It’s not a secret that there are an abundance of new recruiting tools and services available to help you find talent for your organization. However, according to the KPMG U.S. CEO Outlook 2019 report, the adoption of these new recruiting technologies and services has only heightened the war for talent. Further, according to a recent study by MRInetwork, a majority of job openings are for newly created positions. This shift, combined with the aforementioned use of new technologies and services and a shrinking pool of active job seekers, has companies that are serious about winning the war for talent rethinking their talent acquisition strategies.
For years the world’s best companies have utilized retained search firms to hire their top executives. This is because they know the impact of making a great hire versus a mediocre hire at this level is significant and the cost of making a mis-hire can be catastrophic. But what about your company’s key contributors? Those Manager, Senior Manager, Director and Vice President level hires who will be on the front lines delivering on your company’s strategy, leading your company’s digital transformation, and/or in one of those newly created positions?
One of the most important business decisions you’ll ever make is the leaders you hire.
In an effort to fill key contributor positions more quickly and make better hires, some companies have increased the size of their internal recruiting organization or outsourced it to a third party. Other companies have increased their usage of contingent search firms – those search firms that are only paid if you hire one of their candidates. But what does it really take to fill these key contributor positions more quickly and, at the same time, make better hires; especially when it’s for a new position that your company has never recruited for before? What does it take to win in the war for talent for your key contributors?
First, have you considered that your total cost to acquire your key contributors using contingent search firms, beefing up your internal talent acquisition team or outsourcing it might actually be higher than you think? Take using contingent search firms for example. Sure, they may charge you a smaller percentage of a candidate’s first year salary than a retained search firm. But, your method of compensating them actually incents them to increase your internal costs and your competition for talent. Since a contingent search firm is paid only when someone they present gets hired, they are incented to send you as many people as they can as quickly as they can and, to send those same candidates to as many places as they can to get them placed. This increases your internal activity costs related to filtering through the candidates to discover fit and increases your competition for those candidates.
On the other hand, outsourcers and contract recruiters are incented to bill hours and to deliver their service to you at their lowest pratical internal cost in order to improve margins. This means hiring people who are earlier in their careers or in lower cost parts of the world in order to keep costs down. Take a look at the following chart and count the costs.
Some key elements of total cost:
Typically, 20-25% of a candidate’s first year salary for a contingent search firm vs. 30-40% for a retained search firm and “by the hour” for a Recruitment Process Outsourcer (RPO) or contract recruiter.
Number of candidates
This is the number of candidates that you need to evaluate (whether via simply reviewing their resume, interviewing them over the phone, or bringing them on-site for interviews) to find the one person you want to hire that accepts your offer and joins your company.
Number of offers
This is the number of offers you have to make before a candidate you select accepts your offer and joins your company.
40% of all new leaders fail within the first 18 months; mostly due to poor fit. Poor fit is 100% preventable. Further, high fit leads to measurable contributions to productivity and corporate culture. According to Accel KKR, “A” players:
- Are 3-5x more productive with significantly greater impact on top and bottom lines.
- Increase team engagement and participate more actively in corporate culture.
- Positively impact management via:
- Less time spent at work → lower probability to micro manage.
- Less time spent reviewing work due to fewer errors → “Get it right the first time.”
- More innovation.
- Better relationships with other employees and customers.
Regretted hiring decisions
According to Recruiting Roundtable, organizations or new hires regret hiring decisions 50% of the time. According to Accel KKR, the tangible costs associated with mis-hires are staggering:
- 14x salary for employees with a base salary < $100k.
- 28x salary for employees with a base salary between $100k and $250k.
Not only is your total cost lower when working with a retained search firm for your key contributor hires, but you can also expect to receive the following value-adds that will impact your total cost metrics and improve your company’s business outcomes.
1. Exclusive Access: Retained search firm’s leverage their independence, reputations, and knowledge of markets to enable you to recruit not only active candidates but, importantly, passive candidates. Independence and a reputation for focusing on discovering a great fit vs. getting a placement greatly increases retained search firms’ ability to reach passive candidates; those candidates that are highly valued employees at other companies such as your competitors and not actively looking for a new job. Further, within the retained search community, boutique or niche retained search firms have smaller hands-off client lists and therefore broader reach than larger, brand name retained search firms. Retained search firms, unlike contingent firms, don’t submit candidates to multiple clients at once either. In the war for talent, what’s the value of getting exclusive access to the BEST talent?
2. Less Investment of Time: Not only will a retained search firm provide you with exclusive access to the BEST talent, they should also decrease your time spent on candidates that are not a fit or won’t accept your offer. In a retained search, ALL candidates go through the retained search firm’s vetting process. At the best retained firms, this means behavioral and technical interviews with search Partners who have first-hand, peer-level experience in the searches they lead, in-person and/or video interviews, and the completion of behavioral assessments that are designed to match candidates’ basic natural behaviors and work styles with those required for your position. The result is you only see the best candidates; those with a high level of fit. Retained search firms require a greater investment of your time up front to define your search and develop the artifacts that will be used to determine fit and attract the right candidates vs. internal, contingent, or RPO/contract recruiter searches but decrease your internal activity costs by allowing you to spend your time with only candidates that are a high fit.
3. Better Fit: The best retained firms decompose your job description into a competency model that takes the roles and responsibilities required to perform your job and translates them into the competencies that are required to perform those roles and responsibilities well. They then build interview guides to assess candidates’ competencies and utilize executives with peer-level experiences to make those competency assessments. The best retained firms also use behavioral assessment tools, such as PDP.
By using these behavioral assessments, the best retained firms are able to develop a job model for the natural behaviors and work styles required to manifest excellence in the context of what makes your position and company unique and then match candidates against that job model to determine fit. Retained search firms who use these tools, will only present you with candidates who can not only do the job technically, but who’s natural behaviors and work styles highly match your unique job model. For candidates, this means less pressure for adjustment to perform their job and for you it means less micromanagement because the way the candidate behaves naturally is substantially what your role and culture require. For both of you it means higher satisfaction and performance and a dramatic decrease in regretted hires.
4. Aligned Interest: Contingent firms are only paid if you pick their candidate. As a result, their incentive is to see their candidate get placed; at your company or someone else’s. RPOs and contract recruiters are paid by the hour. As such, they are incented to bill hours and keep costs down in order to increase margins. Retained firms are paid a fixed amount, based upon a position’s compensation, to develop and manage the entire search process. To them, it doesn’t matter where the candidate comes from. Their incentive is to help clients and candidates discover a great fit in a timely manner.
Winning the war for talent for your key contributors, just like winning the war for talent for your key executives, is about more than increasing the size of your candidate pool and hiring faster. In fact, if you’re not careful, you can unwittingly be increasing your competition for candidates, turning candidates off through poor first impressions, and increasing your internal activity costs. A sound strategy for winning the war for talent for your key contributors should include an approach that gains you exclusive access to the best talent, decreases your time investment, ensures high fit, and sees you in a partnership where your interests are well aligned with those of your partner. At iHs, we believe a retained search is the best means available today for winning the war for talent for your key contributors… those Manager, Senior Manager, Director and Vice President level hires who will be on the front lines delivering on your company’s strategy, leading your company’s digital transformation, and/or in one of those newly created positions.
About iHs Retained Search
There are many who can do the job but, few who will manifest excellence in it. Poor fit is costly but, it’s also 100% preventable. iHs Retained Search combines expertise from the successful completion of thousands of searches for key contributors at Fortune 1000 and high growth companies with search leadership by Partners with first-hand, peer-level experience in the searches they lead, rigorous process, state-of-the-art research technologies, competency model development and behavioral assessment tools to save their clients time and help them make hires that fit; hires that will manifest excellence. iHs’ clients evaluate three candidates on average before making an offer and iHs has a better than 98% offer acceptance rate over the past 10 years. Consider the following quotes from iHs clients:
“The best hires we’ve made over the past five years have all been the result of an iHs search.” – Global VP of IT at a Fortune 500 company
“All of the top performers that are part of our practice’s leadership that were made in the last three years and are still with us today are the result of an iHs search.” – Senior Director at a leading business advisory services firm
To learn more or to start a conversation, give us a call at (847) 447-7700.