C-suite executives are a vital part of any organization. These officers are the chiefs of finance, operations or information for the entire company. When the time comes to hire or replace a new executive, soliciting résumés on the Internet and waiting to see what comes in isn’t going to cut it. Now is the time for a search based on strategy rather than chance.
“C-level recruiting is a lot different than your mid-management or professional-level recruiting opportunity, because it’s a different skill set at that level,” says Susan Carmichael, client liaison and human resources specialist with Insperity, a business and HR consulting company. “You’re looking for someone who is more strategic than tactical. You’re looking for someone with financial acumen, who doesn’t just get a P&L, but really understands how to drive a company forward. And for an ability to mentor people instead of just manage.”
An organization looking to hire a candidate to the C-suite is most likely going through significant changes. An executive may have recently retired, left for another opportunity or been dismissed for cause.
“They need to think very carefully about the position that they’re looking to fill. What was the incumbent doing? The new person who’s coming in, are they going to be expected to do the same things and perform the same exact role?” says Ellen Rhoades, managing director of the Columbus office of Waverly Partners, an executive search firm. “Do they need to find someone with any kind of particular expertise? Maybe it’s a turnaround situation. Maybe it’s a merger or acquisition, which could determine the kind of skills they’re looking for. There are a lot of things that they need to consider.”
Many organizations are looking first and foremost for a qualified candidate, but someone who fits into the corporate culture is equally important. “A lot of times, you’re going to show them how to do the job, so what they need to bring is the ability to fit into your company,” says Chris Cochran, director of client and talent services at Portfolio Creative. “The most important thing is to know who their company is, what their culture is, what their values are, how this person will be successful and what are the expectations of this person.”
Companies may look for a new executive in several ways, including internal succession planning and career development, using in-house staff and resources to conduct an external search, or networking within the industry. There’s also the hired gun approach.
“It’s incredibly time-consuming to do a recruiting job at this level,” Carmichael says. “To source résumés and really be able to pull out the top five—that in and of itself is a skill set. Executive recruiters understand that, and this is a draw for a client that doesn’t have time to do that leg work.”
Search firms can work on a retainer, taking care of every detail from writing the job description to salary negotiations. Or they can be used on a contingency basis, receiving payment only after a candidate is hired. In the current economic climate, more organizations are using firms on contingency, Cochran says.
“If they start their own search and they want to go that route, sometimes they go down that path and after three, or even six, months there’s frustration. My talent acquisition team will hear from a senior-level person who isn’t finding what they need,” Cochran says. “Other companies will go directly to the search firm.”
Firms on retainer typically break their fee into thirds, receiving one-third when first hired, one-third during the process and one-third when a candidate is hired. Fees typically range from 25 percent to 35 percent of the position’s total compensation package.
“Typically, standard fees are a third of the first year’s total cash compensation. It will vary from firm to firm,” Rhoades says. “There are also monthly expenses that are generally billed for consultant or candidate travel or for research. Sometimes administrative fees are charged. That will vary from firm to firm, and there are different formulas for that.”
Many organizations turn to a search firm when confidentiality is a concern. Some companies might be vetting internal candidates but also want to look for external contenders. In other cases, an organization might be planning to replace a current executive. “In many cases in our world, a chief executive might come to our company and say, ‘My CFO is not performing at a level that I need for the future of this company. I want to engage your organization to reach out and identify a new CFO for me, but I cannot risk my current executive learning about my search,’ ” says Cindy Hilsheimer, principal and founder of SC Search Consultants.
“Companies will take advantage of the confidential nature of our business,” Cochran says. “Maybe they’re wanting to look to their competitors to pull people out of those competitive companies. We can do that. Most companies aren’t comfortable having their own people reach out to their competitors.”
Search firms take advantage of a large network of contacts, communicating the hiring company’s needs to targeted candidates. “There’s typically merit in identifying people who aren’t looking for you, who don’t even have awareness that your company is there with an opportunity that might be right for them,” Hilsheimer says. “We have a huge database that we have built over the years. It’s highly proprietary and confidential, but it contains a lot of individuals who we are following or know or have been referred to us confidentially.”
Since high-powered executives often command high-powered salaries, search firm fees can add up quickly. Some companies opt to save that money by relying on internal human resources staff members to do the legwork.
“One of the reasons to keep these searches internal is to be good stewards of our funds,” says Brad McLaughlin, executive recruiter for OhioHealth. “We try to keep executive searches in-house if we can. That’s my role. If we have to, we’ll use an external firm. We have a couple of firms that we’ve used for years that have been successful for us, but the first thing is to see if we can’t do the recruiting ourselves.”
HR departments use everything from networking contacts to LinkedIn as they beat the bushes for qualified candidates. “If we’re doing a search internally, we can do it for substantially less. Using social media, we do pay some fees to the social media sites for access that we might gain, but we can spread that across lots of positions that we hire for, so the cost is substantially less,” says Carole Watkins, chief human resources officer at Cardinal Health.
“Overall, the majority of our positions are filled from within, more than 50 percent, so that’s always the first place we’re going to look,” Watkins says. “We do, at times, conduct both an internal and external search, or we make the decision to go external if there is a gap in capability for us internally.”
Donald Casey Jr. was named CEO of Cardinal Health’s medical segment in April. Previously the CEO of the Gary and Mary West Wireless Health Institute, Casey was recommended as a candidate through internal networking. “We really enlist a lot of our leaders here to be advocates for us out in the marketplace and, as they’re traveling and at industry meetings, to keep their eyes and ears out for great talent,” Watkins says. “We knew we needed somebody with really deep health-care experience, and we have people who know virtually everybody in the marketplace.”
When hiring chief information officer Patricia Morrison in July 2009, however, Cardinal Health used an external firm. Morrison did not come from a health-care background, having previously served as chief information officer for Motorola. “We could afford to do that in that position,” Watkins says. “I think some of the most important considerations are knowing exactly what the specifications are, the kind of experiences that are required and then stepping back and asking, ‘Where am I most likely to find those?’ I don’t need to pay a search firm to help us know the top leaders in health care. Our leaders here interact with them every single day. In the IT world, the playing field is much broader.”
The last few executives hired at OhioHealth also stemmed from professional networking. Word of mouth from current executives brought candidates to McLaughlin’s attention. “An executive that works here now knew someone from a previous place they worked. That’s kind of the way these things go. It’s a tried-and-true method of getting the word out and connecting with people,” he says.
In situations where a search firm is involved in the process, the first step for recruiters is to learn about the position. For firms that are working with clients for the first time, this includes getting up to speed on the company and its culture.
“The first thing we hope to do is get to know the executive team or search committee we’re going to work with. We really want to understand what they’re thinking, and we talk about the position that they’re looking to fill,” Hilsheimer says. Recruiters ask about the demands of the position as well as the company’s future strategies, current priorities and challenges. Walking through the halls and meeting employees can help to define the corporate culture.
“If the outgoing executive is still around, they will want to get input from that person. Usually there is a formal position description. There may be a search committee internally with key stakeholders in the organization who will be part of the search process. They will want to get input from those individuals,” Rhoades says. “You’ll need to get clear on compensation. What’s being offered? Is it competitive in the marketplace?”
The next step is finding candidates. Databases and networks are put to use, and recruiters set to work identifying qualified and compatible people. Sometimes, they cold-call potential applicants. “Once you get an interest level, sometimes it’s a matter of keeping in touch. A lot of times with the first phone call, what you’re doing is planting the seed,” McLaughlin says. “It’s a couple of conversations. Usually the first is introductory. Here’s what we’re looking for. Tell me about your background. Over the course of a couple weeks, you follow up with a few more phone calls until they reach a comfort level where they want to forward you a résumé.”
The top candidates are presented to hiring managers. “We’ll get the interview set up, then we’re following up to see what the candidate thought and ask the hiring entity what they thought,” Cochran says. “So much of what we’re talking about is, ‘Did each of the parties make a good first impression?’ … That first meeting is really crucial to our understanding of whether we found a fit and which direction we should go.”
In some cases, recruiters deliver qualified candidates, but hiring managers realize during the interview process they need to adjust the job description. Then it’s back to the drawing board. “We tell the client if we don’t get it right the first time, or even the second, we’re going to go ahead and bat this around until we have a very narrow definition of what your needs are. Patience is an important part of the process,” Cochran says.
Once a finalist is selected, it’s time to check references and negotiate salary and benefits. “When you’re talking about a C-level executive, it’s not just a base salary. You may be talking a bonus, incentive plan and relocation,” Carmichael says. “A recruiter should be able to sit down and give them some market data that says, ‘This is what you would need to include in a move package if it were someone you’d be willing to relocate,’ and to be that source of education for the client.”
If the job offer is accepted, some firms even help with the relocation process. “We provide what I would consider the emotional support as they turn in a resignation to their old employer, as they do a relocation transition, as a family might need integrated into the community, as a professional might want to engage in board service or other community service,” Hilsheimer says. Overall, the search process can take anywhere from two weeks to six months and varies greatly from company to company.
Some organizations have mandatory pre-hire screenings. OhioHealth, for example, does a background check, drug test and health assessment with proof of vaccinations for all new hires, McLaughlin says. The health-care system verifies degrees and licenses, takes fingerprints and runs a criminal background check.
Personality tests can help determine if a candidate will fit into the corporate culture. “Often for very senior-level positions, organizations will utilize different personality assessments: leadership indexes, emotional intelligences—there’s all kinds of different assessments. … That’s all used in the process to vet the final candidate,” Rhoades says.
One of the biggest considerations amid the economic downturn has been relocation fees, Hilsheimer says. “It’s very difficult for organizations to make a person whole. At least, it has been in the last couple of years. What you hope for is that maybe someone is going to sell a home in a city where they’re leaving and take the appreciation, although that’s almost not a word you can use anymore,” she says. “The housing market and relocation impacts on a search can be challenging still to this day.”
Geography also may play a part. Candidates from warmer climates might be reluctant to consider a position in Central Ohio. For people who have no experience (or interest in) living through a cold winter, weather can be a deal breaker. On the other hand, McLaughlin has found many candidates who are interested in getting back to the Buckeye State.
“I’ve talked to so many people around the country who went to Ohio State, or a spouse or family member did—people who remember their experiences at universities around Ohio and remember them well,” he says. “Columbus, to me, is a positive. Anyone who has a tie to Ohio or knows about Columbus is positive about it.”
Michelle Davey is a freelance writer.
Reprinted from the October 2012 issue of Columbus C.E.O. Copyright © Columbus C.E.O.