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To grow your organization or institution, you might need a special type of search expert — an executive search firm — to assist in attracting, interviewing, and hiring mid- to senior-level employees. Executive search firms have long been used by large non-profits, but more small and mid-sized organizations are realizing that they can also benefit from paying these consultants to help draft accurate and enticing job descriptions, generate a pool of qualified candidates for top-level jobs, vet references, and speed the hiring process.

When you engage and retain an executive search firm, it is not a matter of just putting an ad in the paper and seeing who the best person is that applies. At the senior executive level, it’s very crucial to find the best person you can. The whole purpose of proactive recruitment is to bring into consideration candidates that might not be otherwise identifiable in the market. They may not respond to an advertisement. It opens up a whole range of candidates who might not have been aware of or shown interest in your appointment.

The cost of a bad hire can be considerable. It can cost your organization time and money and its competitive edge in the marketplace. Tackling an executive search on your own can also distract your senior staff from managing and growing the organization while they search for the right hires.

The following will detail the different types of executive search firms, how to find the right search firm for your organization, and how to best work with your recruiter to find and hire the right candidate.

 

How to Work with an Executive Search Firm: Types of Executive Search Firms and Fees

When it comes to filling a critical position that effects the strategic direction of an organization, some executives may figure that they can save a bit of money by handling the search in-house.

In addition to sourcing job candidates, search firms can help a business narrow down what type of candidate with what type of qualifications they need, write a job description that is accurate and appealing, and ultimately deliver qualified candidates who can pass a rigorous hiring process.

Before looking for an executive search firm to help you fill key positions, you need to understand the different types of search firms and how they structure fees. There are typically three types of search firms:

Contingency Firms: Contingency firms are transaction-oriented — they are paid only if you hire a candidate they present to you, and generally focus on mid- to lower-level positions. Contingency firms work on a percentage (typically 20-30 percent) of the candidate’s first year total cash compensation. Hiring managers must provide timely feedback to contingency firms, thus illustrating your firm’s commitment to hire a candidate. As with any service-based business, contingency firms will focus their efforts based on the real potential to generate revenue and will prioritize their time and energy on realistic opportunities.

Retained Firms: A retained search firm typically has an exclusive relationship with the employer and is hired for a specific period of time to find a candidate. Retained firms are paid a higher percentage (typically 30-35 percent) of the estimated first year compensation regardless of whether a candidate is hired. Most assignments are paid in three installments, typically one-third of the total fee to initiate the search, one-third when quality candidates are presented and interviewed, and one-third when the position is filled. Retained search firms are often more focused on a consultative relationship, and invest the appropriate time to learn about your company, the details of the position and the characteristics of the right candidate, and provide a research team with various resources to assist you with the search. Retained firms are best-suited for senior-level management positions where there are fewer qualified candidates.

Container Firms: A container firm (or”Retingency”) blends the fee structure of contingent and retained services. Container firms are paid an upfront fee, typically $5,000 – $8,000 to initiate the search and require a percentage (typically 20-25 percent) of the candidate’s first year compensation once the position is filled.

How to Work with an Executive Search Firm: Selecting the Right Firm

Once you have identified the type of firm you need, it’s time to find the right firm for your business needs. There are a variety of criteria you should consider in selecting firms, such as knowledge of your sector, personal references, and where they are located.

You should use a firm that has experience placing candidates in positions similar to your open position in your industry. As you interview different firms, look for industry experience, recruitment strategies, network and reach. In addition, find a firm that will represent you and your firm’s culture in an ethical and honest way.

It is important to find a firm that understands your business or the position you are seeking to fill. Some firms specialize in placing chief executive officers or chief marketing officers or chief financial officers. Ask the company what relevant searches they have conducted in the past two years for similar positions and see how that matches the job you are seeking to fill. Another factor to consider is the chemistry you have with the person who will be conducting the search.