Obsolescence should not be feared. While it signals the end of something familiar, it welcomes a new way forward. We have reached this crossroads with retained executive search. It is obsolete.
Today, the retained executive search process is costly. Frequently, after lengthy recruiting processes, retained searches deliver new board members who fit poorly with the boards they join. Alternatively, positions go unfilled, leaving the board without qualified talent around the boardroom table that have a fiduciary responsibility to the company, shareholders and other stakeholders. Naturally, this leaves the organization at risk.
Currently, there are six major problems with the retained search model.
The more searches an executive search firm launches, the more money goes to its bottom line. So senior partners naturally focus on bringing in new business.
Exuding confidence and expertise, they approach potential corporate and private equity clients. They assess the board’s needs and culture, and woo the power players in the boardroom. As the face of the search firm, hiring managers believe that these partners will be heavily involved in their project.
The truth? Partners cannot afford to spend time on board member recruitment because they have to bring in the next piece of business. They need to leverage their abilities. So they pass the baton to junior associates working feverishly in cubicles. After delegating the job, their involvement is minimal.
Not having worked directly with the hiring company, these associates frequently have little understanding of its culture or goals in filling a role. Also, they may not have the necessary expertise to find the right person. Finally, juggling ten to twelve projects, more than is humanly possible to do well and rapidly, their success is hampered.
The heavy workload builds profitability for search firms but frequently leaves their clients high and dry.
In the days before the Internet and social platforms like LinkedIn, there may have been some justification for charging a high fee for board member recruitment. Much of the value search firms provided was the knowledge locked in their internal database. But today, large external databases, such as LinkedIn and other social platforms, are available to anyone at any time. LinkedIn alone has over 100 million users in the United States.
Despite this, retained search firms still typically charge exorbitant rates for the search. Also, regardless of whether or not the firm completes the search, hiring companies still pay the fee. Not surprisingly, the standard payment agreements fail to incentivize search firms.
To start with, it’s a lot of money. When there’s nothing to show for it, it’s beyond conscience.
When hiring managers complete the profiles of the individuals they seek, they describe ideal candidates. Often, the exact match does not exist.
The search firm is unlikely to counsel the hiring managers on their wants and needs. After all, they want the business. They present themselves as the organization that can find the proverbial needle in the haystack. In reality, there may be no needle.
At the other end of the spectrum, a search firm’s associates may write the specs for a board position in a way that makes it easier to fill. They do not look below the surface to understand the experience required to address organizational issues. If they define the role broadly, it will be easier to find a match.
For example, a company may seek a board member with deep domain experience in cyber security. If the search firm develops a profile for a good all-around risk management executive, they will likely miss the mark. They should be looking for an executive who has demonstrated the ability to solve their specific problems.
When you have associates who are juggling eight to twelve searches, they may only be able to serve half of their clients during a week. Capacity constraints alone explain why searches take so many months.
Also, if the “ideal” candidate does not exist, the search can stretch indefinitely.
In the meantime, companies are rudderless and the cost of delay can be enormous.
After months of searching, there’s a real possibility that the search will be unsuccessful. In fact, 20 to 30% of the time the search firm does not find an individual to fill the position on a board. The unfortunate reality of retained searches is that there is no guarantee that the search will end in a successful placement.
There are problems on both sides of the board-recruitment fence. Hiring companies struggle to fill board positions. And professionals who are ready, willing and able to lead companies forward are often stuck in lengthy, fruitless searches.
The way forward is to flip the search process on its head. Instead of working for hiring companies, Summit Executive Resources acts as an agent for executives who seek positions on corporate boards.
Since these individuals pay Summit to hunt down the right opportunities and represent them, there’s no fee for hiring companies. Also, these organizations may find a required board member more rapidly than they would when using traditional search techniques.
To make this model work, Summit had to determine how to find qualified people seeking board positions. We decided to work only for known individuals in our professional network and those who are referred to us by people we trust. No matter how we find someone, each undergoes an extensive vetting process before we become their agent.
Another stumbling block is that candidates often do not have a realistic picture of the value they offer or the organizations or where they would fit best. Consequently, we dig into each executive’s strengths and accomplishments through conversations and assessment tests. This process enables us to create a high-definition picture of his or her ideal role and company. Then we develop a list of organizations that are good matches and reach out to them.
For hiring managers, the beauty is that they can simply call when they have a need to see if we represent an executive who meets their requirements. This solves the problems inherent in the retained executive search model, making board member recruitment more efficient and cost effective.