice president or C-level, virtually all of our assignments are now looking for characteristics such as international experience and diversity. These are the two things being emphasized a lot.”

With security a major concern in some parts of the world and the escalating violence in the Middle East, persuading executives to take up jobs abroad can sometimes prove difficult. Murphy explains: “They are a little bit more gun shy and focused on security. In the US and Europe we are finding that, because of concerns in the Middle East, there are some real concerns about the potential for attack and people in Europe and North America tend to be a little bit more reluctant to move to some of these top jobs because of this.” This international demand for company leaders has meant that firms are now trawling worldwide for a higher caliber of executive. For instance, a headhunter may be asked to find a CIO with al least 10 years of experience at an oil company and who is fluent in Russian. This is where a well-connected executive search firm comes to life. While finding that ideal candidate and backups who meet the criteria can be daunting, the rewards are handsome.

Murphy says headhunters need to know as much about their prey as possible to ensure a successful search. “I have built the reputation of knowing the top talent within the industry. I spend an enormous amount of time tracking and surveying these people. I know them, they know me and we are on each other’s radar screens. I use them to understand thought leadership and we are constantly surveying them.” Most candidates will feel flattered that a headhunting firm has them trained in their sights. This could lead to rash and regrettable decision, however. An offer of a better salary, greater bonus and more stock options may sound fabulous, but candidates still need to do their homework on the search firm to see who they have worked with and their achievements to date. After all, a move to another company, or possibly another country, is a huge step to take and one that could be deeply regrettable if not thought through properly. Executives need err on the side of caution and check whether what a search consultant is offering is true. After all, the headhunter is working for the client company – not the executive.

Negotiations

Finding the best approach when it comes to persuading a candidate to take a job offer has been fine-tuned through experience, says Lewis. “There are many tricks of the trade, most of which can’t be learned in a book,” he asserts. “Over time, through experience, we have seen just about every good and bad approach enough times that winning the best candidate mostly comes down to our ability to influence our clients to ‘do the right thing’ and make a competitive offer.” It seems that offers and counter offers between the headhunter’s client and the candidate can be similar to a high stakes game of poker. Both sides are negotiating the best deal for themselves without revealing the true value of their hand.

Lewis adds: “We don’t oversell since that backfires and doesn’t benefit our clients. Because our candidates are savvy, non-desperate evaluators of opportunities, most clients know or learn quickly that making a ‘lowball’ offer to a candidate, particularly a well-employed one, is almost guaranteed to backfire. Plus, even if a client ‘wins’ a candidate with a low offer, the client isn’t doing him or herself any favors since an underpaid executive is a vulnerable executive.”

On the other side of the coin, poaching top individuals from companies is not especially pleasant if you are on the receiving end. Not only have you lost a valued employee to apparently greener pastures, but you now have the hassle and expense of finding a replacement, as Figueiredo points out. “It is extremely frustrating for HR managers when a key staff member is headhunted out by a rival company. With the labor shortage that currently exists, replacing key people has become increasingly challenging. There is also the risk that the key person who was recruited out may give the headhunters information about other key individuals and put them at risk for being recruited as well. This can be devastating, not only for HR but for the entire executive team, and to the organization as a whole.”

Protecting the flock

Figueiredo has this advice for companies concerned that a headhunter may be about to swoop. “The most obvious way to prevent an exodus is to not publish your list of executives, directors and managers with titles and phone numbers or e-mail addresses. This way you stop outsiders from being able to identify who these key individuals are in your firm and how to reach them. Another measure is to have a well-developed talent management program in place that gives your employees career path options and opportunities within your organization.” Figueiredo is keen to stress that a valued employee is far less likely to be enticed away by a search firm. “When people know they are valued and can see the advancement opportunities within an organization, they are far less likely to consider going to the competition. It costs an organization so much in terms of money, lost time, loss of revenue and potential loss of morale and other employees when key players go to the competition. Employers must also make sure that their salary and benefit packages are attractive and in line with the competition.”

There is no doubt that large companies rely on headhunters in the same way that people need real estate agents to sale property. This is an industry that is set to be in even hotter demand as the US comes to terms with the labor shortage and increasing number of business leaders approaching retirement age. And when a determined headhunter comes knocking with an offer of riches and career advancement it can be hard to say no – but it does happen.

So how often does a candidate escape the clutches of a headhunter and turn down a client’s offer? Not very often, according to Murphy. “To be honest it does not happen to me very often. However, when it does happen it is very frustrating. You have to understand that you are dealing with human beings – it is art and not science. It is part and parcel of the work but when it does happen it is, of course, devastating. That is also why you use a search firm because they have back-up candidates. Any good firm has got more than one candidate in the queue.” Lewis is equally philosophical when broached on the subject. “This is part of the learning process. It happens quite rarely, but usually means either that a recruiter hasn’t done his/her job and gotten to know the client well enough that the recruiter allows him/herself and the client to be blindsided.”