Search Firm Success

Top Ten Causes of Search Firm Failure

By Frank G. Risalvato

The list is arranged in order from the most to least prevalent factors.

By “failure” we consider any recruiting effort that was not completed within a six month period. This is considered an ample time frame for most recruiting projects but for the highest level searches for very visible roles with the largest publicly traded corporations.

TOP TEN CAUSES OF SEARCH FIRM FAILURE

1.        Fee Attitudes: Expense or Investment?

2.        Stalling with Feedback.

3.        Passing the ball to the wrong Team Member.

4.        The Search Party Posse Strategy

5.        Excessive Authority in the Wrong Hands.

6.        Cutting the Recruiter Out of the Loop.

7.        Too Many Chefs Seasoning the Soup.

8.        Overselling, Under-Performing Search Firms.

9.        Requesting References.

10.     Cleaning House.

We now explore the common underlying factors that result in each of the above.

1) Fees: Expense or Investment?

Many consider search fees as expenditures. It is a line item to be placed under the debit column. Or is it?

Few bother to speak to managers across town or state lines to find out what financial impact may have resulted from the service.

Company executives have frequently revealed that most search firms they contacted came “highly recommended”. It leaves one to wonder why then, so many proceed to spoil a good thing through hard-nosed negotiations to reduce a fee as their first goal in the process.

When asked about the fee, most clients hesitated in wanting to reveal “the great deal they received”.

During actual company visits and consultations, client’s eyes would often point downward when asked “what fee did you work out”. As if they know they may have done something wrong just as a puppy dog does when approached about soiling a carpet.

Only after probing did it finally become evident the low fee is precisely why they were without a candidate six months later.

Feeling “you have accomplished something” by bargaining the rate down some ten or twenty percent may momentarily inflate your esteem and instill a false sense of accomplishment. Especially for those making such decisions in the human resource department or financial executives somewhat expected to engage in negotiations.

Everyone loves a deal. Especially CFO’s and Controller types who thrive on such topics.

But we’re not talking about automobiles sitting on a lot that have gone unsold here. When months later you are left wondering why candidates are not being referred quickly enough, you may have only yourself to fault. A search firm may not always decline a search especially if a client came recommended – even though the industry would be better served if they did. But as other factors begin impacting the relationship later on top of the lowered fee … the process breaks down.

Here’s what a postal service worker in a major distribution center revealed to me once about the difference between first and third class postage:

What ever you do Frank, never mail anything at third class postage rates. Do you know how third class is handled? The parcels are dumped in a corner and left there indefinitely until there is no longer any first class postage to handle. It can take weeks or months before that ever happens.

Nearly every search that has failed where we were called in months or years later to consult upon … it was revealed to us that the company was very proud to have obtained a very low fee on that search. Third class fees.

They might have secured a low fee – and enjoyed being able to boast about it - but they still had no hire to show for their Controller, I.T. Director, Network Administrator, National Sales Director or CFO while millions of dollars were being sidelined or neglected during the stalled search.

It has occurred to us that companies rarely make the correlation between the lowered fee and lack of candidate production months later until we made the connection for them.

As Benjamin Franklin so succinctly stated these were cases of being “Penny wise and dollar foolish” (Back then the dollar was actually a British pound.).

2) Stalling with Feedback.

Receiving resumes via email, and then failing to provide feedback for more than two or three days. Candidates are a perishable commodity. The better ones are quickly turned off by unresponsiveness which can be interpreted as a lack of initiative or seriousness on behalf of the hiring company.

Providing essential dialogue and reactive feedback at a glacier pace negates all the hard work and effort put forth by your recruiting partners.

Some average or mediocre candidates might endure a sixty to ninety day extended hiring process for certain rank-and-file positions depending on the fields and geographic market variables.

Most of the better candidates however, will not stand for it. There are plenty of other companies that have their hiring act together. Flubs, flops, stalls and stagnation during the feedback will get noted and encourage astute candidates to accelerate seeking alternate career choices elsewhere.

Put your search firm through more than one or two lost candidates, and they will most likely render your search unserviceable and walk away as well.

3) Passing the ball to the wrong team member.

Initiating a search agreement between upper level management (COO, CEO, CFO, CIO or other similar level), and then turning the executive recruiter over to recently hired, low-level, inadequately trained or inexperienced human resource coordinator as “the person you must interact with for setting up interviews” is a guaranteed recipe for failure.

I have experienced many cases where the search was sufficiently mission-critical for the chairperson, Senior Vice Presidents or CEO of billion dollar companies to conference directly with us, only to later instruct us to “deal with Jennifer from here on”.

To our surprise, “Jennifer” often turned out to possess barely one year with the company and little to no previous experience. It made no sense.

“Jennifer” (name is used to fill in for all such administrative types) was rarely available, didn’t quite care, and did not view the project with the same mission-critical vision the chairperson did.

If the position is responsible for millions of dollars – have someone that understands what it takes to generate millions and appreciate the value of time and money act as the coordinator. A human resource coordinator should not be undergoing training through trial and error during an important search.

Everyone has to have a first day on the job. We all have to learn on the job as well. But there must be a balance between which specific projects an inexperienced or recent employee is permitted to practice on.

Countless studies our researchers have conducted have demonstrated many human resource coordinators are overworked, underpaid for the volume of searches they are unrealistically expected to manage, difficult to reach, and will not interview during lunch, beyond five p.m. or during other non-business hours necessary to accommodate higher quality candidates limited times of availability.

Besides these minor shortcomings, human resource coordinators are usually very nice people.

While weeks lapse as a hard-working candidate struggles to fit a telephone interview into human resource’s narrow windows of opportunity the company is hemorrhaging the loss of untold millions, tens of millions or more due to key positions going unfilled.

All because HR does not want to call someone at six-thirty p.m. After all, that’s after work hours and their private personal time.

In contrast, such hours including weekends are when your external executive recruiters and staffing consultants are hard at work getting a leg up on your competition by being the first “accommodating” recruiter to empathize with a stellar candidate’s priorities.

All of the recruiter’s efforts risk unraveling when confronted with a different mentality by certain human resource staff.

Consider this:

A Fortune 500, multi-billion dollar corporation recently centralized its entire recruiting function with a thirty person team of recruiters. Most of the newly hired recruiting staff consisted of recent college grads with one to two years of experience; none of which was in the company’s industry. Few had relevant degrees. One had an education in zoology. About thirty percent were recruits who had failed in the search industry during their one prior year or so of experience.

Having failed so splendidly in the competitive world of recruiting they were now sufficiently qualified to be hired internally by a major New York Stock Exchange traded company. This was a case of the “Peter Principle” in reverse.

I personally polled a few recruiters of one Fortune consumer product company at the request of a Vice President who wanted to know if “The newly reorganized department is working”. I was unable to deliver good news.

Several individuals made a comment similar to this:

“Truthfully Frank, I have forty open requisitions on my desk. I can’t see how anyone could manage and keep track of more than fifteen or twenty max … there’s no way I can ever get to all of these and half of what I have is going to sit around for awhile … “

There you have it! The classic situation of most internal staff level recruiters.

This lamentation has been repeated hundreds of times and nothing little has changed whether we were in the age of the fax machine in the eighties, the age of the PC in the early nineties, or the internet age at the turn of the twenty-first century.

If you must have such a person handle some of the coordinating process, make sure there is competent oversight or a key contact the search firm or manager can call to cut through bottlenecks and red-tape where necessary.

This applies whether there is an external recruiting firm in the process or not.

You can pass off a process to human resources but designate a manager with sufficient authority as the Roadblock Buster to contact if things are not moving forward.

4) The Search Party Posse Strategy

There’s enough information under this heading to create a separate manual illustrating the pros and cons of contingency versus retainer. For our purposes we will highlight the most dramatic problems which surface under contingency search.

This is a classic scenario that has unfolded thousands of times in searches nationally:

1. Search firm “A” is hired under a contingency arrangement

2. Search firm “A” is perceived to not be delivering results quickly enough (pick any of the reasons outlined in this manual as the usual cause) so therefore …

3. Company signs another contingency contract with search firm “B”. After all, it does not have to compensate to enter into a contingency agreement (in most cases … however many search firms have changed their procedures due to this practice).

4. When search firm “B” realizes “A” already contacted many of the same candidates and the problems exist not with candidate availability but with company protocol, search firm “B” places the order on the backburner.

5. Company now has two firms it views as “unproductive” so it invites search firm “C” and possibly “D” to what becomes the ever-expanding search party posse!

Sometimes a retained or other renegotiated treatment of the fee with the original firm would have been far wiser than starting all over again.

The longer the position remains unfulfilled, the increasing negative stigma and buzz develops on the street within the candidate community who wonder what might be wrong with that hiring company.

Keep in mind offering to alter the compensation structure to your search firm is one very easy, viable and efficient means of possibly getting candidates back in the pipeline and re-stimulating the relationship over the search party posse strategy.

If any position represents a realistic search, one and only one search firm should suffice.

5) Excessive Authority In The Wrong Hands.

In contrast with item number 3 above, giving too much authority to one centralized corporate recruiting representative can often backfire. National hiring or candidate selection control for a specific product line or business segment results in “absolute authority – corrupting absolutely”. This can result in premature rejection. Or rejection for the wrong reasons (such as favoring one search firm over the other) as well as other egregious possibilities.

Whereas management may have appreciated knowing of certain candidates they have been prevented from learning about such due to excessive control from within HR. Other abuses noted have included

·       Stalling intentionally on passing along search firm resumes for the perceived preservation of job security

·       Stalling with the hopes of finding corporate recruiting sourced candidates prior to the manager’s learning of the search firm referral.

·       Allowing individual ego and job preservation concerns to trump company goals and missions.

·       Favoring one search firm due to gifts, kickbacks or other

When individual ego precedes company goals everyone in the organization looses.

Most often, top tier executive managers are never aware of what is going on at these levels.

6) Cutting the Recruiter Out of the Loop.

Having management arrange initial interviews with the search firm and then setting up a second or final interview directly with the candidate without informing the recruiter of the subsequent interview or offer intentions.

By cutting the recruiter out mid-stream, you are only preventing yourself from learning “inside knowledge” the candidate is inclined to share with the recruiter. Why short-circuit yourself from obtaining valuable information and consultation which can be incorporated into an offer?

Sometimes such information could result in savings of thousands in unnecessary perks you mistakenly assumed were needed. Other times a serious misunderstanding has taken place causing a candidate to resign without obtaining all the facts – leaving the search firm potentially liable even though you have prevented them from performing their due diligence by acting on your own.

Would you ever retain a Realtor© to sell your house, have them invest for months in a marketing program – then start calling potential buyers that came to your open house directly ? There’s no difference here.*

*Limited exceptions may apply to large corporations when conducting top level searches. Recruiters may sit in first interviews or facilitate the process to a certain point – then intentionally agree to step aside to allow sensitive dialogues to proceed while helping the candidate build rapport with the company.

7) Too Many Chefs Seasoning the Soup.

Just as too many search firms invoke the law of diminishing returns. The same principle applies to hiring managers involved in the hiring decision.

Limit group interviews to only the most critical and necessary team leaders or members. The more company hiring representatives that must participate and agree in unison on a particular hire, the more likely the chances are of a “hung jury” syndrome. One or two is fine. Three individuals … maybe. Once the hiring decision rests upon the shoulders of four or five or more individuals all coming to an agreement – you will have better chances at winning the lottery than getting a group consensus.

Human nature is the fundamental force at work here. If one … just one person had a “bad day” or did not like his or her review last month; or is perhaps disgruntled for any other reason … throwing a wrench into the hiring process could be their only hope in obtaining satisfaction and retribution. Whether they liked the candidate or not becomes irrelevant.

It happens far more often than executives ever become privy to.

If your search involves a team decision of more than two individuals, and you are experiencing months worth of delays, this could be your culprit.

8) Overselling, Under - Performing Search Firms.

Quite simply, you may have picked the wrong search firm. As we mentioned in Section 2, many intelligent, well-educated and smart business managers have been duped by an irresistibly charming account executive representing a search firm whose name and prestige may have long outgrown its actual capability. Even Donald Trump considered the master negotiator by some, admitted being “duped” many times.

In such instances the recruiting bench strength did not live up to the account acquisition strength. Too bad.

This is a problem that extends through to all types of businesses including hiring contractors, landscapers, plumbers for home repairs or any service oriented profession where a well-rehearsed salesperson convinces you he or she is right for the job.

You may think for a moment that on this one point blame is finally pinned on the search firm where it should lie. True, in this example the search firm might have over-promised and is now under-delivering. Yet, the same responsibility rests on the shoulders of the company.

Just as you would ask for references when hiring a candidate, you should conduct due diligence and ask for references of the search firm. This is not as easy as it seems however when big egos interfere. This leads us to failure number nine.

9) Requesting References.

Here lies the rub: Very few executives would actually call a reference even if a stack of them were left on the table. At least not when it comes to selecting a professional business consulting service such as a recruiting firm. We understand this may not be an appealing undertaking for various reasons, but at least ask for the firm’s track record.

While companies are quick to check references on candidates, very few bother to ask for the same on the search firm they are about to contract.

One comparable analogy is that of the driver that would prefer going around a city for hours than stopping at a gas station to ask for directions.

And if one does not want to alert other industry movers and shakers – you can still ask for printed testimonials or a citation or summary of recent searches.

By obtaining track record and search placement success information, you can eliminate problem number  and avoid having signed on the wrong search firm.

10) Cleaning House.

Savvy real estate sales professionals know that proper house staging can lead to important advantages in selling the house … even while neighboring homes remain unsold.

If the old adage of “location … location … location” holds true when it comes to real estate investing, then “presentation … presentation … presentation” are the next three most important factors.

When it comes to vocation presentation becomes a highly important deciding factor. You are not just offering a job but providing a home away from home where that employee is expected to spend most of their daytime (and in many cases night time) working life.

When a candidate is greeted by a frumpy, unkempt, cluttered or outgrown office environment such will create a negative first impression. It may even be difficult to ever undo this negative reaction during the interview.

I’ve been asked to visit clients and help them understand “… why we can’t fill this position despite trying for more than one full year …”

Often these companies have used one, two or three search firms over one or even two years off and on. They have reached desperation.

Once I rule out the salary and/or compensation not being an issue given the title and responsibilities; the next most likely culprit we focus on are

                        a)  Interview process itself (which we’ve covered in numbers one through nine)

or

                        b)  The overlooked office environment and aesthetics

Sure enough, after excluding procedural causes outlined in this list, the office environment was the case in many instances after ruling out all the above items.

In one company, I walked in to a small lobby, had to go up a staircase that was not painted in perhaps ten years … containing scuff marks, and what appeared to be a hole from a boot kick. I would not want to work anywhere where people kick holes in the wall … especially not knowing if someone standing there was the intended target.

Once upstairs, the carpets were loosened from the wall, bubbling and snaking (they had long outlived their purpose). The lack of attention to aesthetics continued when I walked into the controller’s office and noticed an herb garden that was overgrown and spilling over shelving like something out of “Little Shop of Horrors”.

Needless to say, this company was never going to get anyone to accept an offer. In fact I learned it had offers rejected three times over a period of one year despite offering ten percent more than local competitors for the same type of job.

This company had to attract at least three times more candidates for each single position they expected to fill due to the unpleasing work environment which the president was not about to change.