What is a retained executive search firm?
A retained executive search firm offers services that requires upfront payments to retain their firm – this fee is credited towards the total referral fee for finding the desired candidate. Typical fee agreements are 30-33% of a candidate’s total compensation and will require the client to put 1/3rd of the estimated total referral fee down before the search can begin. Then, the second payment of 1/3rd is required when the search firm achieves the hurdle metrics, such as the submittal of 5 candidates that meet the ideal search criteria. Then, the final payment is made based on the “settled” amount which is the balance left over once the total compensation is estimated. In the case of a flat fee agreement, all three payments will be agreed upon at contract signing without the need to calculate total compensation.
Typical guarantee periods for retainer-based search agreements can range from 60-90 days to as long as one year or more depending on the risk profile of the industry and location.
When do companies typically bring in an executive search firm? What are the benefits? Disadvantages?
If you ever worked closely with a law firm, you’re used to “having them on retainer.” The same way great attorneys require you to put some money up to buy their dedicated time, executive search firms work in the same way. Think about this for a moment. If you want the absolute best in the market, do you think they are going to get to work without you having skin in the game? Well OK, we know the answer to that.
The greatest benefit of hiring a top retained executive search firm is having dedicated resources from one of the top companies in the business. When you put your money down, you’re buying focus and a sense of urgency. You’re also usually getting the top billers in the firm to work on your project. Knowing that human capital is your greatest resource to stay competitive in 2021, especially as fast as the world is changing, hiring a retained search firm makes complete sense.
Companies that often hire retained executive search firms are doing so because they cannot afford to compromise on quality of hire. Whether the search is a discreet replacement of an incumbent, a key executive placement or they have the desire to bring someone in, at any level, with experience from their competition, then retained services are the only option.
For example, at JMJ Phillip Executive Search we get calls every week from new and old clients asking us to find them someone from Tesla, Amazon, Apple, Facebook, GE, Google, and so on.
Which, not surprisingly, this is what everyone seems to want in the year 2021. And who doesn’t want to make a hire from one of the leaders in the industry? If you’re a Fortune 500 then this is commonplace and often easier to attract that kind of talent.
But what if you’re a $250,000,000.00 manufacturing company that isn’t a big brand name on the PR scene? Then how do you attract that level of talent? That is often why companies choose to hire an executive headhunter to go strategically target and sell top talent on their company.
Because, if you haven’t learned this lesson yet, if your name doesn’t ring as Elon Musk’s does, those online job ads you keep wasting your money on never seem to bring in that top 5% of talent you need to survive in this world.
But wait a minute, here is that one pesky disadvantage. What happens if you put down the first or second payment but decide not to make a hire or you put the position on hold. Well, to be honest, the firm spent their money working on your search, and that money is gone. So you do risk losing out on those retainer payments. This is why retained executive search consultants take retained searches so seriously, they know you wouldn’t cut that check unless you were nearly certain a hire would be made.
But, things happen and no one can predict the future. The good news is, depending on how transparent you are with the search firm on why the search is on hold, often they may be willing to work out a credit of some sorts because the smart firms understand lifetime customer value and want to continue doing business with you.
Why a retained search versus a contingent search?
While they seem like the same service, at the end of the day they are not the same “level” of service. In the contingent search world, the recruiter only gets paid if a hire is made. Somehow that rhymes, but say it with me: the recruiter only gets paid if a hire is made. So step into a contingent recruiter’s shoes for just a moment. You spend months working on a search, then the company decides to put the search on hold.
What a minute. What?
Yes, it happens. It often happens more than 50% of the time actually. So knowing this, contingent recruiters are always going to put the most effort into the recruiting projects that they feel will result in a hire. And you can’t blame them. Who wants to spend months working on something and then not get paid? Sounds silly, but that’s the game and if you have enough contingent deals to work on, you can still make a good living.
You can also learn more about the Executive Search industry through the AESC.
Whereas a retained search, especially an executive search where you have the direct ear of the hiring managers is going to have a success rate far into the 90%+ range. So when you hire a retained executive search firm in 2021, you know you’re getting their full attention and sense of urgency because they know they have your full attention as well.
How does a white-glove approach differ from standard executive search firms?
Think about this: how many good customer service experiences have you had in the last 2 years? Not great, just good. Regardless of the product or service, when polled, most have had very poor experiences across the board.
In fact, there is a reason why they say customer service is dead. But when it comes to working with JMJ Phillip, that is not the case. We are a customer-centric brand that understands our customers are everything. We don’t wait days to return emails or phone calls. We send weekly status updates. We understand scope-creep is part of the process and work with you to understand that sometimes the goalposts move as the search develops.
And that’s what you’re coming to one of the top retained executive search firms in the business that is also widely known for their high levels of customer service.
Retained search services aren’t cheap, in fact, they are very expensive so why would you accept anything less than a high touch, white-glove type of search service? Our executive search consultants will never forget that you are always the highest priority on our list.
What are the benefits of having an in-house recruitment research team?
In 20 years we have built this company from the ground up to the powerhouse that it is now in 2021 with no signs of slowing down this decade. One thing we understand that is if the search consultants aren’t on the phone, things aren’t moving forward.
So we built a research company that is focused on recruitment research. Think of the ultra tech-savvy cybersleuths that comb the internet with great vigor to find the resumes, profiles, email addresses, and phone numbers of the worlds top talent. In a world where no one wants to pick up the phone anymore, our research teams relentless pursuit of data allows our retained executive search consultants to reach the unreachable while spending more time on the phones convincing the world’s top 5% of talent to come work for you.
Imagine how time-consuming it is to do all of your own research plus spend 3-4 hours a day on the phone speaking with clients and candidates. It makes for a very unproductive day that also leads to a lower satisfaction rate at your job.
Combining our in-house research team with our executive recruiters allows you to get the highest level of service in the business.
What is the retained executive search firm process for convincing passive and active candidates?
When you think of the recruiting process and attraction of top talent, it really comes down to the opportunity and contrasting that with the candidate’s current position and how it aligns with their future goals or vision. While many people will make a move just for the money, many others have far different intrinsic motivators.
Someone in the Midwest may want to move to California for the weather. Someone may want to move from Seattle to Boston to be closer to their children. Someone may be willing to commute 90 minutes a day if they get the chance to go work for a company they have always dreamed about working for. So the first step of going after top candidates is understanding what makes them tick and then helping them understand how your client’s opportunity can align with their life’s greater plan.
Again, when you think about the amount of time spent getting to know a candidate, building rapport with them on top of having to do that with multiple candidates you see how time-consuming this process is. So when you ask why should I use a retained firm over a standard contingent one, this is the answer.
Are the top 5% of talent passive candidates usually?
Not always, but often. One of the top things all hiring managers, human resources boards, and executive hiring committees look for is some kind of tenure. If the person can’t a job for more than a year it usually tells you something. That isn’t something people like to talk about anymore in 2021 so they brush it under the rug but like it now, the realist in all of us knows that tenure matters.
And knowing great talent often sticks around for 3-5 or more years, that means they are on the market a lot less often than those with lesser tenure. So you often find that people aren’t looking and they are very passive. Now, that doesn’t mean great talent can’t be active candidates. Sometimes it is just time to make a move for any reason and yes, great talent may not have such long tenure, it really comes to each person’s story and you have to figure it out from there.
Amongst non-founder \ family-owned businesses, some top executives’ tenure can explain a lot. Lee Iacocca spent most of his professional life working only for Ford and Chrysler. Indra Nooyi spent over 20 years at Pepsi Co. Alan Mulally spent over 30 years at Boeing. Sundar Pichai more than 15 years at Google. Mary Barra over 30 years at General Motors. Ursula Burns more than 35 years at Xerox. Jack Welch, GE over 40 years.
Now that we have you thinking about those names, imagine if your retained executive search firm consultant brought them to your organization at some point in their career. Top talent is hard to attract, and again, great names like these are not applying to ads online.
They must be headhunted. Executives also move up through various ways.
What is the typical timeline to complete a retained executive search?
This depends greatly on the type of company, the position, their compensation, and how fast or slow they want to move internally. This also becomes even more complex if the candidate has to relocate. If the company is in a reasonably desirable area and it’s not a one-off, niche position, we find that with our in-house research team we can see a good amount of candidate flow in 2-4 weeks.
From here on, it depends on the company. Pulling from over two decades of experience we can say that many companies struggle to get internal feedback in a timely matter especially when there are multiple people involved in the interviewing and decision-making process. Add in travel and covid to this conversation and it’s really hard to get everyone in one place at one time to make it happen quickly.
Between group interviews, individual interviews, onsite interviews, location scouting with the family if it’s a relocation search, things can stretch out for 6-8 months for some of the more complex recruiting projects.
But we also have had a retainer payment hit on Monday and the client had an offer out to a candidate in less than 30 days.
So to answer this question, we can move as fast or as slow as a client wants. This is the beauty of retained executive search services, we are here to take care of you.
To learn more about our retained executive search firms services, call 877-500-7762 today.