The Best Value in Executive Recruiting

A friend of mine who writes an excellent financial newsletter always signs off with a quote from Warren Buffet:

Price is what you pay.  Value is what you get”.

Tony Tiberius came to mind as I read a recent article published by HuntScanlon, a North American publisher in the executive search and leadership niche. The article reviews the best value in executive recruiting and right there – Myth #2 of four Myths – is the old price shibboleth: 

Executive search firms are pricey and provide low return on investment

It is there in every discussion on recruiting. And it is both erroneous and irrelevant because, as Mr. Buffet points out, price is a false metric.

First, a little background.

If you engage a firm to fill a position, you choose between two dominant systems in managerial or executive recruiting. (i.e. excluding low-level, job-board “classifieds”). They are known as Contingency Search and Retained Search

Contingency Search firms work on the TIATWASIIS approach (throw-it-at-the-wall-and-see-if-it-sticks). They select candidates based on a review of available profiles and they only get paid when you accept one. There can be many contingency firms “helping” you on the same mandate.  You do a lot of reading and assuming.

The work of the Retained Search firm is exclusive to you. They get involved. They ask a lot of questions. They want to know exactly what kind of person you think you want and exactly what kind of person they think is most likely to be above average in your environment.

They do the reading and research and assessing. You get a list that only contains the names of people meeting the criteria.

Now, getting back to Mr. Buffett.

The price paid to the contingency recruiter that wins the Resume Lottery is usually – but not always – the lesser of the two.  Not really surprising. A lot less work has been done on your behalf at a considerably lower skill level.

But the differential in value of the work accomplished is huge for these reasons

• The retained search firm has worked exclusively to meet your specific requirement
• That obligation has remained until you are satisfied you have the best person
• You have accessed a much wider talent pool. Your recruiter has not been limited to those looking for work; they know who might consider switching to join you.
• Your regular workload has been, as a rule, not that greatly affected.

The relative value between the two types of recruiting is greatly affected by the talent need.  The more critical the sought-after contribution, the greater the value of the search process undertaken.

Having to replace someone hired as a line manager in a medium-sized company is money and time wasted but will not summon an emergency meeting of the Board.

Finding undiscovered limitations in a C-level hire can go all the way to the bottom line. At a minimum estimated cost of 2.5 times comp, you soon hit a million plus and we haven’t mentioned reputational risk.

In other words, justifying the selection of either a contingency or retained search for a senior position solely on the basis of cost is, to put it politely, looking through the wrong end of the telescope, Less politely, it is dumb.  

By the way, here are all four of the recruiting myths:

Myth No. 1: Anyone can execute an executive search by using a job board.

Myth No. 2: Executive search firms are pricey and provide low return on investment.

Myth No. 3: Internal talent acquisition teams can produce the same caliber candidates as an executive search firm

Myth No. 4: A contingent search firm offers the same value as a retained search firm.

And here, one last time, is Warren Buffet.

“Price is what you pay.  Value is what you get”.

Game, Set. Match.