Aug 7, 2023
Executive search is a specialised recruitment service that companies pay to seek out and hire top talent for senior-level and executive positions as well as non-profit organisations (e.g. Director, Managing Director, C-Suite, and non-executive directors).
A headhunter usually looks for other highly specialised jobs at companies where there is high competitive pressure for food manufacturing talents, like managing director and c-suite positions.
An executive search firm is a professional service firm that focuses on finding executives and other senior personnel—acting as an intermediary between the company and the candidate.
Typically, executive search professionals have a broad range of professional contacts in the industry or speciality they're working in (such as food manufacturing), detailed knowledge of the area, and usually at the most senior levels in executive positions.
Executive search professionals are constantly involved throughout the hiring process, from the initial interview through the offer stage. If they feel the candidates meet their stated requirements and would be a good fit for the company, they may conduct a detailed interview and present them to clients.
Executive search firms typically have long-lasting relationships with clients spanning many years; in such cases, the suitability of candidates is paramount. It is also essential for such firms to be highly professional and confidential.
When companies outsource their executive recruiting efforts, they often lack the internal research resources, networking contacts, or evaluative skills necessary to recruit for themselves properly. An external agency can give companies the freedom of hiring from their competitors without doing so themselves. They can also choose among candidates who wouldn't usually be available via internal or active sourcing methods, such as headhunting.
Contingent & Retained
There are two broad contractual relationships between clients and executive search firms: contingent and retained. Contingent recruitments are paid only after the recruiter has completed the search assignment. Retained recruitments are delivered throughout the entire recruitment process.
As stated, contingent search firms are paid only after completing a search, typically when the candidate accepts the job. Recruiters may earn 15% and 25% of the candidate’s first-year base salary or total remuneration as a hiring fee. The fee may also be calculated as including the candidate’s median or expected first-year bonus payout. In any case, the fee is (as always) paid by the hiring company, not the candidate/hire.
Retained searches typically involve jobs paying upwards of £100,00 and often far more. Search fees are typically between 25% and 33% of the annual salary of the recruited executive. Payments are usually made in thirds; one-third at the time of the initial search, one-third when the shortlist is delivered, and the last third when the candidate is placed.
Alternatively, a fixed price may be set. Retained search firms guarantee to do an assignment again if the hired candidate leaves before a stated milestone (anywhere from one year to three years), generally with the caveat that there has not been a material change in the position requirements or management team.
Retained recruiters are employed by the companies they represent, not by job seekers looking for employment. Recruiters in the UK cannot legally charge candidates for their services.
Search firms usually agree not to poach each other's employees. These agreements prevent a company from approaching its current employees as candidates for other clients.
As management consultants, we work in the best interests of our clients. It would therefore be counterproductive to remove talented executives from those clients.
Search firms may decline to accept an assignment from specific clients to preserve the ability to recruit candidates from them. Some large search firms might require a guarantee of a certain number or pound (£) value of searches before they would place an entire company "off-limits."
Delimited or engaged search
Delimited or Engaged search is another form of retained search, which is often improperly categorised as executive search. However, there are distinct differences between these two types of searches. Similar to owned search agencies, engaged search agencies require an upfront fee before hiring the search.
Unlike conventional retainers, however, the delimitated/engaged search commitment is refundable if the recruiter fails to achieve a hire or other deliverable specified by the contract.
Furthermore, the engagement fee is not calculated according to the typical 1/3 / 1/3 / 1% model of retainers. Instead, a relatively small upfront fee is discounted from a successful candidate's placement fee of 25–40% of their first-year salary.
Retained and engaged searches involve partial payment before starting the job, and the contract recruiter has the search entirely. That said, the search can be tailored to the client organisation's needs, with the search consultant providing a consultative service during the entire process.
Both retained and delimited/ engaged searches to serve clients, not job seekers. However, delimited/hire searches always (not sometimes) state a future deadline when the project must be finished or the down payment refunded.
Pros and cons
When hiring for mid-level positions, clients usually work with contingent search firms. Contingent search firms typically rely heavily on their contacts. It is not unusual for a client to work simultaneously with several contingent recruiters to maximise the number of candidate resumes they receive.
Contingent firms don't get paid until they place a candidate, so the search risk is shifted to the search firm.
Contingent search firms often charge their clients a higher percentage fee than retained and delimited search agencies because they take on more risk. Senior-level positions are typically filled by recruiters who have worked with clients. Usually, they will be assigned to a retained or delimited consultant.
Working exclusively with one firm on these searches allows the client to develop a much deeper relationship with that firm and receive a much higher level of services.
With all methods, including retained, delimited, contingency, and others, clients rely on search pros to provide both resumes and insightful, consultive information about the market in particular. A client who seeks a retainer-style search is often willing to pay for a service level that includes a guarantee of results.
While delimited searches entail upfront fees, they're usually much smaller than the total preplacement fees retained examinations entail. Furthermore, delimited search professionals risk their failures to execute the search within the specified time frame, offering to refund any up-front fees in case of such a failure.
Delimited search is not as ideal for open-ended inquiries, but the "ticking clock," which is often seen by clients, as an incentive that motivates delimited search recruiters to stay more active and involve themselves throughout the hiring process.