Finding a new chief executive or chairman has become a transactional process. The mechanics are well established but the search touches only a fraction of the available talent pool.
Unfortunately, today’s headhunters are professional interviewers who do not understand how chief executives work in practice. Top chief executives focus on winning by hiring strong leaders with the right personal qualities. In contrast, their headhunters rely too much on narrow job briefs. There are more fundamental, structural problems within the industry. Headhunting firms are staffed by highly experienced and dedicated professionals, but their incentivisation, approaches and leadership are out of date.
Individual search consultants earn low base salaries, with bonuses driven by the number of searches they sell and execute. This means that they are heavily incentivised to get as many searches done as quickly as possible. Ideally, a client would want a search across as many geographies and industries as possible. In contrast, consultants cut their own pay if they share the work widely with other partners.
With a pressure to transact searches, and client relationships in the hands of individuals and not firms, knowledge growth is slow, built case by case. What they should do is proactively identify the best leaders and emerging leaders wherever they are in the world. Search consultants typically charge a third of the successful candidate’s estimated first-year package, irrespective of whether the chief executive search is successful. It is not surprising that clients hate this.
The search industry must move towards much lower retainers, a success fee for completed searches and far more significant upside if they place a highly successful boss.
We need firms that understand the different types of chief and how they work. A winning firm is a proactive talent scout constantly building a base of the best global leaders.
It transacts fantastically still, but now shares richly in success and is not paid for failure.
We need to move from a passion for clients and fees to a passion for clients and global leaders and a firm belief that fees follow good work. Imagine, a headhunting firm that clients love and employees are proud to be part of and whose candidates create the next generation of global companies. What a prospect.
Extraction of an article by S. Tappin, The Times.
#1 by Stavros Jeaneaux on February 17, 2010 - 05:06
This all sounds a little naive.
Clients pay for and get what they deserve in the services sector, whether we are discussing plumbers, doctors, headhunters or accountants. If a client insists on paying the lowest possible dollar for a mission criticial hire, then they will get a poorly-networked fee chaser who wants a quick result.
Try setting up a thoroughly professional, value-add executive search firm from scratch in the current climate and if you are still growing and making good money in a year’s time, I will eat my monkey’s hat.
For me, as a senior headhunter in the Asia region, I have witnessed the slow death of corporates looking to develop long term realtionships. Inevitably some new HR hire decides this approach doers not represent value for them and they go with a cheaper and dumber local option.
The best relationships tend to be recognised by Line Management rather than HR, who seem to have a pathological fear of external consultants who are not appointed by them.
And this reality, in my book, makes this article an ideological fantasy.