A form of volume discounting of executive search services. Client agrees to pay so much per month, quarter or year, thereby establishing a credit account against which specific placements are billed. Encourages long-term relationships for greater efficiency, lower marketing costs, improved client service.
See EVALUATION OF CANDIDATES.
Association of Executive Search Consultants (AESC)
Organized in 1959 as the Association of Executive Recruiting Consultants, Inc., this association brought together leading executive search consultants who established strict requirements for membership and standards of ethical practice for their professional field. AESC membership identifies the consultant who is not only pledged to these high standards but who is also accredited by his professional peers to conduct his practice with professional competence and integrity. The association office is located at 500 Fifth Avenue, Suite 930, New York, NY 10110-0900.
Places where recruiters cannot look for candidates to fill a position. Usually refers to corporations that are off-limits because they are, or recently have been, clients of the search firm (see Off-Limits Policy).
An executive search firm that specializes in one or more relatively narrow niches in contrast to presenting a generalist image.
Relatively new term describing the talents required in today's "super executive" who is brought in to replace two or three others and is expected to reflect a "bundling" of all their attributes. Bad for executive recruiters in that there are fewer jobs to fill but good because super-execs are scarce & hard to find, requiring a professional search.
A person who survives extensive screening, reference-checking and interviewing and is to be presented to the client for the position to be filled.
Candidates who may not be considered for a position because they are active candidates in another search.
Summaries prepared on each final candidate that usually include a complete employment history, personal biographical data, appraisal of qualifications, and initial reference information. Data is verified and submitted to the client for examination prior to the first meeting with the candidate. Where possible, search consultants prefer to make their presentation in person so as to permit maximum exchange of ideas and information.
Firms or individuals offering services to individuals. Some are legitimate but many are not. Some have been forced out of business by State Attorney Generals for failure to meet promises. Many have been investigated. (Be wary of claims in blaring ads in Wall Street Journal, N.Y. Times, etc.) Services can include psychological testing, resume preparation, interview training, job-search planning, etc. Fees can run from modest to $10,000! Read fine print in contracts and check with legal counsel before making a down payment or signing anything. Dealing with a small, local counselor on a 1 to 1 basis is usually best and least expensive. Extreme caution is advised.
Organization sponsoring and paying the recruiter for a search.
One of the principal reasons for using executive search. Client identity is usually not revealed to prospective candidates until well along in the process, except in general terms.
See OFF-LIMITS POLICY.
Code of Ethics
Every profession has found it necessary to establish a code of ethics as a necessary part of the process of self-discipline and to protect the interests of clients and assure them of fair treatment. A code of professional ethics helps the practitioner determine the propriety of his conduct in his professional relationships. It indicates the kind of professional posture the practitioner must develop and maintain if he is to succeed. It gives the clients and potential clients a basis for feeling confident that the professional person desires to serve them well and places services ahead of financial reward. It gives clients assurance that the professional person will do his work in conformity with professional standards of competence, independence and integrity. The AESC Code of Ethics is followed by many executive recruiting consultants in North America.
Total compensation can include various elements other than salary for senior executives: typically a mix of deferred income, incentive bonus, profit-sharing, stock options, tax shelters (or some type of compensation that permits estate-building), thrift plans, pension plans, life insurance, health insurance, long-term disability insurance, dental insurance, tuition assistance, payment for personal and family medical and dental expenses, cars, club memberships, loans, joining bonus and other perquisites (including, increasingly, some form of hiring bonus).
Percentage of retained searches that result in a hire. Estimated to be as low as 60%, claimed by some to be 100% (be wary of the latter: no one is perfect, and the imponderables/intangibles in a search are many). Greatly affected by client lassitude in interviewing and following up with candidates, changes (written and subtle) in job specifications, internal client politics, organizational changes, etc... as well as by recruiter performance and effectiveness.
Fee arrangement that combines elements of retainer and contingency methods of payment. Usually involves an initiation payment and progress payment(s) that may not be refundable with a "success" or "completion" portion due only on actual hiring.
There are times when it is important for the client to conduct confidential searches. When secrecy is necessary, it is virtually impossible to handle a search from within the organization. For example, a company may want to introduce a new line of products or acquire a new product or company before competitors learn about it. In such cases, a recruiter can work effectively on the company's behalf without disclosing the firm's identity until the final stages of the search. The company can make its selection and announce its plans after the new executive is on board. Keeping a search totally confidential requires considerable discipline and skill on the part of both client and recruiter. Once the client has been identified to the top two or three candidates, both the client and the recruiter must be ready and able to move fast to make a final decision and a public announcement. This is the only way to avoid possible leaks, and it requires careful coordination.
Directory of Executive Recruiters
Listing published by Kennedy Publications since 1971. Thousands of names and addresses with salary minimums and areas of specialty (indexed by management function, industry and geography). Updated annually.
Employment agencies normally limit their efforts to representing individuals who are actively looking for new employment opportunities within the local area. When an organization contacts an agency to fill a specific job opening, the agency usually reviews its files for applications from people with appropriate backgrounds and may place ads in local newspapers to attract additional applicants. Employment agencies often try to place their applicants in any of a large number of local organizations because they are paid by the individual applicant or employer only if a placement is made. They make the majority of their placements in the lower salary ranges. Their payment is a fee based on the employee's starting salary. Their fees may be regulated by the state and frequently follow the pattern of a 5 percent minimum plus 1 percent for each $1,000 of the annual salary of the individual employed, up to a maximum of 20-30 percent. Some states also permit an advance fee or charge to the individual who lists himself with an employment agency. The line between Fee Paid Employment Agency and Contingency Recruiter is sometimes very difficult to draw.
Equal Opportunity Act
An Equal Employment Opportunity Commission was established in Washington, D.C. in 1964 to prevent employment discrimination. (The Roosevelt Administration established a similar organization to prevent such discrimination during World War II.) Although the law demands that women and other minority employees be considered for executive positions at various levels, most organizations, for example, lack candidates with both the education and experience required for such positions. Consequently, a growing number of these organizations must look outside for qualified individuals from the relatively small pool of qualified middle and top managers. To help such companies, some search firms have set up special departments to recruit such executives. Others specialize in this field.
Evaluation of Candidates
At a convenient time and place, the recruiter interviews the prospective candidate to verify the original information gathered during the process of sourcing and researching, to examine his background in depth, and to determine if the personal chemistry will be appropriate. These appraisal interviews develop an in-depth picture of each candidate: his employment background, business philosophy, career objectives, potential and personality characteristics. Education and employment are verified and a reference investigation is made of past performance. From the group of prospective candidates evaluated, several of the best-qualified are selected for introduction to the client. During this phase, the recruiter's breadth of background, depth of insight and sound judgment are critical.
Evaluation of Executive Recruiter
Which benchmarks should the client use in evaluating the recruiter's performance over a period of time? They include professionalism, results, adequate communications, realistic costs, proper staffing of assignments and timing of assignments.
Executive Assimilation Process
The process of integrating the new executive into the organization. See SHAKEDOWN EXERCISE.
Executive Clearing House
These are information centers whose basic function is to bring together employers and candidates for positions on an informational basis. They collect information from two sources: individuals interested in a position and employers or their search consultants seeking executives to fill specific positions. The information concerning the person and the position is classified and put into a mechanized or computerized retrieval system. Both the individual and the employer are expected to share the cost of these information centers. Companies may pay either a standard amount per position or per year or a placement fee if and when they employ a person referred by the clearing house. Some of these have been computerized into job banks or registries of one sort or another. Caution is advised.
The service performed for a fee by independent and objective persons or a group of consultants organized as a firm or similar entity. Executive recruiters help managers of client organizations identify and appraise executives well-qualified to fill specific management positions in commerce, industry, government, and the nonprofit field. Their fees are paid by the organizations that retain them. This highly specialized area of the management consulting profession started as a normal service rendered by general management consulting firms. Executive recruiting has experienced rapid growth since the end of World War II, both in the United States and abroad. There are hundreds of consultants (most of whom refer to themselves as "firms") that handle executive search either as a specialty or in conjunction with other forms of consulting work. Executive recruiting firms, also known as executive search consultants, generally bill their clients monthly as the search progresses and deduct these payments from the total fee, frequently up to 35 percent of the first year's total compensation. Some may use other methods of billing such as a regular per diem, or a flat fee, plus out-of-pocket expenses. The true role of the executive recruiting consultant is not that of a glorified pirate, body-snatcher, headhunter, or any other erroneous label frequently applied to him or her. Executive recruiting consultants are usually willing to receive resumes from executives seeking new job opportunities, but they are not in a position to help executives find jobs.
Euphemism for RESUME FLOATING to former or present client
Synonym for EXECUTIVE RECRUITING, although some feel strongly that "search" better describes the process and identifies its major thrust.
Addition to the search fee intended to compensate the recruiter for out-of-pocket payments incurred specifically for a given search (i.e. telephone calls, special directories or subscriptions, candidate and recruiter travel, etc). An item to be carefully monitored by the diligent client as some search firms tend to "make money" on expenses (double-billing for travel involving two clients, for example). Other firms attempt to recover ordinary administrative expenses. A variable item on the search firm's invoice but bears watching and documentation of over 15-20% of the fee.
Fair Credit Reporting Acts
Legislation to amend general business law regarding procedures for securing information about individuals seeking commercial credit, loans, jobs, etc. Also covers the confidentiality, accuracy, relevancy and proper use of such information. Can affect the reference-checking aspect of executive recruiting significantly. Regulations vary widely from state to state.
Term popularly used to describe the following condition: after a placement has been made (or during the assignment), the client decides to hire one or more additional candidates who surfaced and were recommended by the recruiter. Some search firms demand full fee for each such additional hire. Others will not accept a fee. Most frequently a matter of negotiation dependent on the time frame, client relations, etc. See PLACEMENT, MULTIPLE.
The total fee paid by the client to an executive recruiter for a search assignment. Most recruiters these days charge clients 30-33 percent of the first year's total compensation for the executive hired plus out-of-pocket expenses. Thus, if the new executive is paid $50,000 base salary and no bonus or incentive, the client's fee would be about $15,000 regardless of the billing method, plus 10 to 25 percent of the professional fee for out-of-pocket expenses. Retainer recruiters are paid for their services whether or not a placement is made. See METHODS OF BILLING, FRONT END RETAINER, INVOICING ARRANGEMENT and REIMBURSABLE EXPENSES.
During the course of a search, clients are invoiced monthly for agreed-upon fees, plus out-of-pocket expenses. These monthly installments generally range from one-third to one-fourth of the total fee involved. They are sometimes called "front-end retainers" and are credited toward the total fee when the individual is employed. Usually a final billing for any remaining fee is rendered at that time. Retainer recruiters require a payment before commencing a search. This is also called a "front-end retainer."
When companies merge, this is the signal given to the manager of the acquired firm to start looking for another position because his counterpart in the parent company will assume his role for the combined firm.
Promise by the search firm to replace a failed candidate within a certain period of time (usually one year), especially if caused by negligence on the recruiter's part. Search is usually reinstated for expenses only.
(Graphology) A controversial selection technique pioneered in Germany and used occasionally elsewhere as another tool to help predict candidate performance and fit.
Formerly pejorative term for executive recruiter, still only passively accepted by professionals in the field... currently used more in a jocular and light-hearted sense than critically... even voiced occasionally by some executive recruiters themselves! (Other labels, far less in evidence today, have included "body-snatcher," "pirate," etc.)
A one-time payment originally intended to compensate a joining executive for extra expenses occasioned by a major move. Now viewed somewhat more broadly, though not quite like a professional ball-player "signing bonus," nonetheless the comparison has been made! The concept includes, for example, recompense for "lost" bonuses at the company the executive is leaving. It can also be a device to compensate for lower salary scales in the hiring company. A hiring or joining bonus, then, is whatever it takes in addition to total compensation to convince the candidate to join. The amount can range from a few thousand to over a million dollars, sometimes paid half on joining and half six months later.
Another term for both preliminary and appraisal interviews which are conducted for the purpose of assessing prospective candidates.
Regardless of the type of fee structure used by the recruiter, the client should understand the invoicing arrangement in advance. Many recruiters require a payment before commencing the search. Others will do much of the preliminary work involved in a search before sending the first invoice. Invoices for professional fees and out-of-pocket expenses may be payable monthly for three to four months or may require payment at certain periods during the search, usually with the final payment upon completion of the search.
This describes the client position to be filled and outlines the desired characteristics and experience that the executive being sought should possess. When approved by the client, the "specs" become the guidelines for the search.
Leaving Money on the Table
Outside search consultant's lament when placed executive gets higher first-year compensation than was estimated and fee was fixed, not percentage.
Length of Recruiting Assignment
The average recruiting assignment takes three to four months from the initial meeting with the client until the candidate is finally selected. Once a new executive is selected, it may take two to four weeks or more before he or she actually reports to work. An assignment may take as little as a month or two if everything goes right, but this is rare. On the other hand, a search may take six months to a year. When it lasts that long, chances are that the position was impossible to fill, the specifications were changed, the client was not available to meet candidates or didn't really want to fill the position, the recruiter miscalculated, or something else out of the ordinary happened.
Many years ago, when immigrant laborers were taken advantage of by unethical employment agencies, most states enacted legislation to protect individuals by licensing and control of such agencies. Thus, employment agencies are licensed today. Executive recruiters are generally not. As employment agencies move into fee-paid and retainer work, the line becomes more difficult to draw. Many states now write specific exemptions for executive recruiters, citing salary minimums and the fact that the individual does not pay a fee.
Following a shootout, the losing firm "lobs" a resume to the client, showing the kind of candidate the losing firm would have recruited had it been given the assignment.
Methods of Billing
The most commonly used methods of calculating the professional fees charged for executive search services are: -A fixed percentage fee, usually 30 to 33 percent of the first year's agreed-upon total compensation of the executive recruited. -A flat fee, fixed in advance on the basis of estimated time and difficulty of the search. -A retainer fee for professional services over a stated period of time. -A straight time formula, based on actual time spent on the search, but sometimes governed by an agreed-to-maximum. -A per-diem or hourly fee for any candidate appraised and recommended by the recruiter and hired by the client. In addition to the fee, there are also expenses. These are mainly for travel and communications, and they will vary, depending on the complexity of the search and the distances between client, recruiter and candidates. It is customary for clients to pay for candidates' travel to interviews. See FEE and REIMBURSABLE EXPENSES.
A key issue in executive search. Refers to the recruiter agreeing not to approach executives in the client organization. Factors are definition of "client" and time: the whole corporation (e.g., General Motors) or the division the search was done for (Chevrolet), or some even more specific entity (Truck Division, Northeast Region) . . . and for one year, two, three? Some large firms say they can't "afford" a strict Off-Limits policy because it reduces the universe from which they can draw and gets extremely complicated ("client" served by the San Francisco or Zurich office, how significant a client, etc.). Small firms magnanimously offer "full" worldwide client protection because it doesn't really affect their business. Whether this is an ethical or trade practice or business issue, it is extremely important to have it fully and mutually understood, preferably in writing, at the outset of a search assignment.
When executives are fired or dropped by various kinds of organizations today, they are often referred to outplacement consultants. These specialized consultants analyze their abilities and counsel them on how to prepare resumes and find new careers. Outplacement consultants work for and are always paid by the firing organization. A few serve both companies and displaced executives, and there is, in such circumstances, a potential conflict of interest. The Association of Executive Search Consultants (AESC) bars its members from offering outplacement services for the same reason.
There is a rough analogy between mixing chemicals and mixing executives at the top level. By combining executives, an organization can achieve synergy, or neutralization, or can produce explosions. The daily newspapers verify this chemical analogy as it operates in the executive suite. The search for a new executive is part of a process of organization change, often with traumatic implications. Preparing for this change and tackling the inherent integration problems are essential if the needs of the individual and group are to be met. In their evaluation of prospective candidates, professional recruiters try hard to determine whether the personal chemistry will be appropriate. A few recruiters help clients integrate new executives into the organization on as firm a footing as possible by means of formal programs. Interpersonal breakdowns can create enormous organizational cost, and it is important to anticipate and head them off.
The act of an executive recruiter filling a client position.
When a recruiter is searching for a top-level executive, he or she frequently interviews candidates who are not exactly right for the position, but who may be of interest to the client for another position. When the client fills a secondary opening with a candidate presented to him for the primary position, it is called a secondary or multiple placement. This happens often enough so that the recruiter should spell out the details in his confirmation letter before commencing the search. Some recruiters charge a full fee. Others reduce their fee for a secondary placement because their research effort time devoted to the placement has been absorbed by the primary search. See FALLOUT.
An infrequently used synonym for confidential search. It is also used to refer to the various privacy acts and legislation protecting the individual.
Professional Practice Guidelines
These are standards of good practice for the guidance of executive recruiters. They make for equitable and satisfactory client relationships and contribute to success in recruiting. (See the AESC Code of Ethics and Professional Practice Guidelines for specific standards of good practice.)
Monthly payments made to the recruiter by the client for agreed-upon fees, plus out-of-pocket expenses during the course of the search. Frequently cited as a key difference between Contingency and Retainer Search.
Proposals, Letters of Agreement and Contracts
Each recruiting assignment should have as its base point a formal written instrument (usually a letter of agreement or proposal) between the recruiter and the client. It should accurately describe the terms of the assignment. Unwritten agreements often lead to misunderstandings and dissatisfaction on the part of one or both of the parties. The written agreement should be specific on all pertinent points: job or position specifications, responsibilities of each party, amount of fee, method of payment, time limits involved and any other points of agreement.
Professional search consultants develop their own evaluation methods. Formal psychological evaluation is almost always left to the client's discretion. If a client has doubts about the fitness of a candidate, psychological evaluation may be indicated. But it is not likely that the search consultant will use psychological testing as part of its own selection process.
The temptation faced by retainer recruiters charging on a percentage basis: the higher the salary at which the candidate is hired, the higher the fee (even a hint of conflict of interest in such instances is eliminated when charged on fixed-fee basis).
Professional recruiters have clear policies known to their staffs regarding the retention of records and coding in compliance with existing laws and regulations on federal and state levels, together with the spirit of the various privacy acts and legislation protecting the individual.
See FEE and METHODS OF BILLING.
Professional recruiters feel that advertising with regard to a particular assignment should be done judiciously and only with the approval of the client. It should state the position clearly and be used with discretion. Absolute honesty in statements and actions should be observed in the text of the advertisement. In Europe and Canada, advertising is commonly used in the executive search process. Sometimes this is called Executive Selection. At other times, the terms are interchangeable.
After intensive interviews with the candidates (but before introduction to the client) the recruiter will begin to check references. Initially the recruiter will be limited to references provided by the candidates. These are likely to be favorable. However, from these references the recruiter will obtain others (known in recruiting as second-generation references) who will be likely to provide a more objective picture of the candidates. These references include such persons as social contacts, professors, business associates and former roommates. This initial checking of references is a delicate area and must be done with prudence. It is vital that the candidate not be embarrassed or have his current job jeopardized as a result of these checks. In addition, the client often wants the search to remain confidential at this stage. For these reasons, it is customary to defer an in-depth development of reference information until mutuality of interest has been determined. Reference investigation and reporting should be conducted with the candidate's prior knowledge; within the spirit and intent of applicable federal and/or state laws and regulations; with persons considered knowledgeable about the candidate and whose information can be cross-checked for objectivity and reliability; and with respect for the personal and professional privacy of all parties concerned. References today are rarely in writing, usually in the form of telephone notes.
Persons to whom a recruiter refers for testimony as to a candidate's character, background, abilities, etc. Executive recruiters usually take references proffered by candidates only as a starting point. They then confidentially seek out former superiors, subordinates, peers, colleagues, vendors, suppliers, etc., to get an independent and objective evaluation of the candidate. See below.
Most large banks in metropolitan areas provide a referral service for executives, especially in financial and general management fields. They provide this service at no cost to their customers, and the executives are generally seeking a new position. Often, banks will recommend executives for senior positions if their particular skills will strengthen the customer's position. Large law firms sometimes provide a referral service to their clients. Trade associations and professional organizations also refer names of members who are actively in the job market at no cost to job seekers or interested companies. In addition, placement offices of most universities offer a free referral service, and many graduate schools of business help place their alumni.
All recruiters incur out-of-pocket expenses in their day-to-day search activities. Typically, there are travel expenses for both recruiter and candidate, related costs for hotels, meals, long-distance telephone calls, printing and other related costs. Some recruiters charge for their reimbursable expenses at cost while others may add a service charge. Some charge for secretarial, research and other support services while other recruiters absorb part or all of the expenses. Reimbursable expenses may run from 10 percent to 25 percent of the professional fee or more, depending on such factors as length of assignment, location of client and the majority of candidates, number of offices used by the recruiter and salary range of the position being filled. International searches covering several countries obviously incur higher expenses.
The foundation of professional recruiting is research. All well-established recruiting consultants maintain research facilities to develop background information about industries, companies, and key executives. In a rapidly changing business environment, constant research is the principal guarantee against superficial or haphazard research work.
Someone who can possibly recommend a candidate for a specific opening.
A brief account of personal and educational experience and qualifications of a job applicant. The resume is the first formal contact between a company and a potential employee, and in some ways, it is the most critical. Personnel officers in most major corporations can usually give only 20 to 30 seconds of attention for each of the many resumes they see every day. So, to make the best impression, an applicant's resume must be constructed in such a way that it provides the most pertinent information about him or her in the simplest and most easily digestible form. The information should be brief, complete and easily accessible.
Frowned-upon practice of sending resumes to a potential hiring organization without a contractual search assignment in hopes of a "hit" . . . banned by AESC as "inappropriate."
Retained search is one in which a client retains a recruiter to identify and appraise executives well-qualified to fill a specific management position. An initial down payment is followed by progress payments, and the full fee may have been paid before the position is actually filled.
A retainer fee (usually paid monthly) for professional services for an agreed-upon period of time.
Search Process, The
The task of identifying and appraising well-qualified executives is painstaking and time-consuming and must be governed by an orderly approach consisting of several major steps or phases if it is to be successful. These steps represent the broad phases of a typical search assignment and identify the major areas of activity involved in the work that recruiters do for clients. These steps are interrelated and interdependent, but they are often adapted and modified by search consultants as they work out their own approaches to client engagements. The professional search process does not depend on luck, shortcuts, or gimmicks, but on a step-by-step procedure, whereby a list of potentially suitable executives is reduced to several uniquely qualified candidates. In outline form, the successful search consultant must: meet with the client to discuss the engagement in depth; develop a strategy or search plan; review files and previous search assignments; contact candidates and evaluate them; check references and participate in negotiations; and follow-up with the client and executive to see how things are going. The aim is not merely to produce qualified candidates (which is relatively easy) but the very best candidates available.
Second Generation Reference
See REFERENCE CHECKING.
This exercise or process sometimes involves getting the new executive and his or her boss together in a one- or two-day session with a behavioral psychologist before the new executive reports to work. It is based on the premise that the end of the search process is only the beginning of the more rigorous, more critical process of integration into the new organization. In these sessions, each nails down precisely what each is expecting of the other. The purpose of the shakedown exercise is to bridge the gap between promise and performance. This approach, with its emphasis on behavioral science techniques, is not yet common practice in recruiting.
Popular term for competition that finds several search firms making new-business presentations to a potential client. Increasingly used, to the recruiter's chagrin, by sophisticated, cost-conscious or short-sighted clients who sometimes fail to see the value in long-term professional relationships.
Specialist vs. Generalist
Increasingly, clients demand a certain amount of industry or functional knowledge from the executive recruiter. Exclusive practices have sprung up in banking, healthcare, training, hi-tech, finance, etc. Yet there is always the demand, in addition (especially at higher executive levels), for the generalist viewpoint. How else, for example, can an executive with consumer products marketing experience in soft drinks be found for the personal computer company that has decided it needs this type of leadership? Some industries lend themselves to recruiter specialization, i.e., those with a large number of non-competing units nationally (banks, hospitals). Others, with a high concentration of firms (automobiles, for example) do not lend themselves to specialization. The determinant is adherence to a professional Off-Limits policy. See OFF-LIMITS POLICY.
A candidate submitted relatively early to test, confirm and fine-tune specifications. Not a uniform practice and frowned upon by some as unfair to the candidate.
Term sometimes used to describe effectiveness of executive-position matches whether through search or otherwise. No real statistics yet on whether searched executives last longer in new posts. Not to be confused, however, with success rate (i.e. underperformers can sometimes stay in the job for a long time!).
When a search firm hears another search firm may get an assignment, it sends over a few resumes as "stoppers." See LOBBING.
Manager who combines the talents and experience of the two or three people he or she is replacing. See BUNDLING.
A person identified in a preliminary way as a possible candidate to fill a search assignment.
Types of Executive Recruiters:
These include independent individual recruiters and recruiting firms, executive recruiting divisions of management consultant firms and certified public accounting firms, and internal recruiting departments in companies.