By William Fitzgerald | Managing Partner | FitzDrake Search | Fall 2011
A MORE STRATEGIC WAY TO THINK ABOUT TALENT ACQUISITION
Mike Cassidy, the CEO of Undertone Networks said it best when he commented in a January 4, 2011 article for Venture Beat: “The right people can drive growth for almost any business.” Jim Collins, author of the book Good to Great commented: “People are not your most important asset. The right people are. Get the right people on the bus, the wrong people off the bus, and the right people in the right seats.” It seems very clear from these two comments that no matter what kind of business you are in, having the right people determines failure or success.
The challenge for a growing organization is not simply filling one role; it’s filling multiple roles quickly at a reasonable cost. This is especially difficult if you don’t have the resources of many Fortune 100 companies. Building an internal staffing function, with the purpose of identifying candidates an organization might possibly hire sometime in the future, is a luxury many organizations can’t afford. While it makes sense in theory, in practice it’s cost prohibitive.
The real challenge facing many small organizations, as well as many growing Fortune 500 to Fortune 1000 organizations, is how to build pipelines of great talent, hiring the right person in a timely and cost efficient manner.
WHY CURRENT SOLUTIONS FALL SHORT
The staffing options we’re familiar with are inadequate, which makes building pipelines of talent difficult. In some cases, business models are based on filling one position at a time. In others, the approach is not associated with quality. In all cases, cost remains a barrier. Retained search charges a placement fee of 33 1/3% of first year total compensation for each placement—this includes base, bonus, sign-on cash and often a 10% administrative fee. You pay some percentage of the fee whether the position is filled or not.
Contingent search also charges by the placement fee, ranging from 20% to 25% of first year compensation. Unlike retained firms, contingent firms only make money when they make a placement. For a contingent search firm to survive in the market, they need to make as many placements as they can, as quickly as possible. Working on an assignment that is about building a talent pipeline, when there is no plan for an immediate hire and hence no payment, is not an option for these firms.
Social networking sites like LinkedIn are the latest recruiting phenomena, making it easier to connect and find people. However, the openness of LinkedIn and similar platforms is also a turnoff to talented professionals who prefer more privacy and confidentiality, thus opt not to join. We’ve even heard from users who are afraid to be too active on LinkedIn because they don’t want their current employer to know. Social media sites essentially allow everyone in. As a result, if you are an internal recruiter, you need to wade through hundreds, or sometimes thousands, of unrelated records to find the people you’d like to reach. This option is not scalable if you are trying to fill multiple requisitions.
Finally, the belief held by many in the recruiting industry is the most talented professionals are not on a job board. For some there is a negative stigma attached to posting a resume on a public forum, as it’s perceived as devaluing your personal brand. This calls into question the value associated with searching a job board database. While the price may be reasonable, the quality a growing organization needs may not be present.
A NEW WAY TO THINK ABOUT BUILDING TALENT PIPELINES
A hybrid of the current solutions is needed to solve this more strategic problem. One such hybrid has been developed holding great promise for organizations looking to build robust pipelines of talent. As we will learn from the case study below, this solution is both effective and efficient, and a viable option for organizations with or without the necessary internal resources to build pipelines of talent. The approach combines aspects of retained search and social networking, while offering the confidentiality and exclusivity highly talented professionals expect as they manage their career.
This solution eliminates the traditional placement fee, which is at the core of the retained and contingent search business models. FitzDrake Search has developed and fine-tuned a “retained hourly” business model that charges employers by the hour, not the placement. This means they only charge for the time they directly work on a search. After six years, the FitzDrake Search average charge is equivalent to a 12% placement fee. In addition, employers can hire as many of the candidates that FitzDrake Search presents, at any time, without any additional cost. They also give employers their research at the end of the search to allow their clients to build greater capability.
Without a placement fee standing between the employer and the candidates, FitzDrake Search can serve both parties without worrying about the candidate’s compensation. They can provide advice and counsel that is in everyone’s best interest. The overall objective is to present great talent as quickly as possible, which is completely aligned with the priorities of employers. With rates that are one-third the industry average, you have a value proposition that is unmatched in the industry. This is an example where all of the advantages provided by technology, are being passed along to the hiring organization.
To help growing organizations solve the more strategic problem and build pipelines of exceptional talent, FitzDrake Search has introduced a new product, Top Tier. Top Tier is a member’s only site for the most talented C-Suite Executives, Vice Presidents, Directors and Managers in the marketplace. Unlike job boards or social networking sites, Top Tier is exclusive and confidential. This means only the most accomplished professionals are accepted for membership, which adds prestige and stature to joining. It’s also confidential—no company or other members of Top Tier can access a member’s personal information without consent. As FitzDrake works on retained assignments, they are posted to their member’s only job board, and members learn about opportunities that match their “interest profile” through an alert system. If an opportunity sounds interesting, they can contact a member of the FitzDrake Search team and receive more detail. The company with the open position will not know of a member’s interest until the member is ready to go public.
As FitzDrake Search works with a company over a period of time, they are able to build a database of Top Tier candidates the company may find attractive in the future. Having this Top Tier resource allows FitzDrake to quickly identify exceptional candidates, and using the “hourly retained” pricing model, is able to pass those savings along to the company. As we will learn from the case study, the FitzDrake Search business model, combined with Top Tier’s ability to attract the most talented professionals, means speed and quality go up as costs go down. Up until now, the recruiting industry has been exempt from this expectation.
CASE STUDY
FitzDrake Search has been working with the client described in this case study for over three years, which is a Fortune 1000 company and a leader in the Payroll/Human Resource Outsourcing industry. While they have an internal recruiting function, they lack the expertise needed to hire C-suite executives, Vice Presidents, Directors or Manager level talent. As a result, they sought a partner with expert skills in research, networking and evaluating talent, who could attract talented professionals to a non-mainstream market— FitzDrake Search. As a result of doing numerous searches in the same industry across multiple disciplines, FitzDrake Search started to build what would become the pilot for Top Tier. As FitzDrake Search continued to work with this client, they were simultaneously building a network of the most talented professionals in the industry. This community of Top Tier professionals made it increasingly easier to connect the client with highly talented individuals. While the quality of candidates was always high, the speed at which FitzDrake Search was able to find them was unprecedented, and the ultimate cost to the company has gone down.
In the last 3 years, FitzDrake Search has completed the following searches for this one client:
- VP of Product Development
- VP of Marketing
- SVP of Sales
- Director of Operations
- Director of Talent Acquisition
- Director of Mergers and Acquisitions
- Regional Manager
- Product Manager for Insurance
- MSPP Marketing Manager
- Attorney
The best way to demonstrate the value of this approach is to compare the results against commonly held industry metrics, in the areas of quality, speed and cost:
QUALITY
In March 2009, Kevin Kelly, the CEO of Heidrick and Struggles, one of the world’s best known executive search firms, commented on the retention of placed executives. In an internal study of 20,000 Heidrick searches, they found that 40% of executives hired at the senior level are pushed out, fail or quit within 12 to 18 months.
Compare that to our Top Tier case study where the first VP we placed has been with the company three plus years and counting. In fact, that person has been promoted for a second time. The Regional Manager is at two years and counting, and the Director of Operations is two years and counting with a promotion. All of the other executives hired from the Top Tier membership are currently still with the company.
SPEED
While it is hard to find specific data, the belief among recruiters is that it takes up to 20 weeks or longer for a traditional retained search firm to fill an executive opening.
Compare that to our Top Tier case study where they were able to hire 11 executives in an average of 14.27 weeks each. The median time was 12 weeks. This is roughly a 40% improvement over traditional retained search firms. Also noteworthy, the candidate that was eventually selected was presented in an average of 8.45 weeks. The median time was five weeks.
While our experience shows that it often takes four to six weeks or longer for traditional retained firms to present candidates, in all 11 of these searches, candidates were presented within 2.45 weeks.
What you also see is a drop of almost 50% in the amount of time required to fill the first position compared to the amount of time required to fill subsequent positions.
COST
We reviewed before the cost of retained search. The AESC has reported that up to 30% of retained searches go unfilled. In all cases, whether the position is filled or not, the client pays.
For the 11 searches that are included in this case study, the average placement fee is 9.01%. Compared to the placement fees charge by traditional retained search firms, this equates to a savings of $726,147. One of the most recent searches completed by FitzDrake Search using Top Tier was the Director of Mergers and Acquisitions. The charge for this work equated to what would be a 4% placement fee. A subsequent search for an attorney took full advantage of the work performed, being placed at 0%.
SUMMARY
The results of our case study demonstrate a viable alternative for addressing the more strategic challenge discussed earlier in this paper. Not only does the “hourly retained” approach, presented by FitzDrake Search, offer considerable advantages over traditional retained or contingent search, combined with Top Tier, this offers employers considerable strategic advantage in the marketplace.
William Fitzgerald
Managing Partner, FitzDrake Search
(703) 729-6110
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