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Executive Hiring Gone Rogue

by
Shanil Kaderali
Apr 8, 2013, 8:08 am ET

I came across a new and hard-driving CEO of a billion-dollar private retail company who loved a CTO candidate after the first meeting. The candidate came from a top-notch external search firm. The external recruiter worked with the CEO in past and was an industry expert in retail, but not with this new industry. The CEO championed the candidate to all his reports, fast-tracked the interview process with little HR involvement, and candidate was eventually hired. The CTO lasted two weeks.

Little to no HR involvement in selecting the best outside recruiters for your company; no defined process; and when headhunters are the strategy — that’s when hiring goes rogue. I’m going to talk about how to handle these situations.

There are great external recruiters who add tremendous value to an organization. I’m not advocating against retained search professionals. If external recruiters know their market, have the portfolio of top candidates, it’s likely a good call to use them. Effective external search recruiters could be an extension of your team. Have executive/outside recruiters as part of your strategy, but they can’t be your strategy, especially with no process involved.

An effective executive hiring strategy would include:

  • Assessing the situation
  • Building relationships with your leaders internally and understanding their needs
  • Identifying the best outside recruiters for your firm — true industry experts
  • Building a business case and the right process for internal executive recruiters
  • Getting buy-in on the process (and performance criteria if lacking)
  • Partner with your HR leaders to develop an effective development-oriented succession planning strategy

Compare the CTO disaster with a Fortune 100 health care company that has a VP in charge of executive recruitment with high-skilled executive recruiters. There is a defined process with a competency model for leaders resulting in less than 10% of all senior level hires from external search. The CEO respects this VP. This VP shares exploratory leadership candidates with other leaders and drives the process so that the executive hires are done very strategically and process is well-communicated.

Now, your team (or you) may not be ready yet for C-suite hiring, so a retained firm is a good idea. Confidential positions should require a retained firm. The talent acqusition team can make an impact at the director  & VP level positions, but needs the right resources and budget to be effective, and passion for hiring at senior levels. It’s a different ball game than volume hiring or even hard-to-find complex individual contributor or manager roles.

Assessing a situation requires being objective, even clinical. What are you spending? How successful are those placements at the companies? Be honest about your team’s skills in hiring executive level talent. They may want to tackle it as they’re ambitious, which is great, but they may not be ready for it yet. Guiding them through the process makes most sense.

Create the Business Case for Internal Executive Recruiters

Forecast a budget for executive search. Then project a budget for an internal team to fill roles. Show the variance as to what you’ll save the company. Include companies you’ll need for research. Hire a sourcer if it makes sense. Hire an executive recruiter if the numbers work. Make sure the executive recruiter has the right experience, presence, and understanding of your market. Ensure they understand the strategy of the business to explain it to prospective candidates.

You have to work with your leaders to show the business case.  Make sure your boss supports this effort. There’s a lot of pre-work. Talk to leaders to make sure you know their views and see if there is openness to a different process. Be up front that you’d like to get to that point when search firms are part of the strategy but not the only strategy and explain your approach. Keep the process simple. Use panel interviews and video interviewing.

Also, work with your HR teams to build an effective succession planning strategy. In a 2011 study of 20 large organizations, McKinsey revealed that most anticipate 50 to 60 percent retirement among their management ranks over the next five years.

With respect to succession planning, employee development is absolutely vital to retaining key players. By incorporating development into succession planning processes, companies will cut preventable turnover substantially while also bolstering internal bench strength and talent pipelines. Be an advocate for succession planning and executive development and be involved in both.

The most important part: get buy-in from the executive team. Ask for a few pilot cases … a few roles. Start at the director level.

You want to get to the point where that leader trusts you. It’ll take time but be assertive and trust your instincts.  If so, you won’t likely lose any senior leaders after two weeks. Good luck.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  1. Keith Halperin

    Thanks, Shanil. Excellent points:”get buy-in from the executive team.”
    The $564,000 question- what’s the best way to get buy-in to use your team, when the folks you need buy-in from have probably been brought in by the 3PRs you’re trying to minimize/eliminate? Also,IMHO your team should already be handling director-level and other sub-CXO executive searches, so how do you get over the divide to get to work on the CXO searches? “Just” have a good number of successful sub-CXO executive searches as a track record?

    Cheers,
    Keith

  2. Shanil Kaderali

    I’m not advocating to not use the big players. Most Execs tend to be beholden to them anyway so it’s best to make friends with them and I do stress – they are part of the strategy (just not the only strategy and you need right process in place too)…but the reality is that Dir, VP roles that can be handled internally, should be done so if you can prove/execute successfully. It’s usually always a balance. Smart Exec Recruiters know that too.

  3. Keith Halperin

    That is so… My followup question: how do you get powerful, entrenched people to stop doing what they want to , and start doing what they don’t want to?

    Cheers,
    Keith

  4. Shanil Kaderali

    Abstract and situational question that would solve much if there were a magic pill or formula. There isn’t… One way of many: Of x# of SVP vs. #of VP vs. #of Dirs – show business case value, ask for pilots to demo competency and over time, build the model if successful – ie, be incremental with company A and can vary with diferent companies

  5. Rob McIntosh

    Keith – the business case is quite simple, it’s the historical perceptions by leadership that need all the attention.

    I went through making the investment with a dedicated internal executive recruiter who handles all VP+ roles globally for the company about a year ago. Simply the case was:
    1)Save significant dollars on building internal capability to fill these roles without impacting delivery. Check, as YTD we have saved over 600k an traditional executive search fee’s.
    2)Create a consistent and added value engagement model for both internal executives and external candidates – Check, feedback from both customers continues to be very strong.
    3)Create a proactive search model that also maps to our external succession plans so we can identify/assess executive talent and build relationship ahead of the actual need. Check, as we have a plan and process in place that allows us to achieve this.
    4)Create a more robust and tailored assessment methodology that allows us to improve the Quality of new Executive Hires (Better fit, increased performance, lower attrition, etc). Work in progress, as we are using an Executive Leadership Profile of Excellence and weaving into our QoH framework.

    Point number 1) was the primary driver in support for the investment given the ROI business case.

    The other key decision was I ensured we hired a very senior recruiter who has worked in this space (which is different to the bulk of hiring needs) in a corporate function with a proven track record. While some internal executives wanted to default to using an executive search firm in the early days, we took the approach with these internal executives of give us 2 weeks to come up with a targeted list of names to show value (similar to an Exec Search Firms methodology) against the search and if we cannot, then rather than lose precious time on the search we could then engage the Exec Search firm. So far this approach has worked in nearly all cases and the internal executive is now happy to engage with the internal executive recruiter vs. defaulting to the external agency. There is still room for relationships with some Executive Search firms, which we have and continue to use on some searches where it makes sense.

    I am sure some Executive Search Agency people reading these comments will not be happy but the reality is, if you can build the internal capability, execute consistently against the demand but do it with significant cost savings, then you would be a fool as a recruiting leader not to explore the option.

    Rob

  6. Keith Halperin

    @ Shanil: Thank you.
    @ Rob: This is $1,000,000 information. and I very much appreciate it.
    I’d really enjoy seeing more of these specific “how to” comments/articles here on ERE…

    Cheers,

    Keith

  7. Carol Schultz

    @Rob: You make very valid points and are implementing a good strategy. I think you are the exception, however, rather than the rule.

    Can I assume the “very senior recruiter” is being paid commensurate with your most senior sales people? I ask this because back in late 2006 I considered the possibility of making a move to corporate to try something different, and interviewed for the exact position you describe with a large tech firm HQ’d here in Denver. They had been using H&S locally and were tired of paying such huge fees. When we got to the place of what I was looking for income wise, the Global Director of Talent (who has next to zero actual search experience) looked at me like a deer in headlights. They said they wanted a “rainmaker” to do all their executive level searches, yet they were unwilling to pay for this.

    Also, have you tracked your retention/turnover with the new recruiter vs the agency route? Would love to know the numbers.

  8. Rob McIntosh

    Carol – Of course I cannot get into $$$ and cents on the level of the recruiter, but the short answer is no.

    Sometimes the motivation to do something does not have $$$$ as the primary reason for accepting the role or how the role is sold :-)
    Do not track turnover by agency experience but I can say that directionally agency experience definitely helps in corporate recruiting (speaking fist hand as well).

    Rob

  9. Keith Halperin

    @ Carol and Rob: Let’s do the math-

    If you’re paying 30% fees for retained, then it would make sense to have an internal person at the annual salary of a typical hire if you do more than about 3 hires/yr. e.g., if you hired more than about 3 people/yr at $250k and 30% fees each, it would make sense to have an internal person do that for a salary of $250k/yr.

    @ Executive Recruiters: why would you go inhouse instead of earning $80k fees? Would YOU work for a lot less to go inhouse? If you would, HOW MUCH less would you work for to go inhouse?

    -kh

  10. Merlynn Bertini

    Shanil, a really, really good article! This article was very balanced and as a result very informative.

    @Rob, I agree with your comments and you also provided valuable information as well.

    @Keith. I am in agreement with you, I would also like to see more articles like Shanil’s –not only for the information, but because this type of article provides a balanced perspective

    Great job!!

  11. Shanil Kaderali

    @ Rob – Thank you for your insightful comments. I agree with your approach – proactive sourcing, tailored assessment methodology (already with buy-in)

    @Carol – in my cases with internal exec recruiter teams, 1 recruiter was promoted, given training, coaching and eased into working with execs (side by side with me or a HR Leader) and once, did get comp to agree to an enhanced recruiter profile and new level but it wasn’t as high as highest paid sales..it was more comparable to a TA Manager position and there were other motivations involved too. In some cases, they do work with external search recruiters

    @Keith – the best recruiters who do exec and eventually build their own portfolio in time, within an industry will leave (or should as they’ll make way more money but that could take 5-10 years of commitment)

    My 2 cents…

  12. Rob McIntosh

    Keith – I wonder if you get paid by the question ;-)

    My POV and experience is that any Executive search recruiter who is billing significant fees would not make the change to Corp Exec recruiting given the amount they can make is significantly different. That being the case, let me tell you a little story as I think you are looking at this through the wrong lens of rationalization:

    I was a successful Agency/Executive recruiter for many years earning a nice income before getting into Corporate recruiting. At the time my wife thought I was totally nuts given I took a very large drop in total comp to accept my first corporate recruiting role. Why did I do this you might ask?……

    Quite simply, I had gotten bored with agency recruiting as the challenge of getting new business and filling roles to be paid a fee did not have me leaping out of bed, so to speak. The appeal for me and many other successful agency recruiters I have seen was the challenge to solve bigger more complex problems for a company (Speed, Quality, Cost, Brand, Candidate Experience, to name a few).

    To me it was not just about the $$$$, because if it was I would have never made the change from agency recruiter in the first place. The same logic applies to the Corp Executive Search Recruiter. I get a little ‘miffed’ when I have seen agency folk also imply that the reason agency recruiters move into internal corporate recruiting is because they don’t cut it or a seen as a failure in agency recruiting. Total BS broad sweeping generalization !

    If money is the only motivator, then logically moving into an internal corporate role is not going to be your thing. But if you are motivated, inspired and passionate about solving corporate recruiting problems, then I find smart people weigh up the personal reward of solving these problems as having its own level of equity in the total equity picture as well.

    I never regret my decision even though it took a few years before my lovely wife, the family CFO, saw the full picture as well :-)

  13. Carol Schultz

    @Rob: I must not have made myself clear. I meant, have you tracked the successes/turnovers of your internal hires vs agency hires since hiring the very experienced recruiter? As to your most recent comment, I would agree with your rationale. For me, after the experience I described above and one other at the same time, I was totally turned off to considering moving inside. I know not all companies are created equally, but those experiences were enough to make me turn up my nose.

  14. Rob McIntosh

    Carol – If you mean do we track attrition and performance by source = Agency Hire vs. others sources…..then yes, but not published metrics yet given part of our Quality of Hire framework in progress.

    Not the highest quality source of hire but far from the lowest. FYI on high level QoH data points = (Attrition/Annual Performance Reviews/Promo’s/Hiring Manager CUSAT)

    Rob

  15. Keith Halperin

    @ Merlynn, Shanil: Thanks.

    @ Rob: “I wonder if you get paid by the question?”
    Do I? Should I? How much will I?

    “…motivated, inspired and passionate about solving corporate recruiting problems…”
    Do companies still hire people like this?

    When I hear a company values “motivation,” “inspiration,” and “passion,” I figure it means they want to hire lots of 25 year-old “Sr. Recruiters”- attractive, perky young people, often with a great set of “references”:
    1) Who put into their conversation all sorts of trendy terms like “Social Network Recruiting,” “talent communities,” “employer branding,” “employee engagement” and “innovators” .
    2) Who mention a number of JARS (“Just Another Recruiting Startup”) whose products or services they’ve used.
    3) Who have a burning desire to unquestioningly do whatever their bosses want them to do- it’s called “passion”.
    4) Oh, and by the way: who are 30-50% cheaper than more than more experienced recruiters.

    They don’t want seasoned recruiting hands who know how full of dysfunctional BS their recruiting organizations are likely to be,
    or to offer their years of experience on how to fix the problems. (Plus: did I say these “perkoids” are a LOT cheaper than the “seasoned hands”.)

    As far as money is concerned: I’m glad you were able to be able to make a decision to do more of what you liked as opposed to what you were being paid more to do.

    Cheers,

    Keith

  16. Rob McIntosh

    Keith – I certain do hire that way and if you ask anyone who has or still works for me you would hear I greatly value people that are passionate, inspired and are engaged by a challenge. People that are not satisfied with just good enough.

    This is also not an age issue and not sure why you are trying to turn it into one as I have plenty of people that work for me not falling in the 25 year category. Maybe you should speak to my ‘experienced’/’seasoned’ Global Executive recruiter, but based on your level of cynicism I am sure you have already come to the conclusion that if someone is older and interested in such a role then they must already financially independent or not very good at their job.

    I think you need to walk a mile it a set of shoes besides your own old worn out ones before coming to conclusions on subjects where the generality of your statements are grossly misleading to others who might actually view the world a little more glass half full.

    Rob

  17. Carol Schultz

    @Rob: Yes, that’s what I was asking, but specifically the metrics associated with the recruiter you hired to to your high level work. There’s a very interesting discussion to be had regardless of the results.

    @Shanil: Sounds like a good plan. Even if I build a process for a company (the goal of which is to only or mostly use corporate recruiters) there are occasions, depending on company circumstances, when it makes good sense to retain an outside agency.

  18. Shanil Kaderali

    @Rob – For your QofH view, I’ve also seen engagement scores added. I did write an article on my view of QofH that needs to look at pre and post hire QofH aligning to what we can and can’t control….Welcome your feedback on it directly should you choose to read it…feel free to email me if you’d like to discuss

    @ Carol – I’ve tracked quality of hires by source but I only had 2 years or so of full data..rarely more than…and exec recruiters inside will use a full gamut of other sources/strategies so it’s important to tailor their profile/measurement to what they control and can achieve

    @ Marilyn – thank you for your comments

  19. Keith Halperin

    @ Rob: I hear you.

    First of all, I’d expect that your GER is quite good and happy at his/her job.

    IMHO, if you believe that your work should be a “calling”: then perhaps you you should become a pastor, work for a non-profit, or perhaps public service. Despite that an employer may be very sincere in his/her belief that his/her work is “special” or meaningful in the broader sense, as the old song says “it ain’t necessarily so” it’s a “livelihood” not a “life”. Furthermore, I have found out that the more an employer uses words like “motivated, inspired and passionate” the greater the likelihood that they:
    1) Take themselves and their company WAY too seriously
    2) Tend not to take constructive criticism well
    3) Are likely to create the beginnings of what I’ve called a “corp-cult” ofexecutive personality and slavish followers and finally
    4) Are likely to “—- over” many of the people who most believe in them, even sometimes completely unintentionally.
    In summary: I have found that companies run by sincere/insincere fanatics of whatever stripe are not very good to work for in the long run, particularly if you’re not the same strip of fanatic yourself (and I never am, quite).

    Why would young people be more attracted to smooth-talking, charming, and charismatic (and more than occasionally: *psychopathic) types? Well, I think if PT Barnum were alive today he’d say:”There’s a cohort of suckers born every generation”, and most of these newbies (at least the nice, middle/upper middle class [largely white] ones that corps like to hire) haven’t been ——- over as much yet; at least one would hope not. In a nutshell: the more a person starts using these emotionally-laden trigger words, the more you should scrutinize him/her- If they’re talkin’ about putting your “soul” in the business, they may be the Devil, and dance with they Devil- you gonna get burned…

    As far as the glass more than half full- well I think it is: $400 million and more from the Koch Bros and their business buddies couldn’t buy them the election. Maybe more and more folks are getting suspicious of smooth-talking hucksters spouting snake oil and “positive mental attitude”.

    As far as “walking in other people shoes”: well, I’ve only walked in my own, but they’ve been taking me to work for more companies than most of our readers have had hot meals. (Well, not quite…) I’ve worked for tiny startups and Fortune 500 giants. I’ve seen the good, the bad and the ugly. I’ve work for some people whose hard work and goodness were exemplary, and others so nastiness and toxicity should have got them imprisoned (in case, that’s what happened). Consequently, I may have a rather broad perspective on things work-related.

    Best of Luck to You Rob,

    Keith

    *http://scienceblogs.com/deanscorner/2011/06/24/psychopaths-in-the-boardroom/

  20. Alec Laurie

    @ Rob McIntosh 9:03am. I completely agree with you regarding motivations for moving into ‘Corp Exec recruiting’. I think there’s an old, tedious, and, these days, inaccurate view amongst the general majority of ‘external’ recruiters that people go ‘in house’ because they can’t cut the agency environment. There doesn’t appear to be any consideration that motivation has evolved very rapidly, well beyond $ alone. One reasons why, IMO, the vast majority of recruitment firms (regardless of ‘exec’ or otherwise) fail to achieve true customer-centricity. It’s obviously more important to be a top biller/earner.
    I’m a big fan of Daniel Pink, and find his (empirical) work on motivation fascinating – carrots and sticks still work as motivators for simplistic tasks (like hitting basic KPIs), but not for more complex or intellectually stimulating work (like recruitment, especially at a senior level, has become in the past 5 years).
    I’m an ‘external’ recruiter, but run a small search firm that swims against this traditional ‘agency logic’. (I’ll stop short of a plug!)
    My opinion on the general topic of the article: lots of very interesting points, and a fascinating insight from an internal recruiter’s view. It’s a shame the vast majority of ‘executive/outside’ recruiters don’t do more CONSULTING on recruitment process and retention. I get the sense that recruiters are seen as not much more than sources of candidates… surely we now live in an age where anyone can identify candidates? In that respect ‘we’ recruiters are clearly guilty of driving the trend to do more in-house.

  21. Tim Taylor

    I’d agree with everything Rob says above. The only thing I’d add is that whilst the business case makes sense, it can be a challenge getting the HRD/VP to hire someone who works in their team but is paid more than them.

    It’s all about delivery. Managers need to have confidence in their recruiter. If that recruiter is internal then great. If you try to maximise the savings by hiring a more junior recruiter, confidence drops, compliance suffers and managers start talking to agencies so your business case is blown. I’ve always worked on the basis that recruiters should be filling roles paying roughly what they earn.

    Delivery means having the right tools and process too. If managers feel they get something from an agency that they don’t get from an internal recruiter, there’s more temptation to go that route. The agencies normal argument here is that internal recruiters are too internal, so not in touch with the market. There is a tendency for this to become true over time if the process is not right.

  22. Rob McIntosh

    Keith Halperin – I will make this short and to the point.

    Comments like yours are destructive, not constructive, and why places like ERE drop their public discussion forums and waste time on forum moderation. It is the reason why practitioner’s like myself shy away from wanting to more actively contribute to the dialog because of the puerile bile for comments that are off topic from the discussion at hand and do very little to further the real dialog. If you intent was to achieve this result, then job well done !

    If you intent is trying to show off your intellect, further the dialog and get more people engaged in the conversation, then I agree with the purity of your intent, but I think you might want to reassess your delivery style.

    This will be my last response to your comments on this post as I have no interest in being party too driving this conversation into the levels of non-productiveness it is starting to reach. If you still feel you have a particular point you want to make with me, then happy to discuss offline and not waste anymore of the communities time.

    Rob

  23. Keith Halperin

    @ Rob: Sorry you feel that way. Exactly who and what am I destroying (except perhaps for complacency with the usual recruiting cliches, which is my intent)? I am here to get people to think and feel strongly (dare I say “passionately”) about recruiting, and if I get people stirred up enough in one way or another to comment, then I’ve done my job.

    Also, I hope you do not stay off ERE. As I said before in my first address to you: you provide invaluable information, and I hope you will continue to provide more to us.

    Cheers,

    Keith keithsrj@sbcglobal.net

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