A company that I do work for does a terrific job of finding and hiring A-players. It follows the steps in this book, has a strong farm team, and consistently hires A-players. Yet when the time came to find a new vice president of sales, the president of this company used an outside recruiting firm that specialized in sales and sales management. The president had several people on his farm team who were contenders for the role, but he wanted to conduct an exhaustive search that guaranteed the company hired the best person available. He was willing to pay a recruiting fee of 25 to 30 percent of first year starting salary. The recruiter conducted a thorough process, winnowed the candidates down to a final list—and the company hired its top choice.
Several years later, this new vice president of sales has been instrumental in taking this business to the next level of success. She is a great leader and is committed to creating a team of A-players. The recruiting fee this company incurred to find her has paid for itself many times over.
Ironically, it is often the companies that are effective at finding A-players on their own that turn to outside recruiters to fill leadership roles and key technical positions. Because these companies are so committed to creating an A-player team, they are willing to invest in recruiters' fees when necessary. No company wants to pay a recruiter 20 to 30 percent of first-year salary, but sometimes doing so is the right decision.
In contrast, companies that have not used recruiters often don't understand their value and are hesitant to use them. The chairman of a large, privately held construction firm told me that he found the idea of hiring an outside recruiter to be repugnant—until he talked to his friends in the Young Presidents' Organization and found that all of them had used these firms to fill important positions. This company chairman then decided to use a recruiter to fill a key role and was glad that he did.
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A-Player Principle: Ironically, it is often the companies that know how to find and hire A-players that turn to outside recruiting firms to fill key roles. Their commitment to creating a team of A-players makes the recruiting fee worth it.
The right recruiters are a valuable asset for finding A-players. You turn to recruiters when:
You want to turn over every rock to make sure you find and hire the best person—whether the person is actively looking for a new position or not.
You need very specific industry or technical expertise.
You want to hire people out of certain companies but don't have the relationships with these individuals to reach them directly.
You want to recruit someone from a competitor and prefer to have a middleman do it for you.
The cost of allowing a position to go unfilled exceeds the cost of paying a recruiter's fee.
Outside recruiting firms find A-players on your behalf. They determine what you are looking for in a new hire and then reach out to their networks to find the people who best fit this profile. Once they identify these candidates, they present them to your company and you make the final hiring decision. Contingency recruiting firms get paid if you hire a candidate that they present to you. Retained recruiting firms get paid for designing and executing a recruiting process. You pay them even if you don't hire one of their candidates.
There is an incredible range in the quality and sophistication of outside recruiters. High-end retained firms that fill senior executive roles have extremely structured processes for determining job descriptions, recruiting and interviewing candidates, and making final hiring decisions. Low-end contingency firms may do no more than have a phone conversation with you about the position you are filling, send you 10 resumes, and let you figure out the rest.
Headhunters are brokers. They achieve success when a deal has been sealed and your company hires their candidate. A few are fantastic. They listen to your needs, conduct a great process, watch out for your interests, and consistently find and place A-players. Others can perform poorly. They're more salespeople than recruiting experts, and they try to push any warm body to fill a position. As a result, if you choose to use recruiters—and I believe you should in certain cases—choose wisely. Select a recruiter with the care that you would use to select an attorney or CPA. When you find a good one, hold onto that relationship with everything that you have.
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A-Player Principle: There are situations in which paying a recruiting fee is well worth the cost. A good relationship with an effective recruiter can be a valuable asset in the struggle to find talent.
How do you differentiate between great recruiters and average ones? Here are some characteristics the best recruiters share.
You don't have to educate the best firms about your industry; they already understand it. Whether you work with a retained or contingent firm, you want to hire one that knows your field and understands how different roles and positions fit together in a company like yours. Justin Smith, a highly regarded recruiting executive in the retail industry, says, "The best recruiters not only know the right people. They understand what those people do and how they fit into your organizational strategy. For example, a recruiter may know a lot of people who are Java programmers. But do they understand how a Java programmer fits into your IT department and what differentiates a great programmer from an average one? That is the kind of knowledge that differentiates great recruiters from everyone else."
A company I know recently hired a search firm to fill a chief information officer position with responsibility for global operations. The recruiter it retained had just successfully completed a similar CIO search for another company in this industry. The search went very well, in large part because the recruiter already knew the relevant players and was ready to conduct an effective search.
The best recruiters take the time to understand what you are trying to accomplish and whom you need. Particularly for lower-level positions (annual compensation less than $100,000 per year), some firms are notorious for "throwing spaghetti at the wall" and seeing what sticks. That is not what you want from a recruiting firm—no matter what position you're seeking to fill. You want a recruiter who will strategize with you to define your A-Player Profile and then focus on finding people who fit those criteria.
The process is the product when it comes to good recruiting. Particularly in a retained search, the best firms map out every individual with whom they speak and review this list with you. As the client, this gives you the opportunity to make sure the recruiter is casting a wide net and reaching a lot of qualified people. You can then see in detail how the recruiting firm uses your agreed-on A-Player Profile to narrow the search to a short list of the best people. Some recruiting firms resist this kind of transparency, but it adds value and provides peace of mind for you.
An outside recruiter becomes the face of your business to every person with whom they speak, so make sure that you hire a recruiter who represents you well. Many recruiters are aggressive and sales-oriented, and it is great to have such people working on your behalf. Just make sure that your recruiter is also professional, intelligent, and trustworthy.
The best recruiters are worth their weight in gold. You will likely have to work hard to find one or two great ones. So when you do find these people, cultivate those relationships for the long term. Make sure that the recruiters you hire are people with whom you can see this kind of relationship developing. If you don't have a good feeling about them, find another firm.
Should you use a contingent or a retained recruiter to fill your key position? Here are some suggestions on when each is appropriate.
For positions that pay less than $100,000 annually, recruiters typically work on a contingent arrangement in which they are paid only if you hire a candidate that they find for you. You'll want to use these firms to find candidates when your company can oversee the screening and interviewing process on its own. Contingent firms typically:
Take a somewhat less structured approach to defining the requirements of the job.
Focus more on candidate "sourcing." They find qualified candidates for your company and then allow you to take over the screening and interviewing process to select the right person.
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A-Player Principle: Use contingent firms when your company is prepared to oversee the interview process while the outside recruiter sources candidates for you.
Retained recruiting firms focus on executive (six figures and up) positions. These firms typically provide a search process that includes:
Face-to-face interviews with your team to define the role that you are filling.
Mapping out and contacting potential candidates for the role.
Keeping you updated on the candidates they have contacted.
Providing you with a relatively small number of qualified candidates to interview.
When you talk with references for these firms, make sure to verify the thoroughness and effectiveness of their recruiting process. At the end of a search, you want to feel confident that your recruiter did everything possible to find and hire the right A-player for your company. Ryan Lafferty is one of the founders of Attolon Partners, a firm that provides retained search for accounting, finance, and information technology executives. In Ryan's words, "There should be steady reporting and updates on the direction of the search and on the specific candidates reached throughout the search process. That kind of process gives clients peace of mind. It's a large part of the value of retained search."
Having made these distinctions, the best contingent firms often act like retained firms. They take the time to listen to you at the beginning of the process and understand the position you are filling. They have deep contacts in your industry that allow them to reach out and comprehensively search for the strongest candidates. They also emphasize finding qualified candidates rather than just sending you resumes.
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A-Player Principle: The best recruiters combine a proven process for uncovering A-players with deep contacts and industry knowledge. When you interview recruiters, look for all three factors.
You are generally better off working with a recruiter who specializes in your industry or discipline. If you are hiring salespeople for the pharmaceutical industry, there are recruiters who specialize in that role. If you are hiring petrochemical engineers, there are recruiters who focus on filling just such positions. If you are hiring a chief financial officer or controller, there are firms that do nothing but place financial executives.
Specialization makes sense when you realize that recruiters spend every day talking to people who are both potential clients (executives who want to hire someone) and potential candidates (individuals interested in the right new opportunity). The more recruiters focus on a specific industry or job type, the deeper their contacts and understanding become. This translates into a recruiter who quickly grasps what you need in your new hire and efficiently taps into a strong network of people to find the right A-player for your business.
There are recruiting firms out there that are generalists. These firms are one-stop shops; they will fill almost any position in your company. If you build a strong relationship with a firm like this, it can become the outsourced recruiting department of your company. This can be a valuable solution, but be cautious when you first try to establish such a relationship. If you have limited experience with recruiting firms, your tendency will be to turn to a recruiter you know from your network. When you ask the recruiter if he or she can fill any position—from chief executive to dog catcher—the recruiter will likely say "Absolutely." In most situations, you are better off being referred to a recruiter who specializes in your industry or area of need. You will likely have more success finding the next A-player for your organization with specialists.
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A-Player Principle: Though there are exceptions, you typically want a recruiter who specializes in your industry or discipline rather than a generalist. Don't pay a recruiter to learn your business; leverage those who already have the knowledge and contacts that you need.
Some great advice for college students is to "take the professor, not the class." A terrific professor can transform a seemingly boring subject into something interesting and valuable, while a lousy professor can turn the most scintillating topic into a trip through Purgatory. This same wisdom applies when hiring a recruiter. Hire the recruiter, not the firm. The outside recruiter you select may work for one of the biggest search firms in the world or for a boutique firm with a small staff. Hiring a big firm does not guarantee you great results. Find a recruiter who is well known and well respected in your niche and make sure that he or she will personally conduct your search. The size of his or her firm is secondary.
When you find a handful of reputable recruiters in your space, interview them before hiring one. Here are some questions to ask:
What industries or roles do you specialize in? (Are they gener-alists or specialists?)
How many searches have you conducted in our industry in the past year? (Do they have the industry expertise you want?)
How many positions have you filled in these areas in the past year? (Do they have a deep list of contacts as a result of recent search activity?)
Can you describe your process for conducting this kind of search? (Listen for how comprehensive and analytical their procedure sounds to you. Is this a recruiter who is going to follow a great process or a firm that shoots from the hip? Clearly, you want the former.)
What is your success rate? (Believe it or not, many searches are unsuccessful—the positions don't get filled.)
Who will be conducting my search? (Particularly in large recruiting firms, well-known search consultants are the rainmakers, while less seasoned consultants conduct the searches. Make sure you know whom you are hiring.)
What is your fee for this kind of search? Is it calculated on base salary, base plus bonus, or some other formula? Do you have any flexibility in your fee schedule?
What type of guarantee do you have for candidates that you place? (Almost every firm provides some sort of guarantee for the placements it makes. If a candidate placed by a search firm leaves within the guarantee period, some firms provide a prorated reimbursement of your fee. Other firms redo the search at no additional fee. The time frame of these guarantees differ, so verify that as well.)
Who are your clients? (A very important question, because firms will not recruit employees from their current clients. If the people you want to hire work for a recruiter's clients, forget that firm and find its best competitor.)
Can you provide me with at least five executive references at companies where you have conducted a search in the past year? (Make sure to check them.)
What taxes must be paid on your search fees? (Depending on the state in which the firm is based, you may be responsible to pay taxes on the recruiting fees. While this shouldn't be your number-one criterion for choosing a firm, it is good to know).
Just as when you hire an employee, checking references burns up time but is always worth it in the end. You will deal with this recruiter extensively, and he or she will represent your company in the marketplace. It's worth your time to verify that a recruiter generates good results and "plays well with others."
Matt Todt, a seasoned recruiting manager in the pharmaceutical industry, asks these questions when speaking to a recruiter's references:
Is this recruiter professional?
Does the recruiter follow up and do what he or she promised?
Does the recruiter have a well-defined process for conducting a search?
Does the recruiter follow instructions?
Did the recruiter interact with you and your people appropriately or was he or she inappropriately aggressive?
Would you hire the recruiter again?
The process is not over when you settle on a recruiting firm. You want to review the contract closely before you sign it and have your attorney do so as well. Here is another helpful checklist from Matt Todt to guide your contract negotiation with a recruiting firm.
What is the fee? Calculated on base salary? Base plus bonus?
What is the guarantee period?
What is the definition of a "candidate"? For example, you can stipulate that if a recruiting firm presents you with a candidate who is already in your database, you don't owe that firm a fee if you hire the person. Alternatively, if a recruiter submits someone to your company and you hire him or her later for a different role, you often still pay the recruiter's fee.
Include nonsolicitation and confidentiality agreements in the contract. These are clauses that spell out that the recruiting firm cannot recruit your employees or share information with your competitors. Ethical firms always follow these guidelines, but it never hurts to have them in writing.
In order to fulfill a guarantee, recruiting firms sometimes require written details about why a new hire they placed with a company did not work out. You can take this verbiage out of the agreement if you don't want to provide this information to an outside party.
Confirm what state sales tax (if any) must be paid on search fees.
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A-Player Principle: Pay attention to the details of your recruiting contract. Follow the checklists in this chapter to avoid unpleasant surprises down the road.
Recruiting fees typically range from 20 to 30 percent of first-year starting salary, plus any additional expenses the recruiter incurs during the search. I once worked with a contingent recruiter who occasionally agreed to work at reduced fees with clients who negotiated. He made 30 percent of starting salary with Company A and 20 percent with Company B. Company B thought it had driven a great bargain with him, but it did not account for the fact that it was always the second client to interview the A-players he recruited. This recruiter sent his strongest candidates first to the companies that paid full fees.
You don't have to pay absolute top dollar to recruiters, but you must be willing to pay a competitive rate. A firm that takes a bargain-basement fee arrangement is often desperate for business and will likely not represent your firm well in the marketplace. You do get what you pay for when it comes to recruiters.
There are times when you should hire an outside recruiting firm. However, the primary point of this book is that you and your team must take responsibility for finding and hiring A-players. What can you learn from the best recruiters about how to find A-players? Here are some takeaways.
I know a recruiter who asks every individual whom she places with a new company for a phone directory from his or her former employer. When she gets it, she immediately gets on the phone to expand her own network of contacts. While you don't have to be quite as aggressive, you should be asking people for A-player referrals all the time. Particularly when you hire new A-players, strate-gize with them about connecting with other A-players in their networks.
Karyn Rogers Verret, president of Verret & Associates, a well-regarded executive search firm in the retail industry, strongly believes that "the Internet is a supplement to—not a replacement for—personal contact." You should absolutely leverage social media tools to make initial contacts, but you build those connections into relationships via phone and face-to-face contact with people.
As an executive committed to hiring A-players, the more people you meet, interview, and add to your farm team, the better your chances of having A-players to hire when you want them. The best outside searches for A-players start with hundreds of possible candidates and narrow down to a handful of highly qualified people. Doing this yields multiple candidates who have strong technical qualifications. Then, the company doing the hiring can focus on selecting the person who combines this technical ability with critical leadership skills, communication skills, and potential for further promotions.
The best search firms emphasize the quality and thoroughness of their recruiting process. They know that it is their ability to conduct an exhaustive search every time that keeps their clients coming back. If your company is committed to hiring A-players, you must pledge to make recruiting a strong, ongoing process, not a haphazard and periodic event.