Utilizing Executive Search Firms
November 26, 2018
Matt Kerzner interviews both Nkrumah Pierre and Allen Geller on the importance of using an executive search firm to find the right executive for your organization.
MK: Let's just jump right into this conversation. Executive search and recruiting is a very important topic that a lot of businesses need to really understand when they're looking for executives. Why is it important for organizations to think about using professional recruiters when looking for professionals and executives?
AG: For the most part, it's about who they're trying to hire. An executive search firm, a retained executive search firm is better off working on leadership type of roles, either CEO, CFO, direct reports to those people, as opposed to a manager-level role. We have a full research function. We go in and identify who the leaders are within organizations and then recruit them for your organization.
MK: Nkrumah, what are your thoughts on that?
NP: I actually come from the contingent side of the house. I did the contingent search for about eight and a half years in NYC, a little bit different than retained. To Alan's point, with regards to a contingent, I think the biggest and the most important part is really culture fit within an organization—getting an idea of the types of professionals who thrive in this environment, specifically. Whether it be a certain demographic, a certain background, public or private. I'm really getting an idea for the feel of the organization.
MK:I would love to know the difference between retained and contingent.
AG:A retained firm works with a retainer, so a fee is established in advance and our fee is one third of the first year's annual estimated compensation, which means cash—no equity or things of that nature. We'll establish a retainer, say, on a search that's $200,000 where there's a bonus on top and additional perks. We might establish a retainer of one third of the $200,000, which will be paid in three equal increments and the fourth increment is paid when the person is hired at a rate above the number that we initially determined.
MK: That's great. Nkrumah.
NP: With regard to contingent versus retained, on the contingent side of the house, typically it's a 25% fee of the annual salary, and the person has to make a 90-day guarantee. Now, if the person only makes it to day 87 or 88, the client gets a 100% refund back on that fee. Or what some search firms do is they keep the fee and they say will refill it for free.
AG:When we're talking about differences, with a retained firm our guarantee is a year and when you're talking about more senior-level people, sometimes it takes a little bit longer to figure it out other than 60 or 90 days. In addition, if for some reason the firm changes their mind as to what needs to get done, whether somebody walks in and you hire them, we stop and your obligational is only for time spent. The other piece that's different is we're looking for people who are not actively looking for jobs, people who are happy in their role. And the idea is that maybe somebody can make you happier.
MK: Alan, how do you source your candidates?
AG:Will utilize three methods. On February 1, 2019, we’ll celebrate 50 years.
AG:We have a database that exceeds several hundred thousand candidates. So that certainly is always the first piece of every search. The second piece is what I call the usual suspects. Since we've been doing searches for so many years that are similar, we have a list of candidates that become wonderful referral sources. Reliable sources are critical. One of the things, because we've been around so long, we're a very sizable firm. We have 27 consultants and offices in New York, Boston, San Francisco and Bentonville, Arkansas. So that's the first and the second piece. The third piece is what I call the original search, where we identify companies that have similarities to the hiring company, multibillion dollar, multinational, global consumer products, or a privately held $200K company. The CFO of that company is going to do the same thing as the CFOs at the other $200K, $300K, and $400K companies. So we're going to source those people to identify potential fits. And then the interview process starts.
MK:Excellent. So, Nkrumah, with Friends of the Firm how do you go about sourcing candidates and working with recruiters?
NP: It's a little bit different. In order to be part of Friends of the Firm, you must be introduced by a partner or employee at EisnerAmper. That's first, either you were a former client or prospective client and/or former employee or an alum. That's how you get into the program. With regards to recruiting. Again, we're not a full-fledged (recruiting) firm. We're very transparent about that. We're more like the facilitators. So we have this database of about 4,000 CFOs and controllers nationally, and then we have positions that get posted on our Friends of the Firm website. It's a public site, but it's not publicly advertised. So the folks that know about it could access it. We have about 60 to 70 jobs at any given time, and candidates who were part of the Friends of the Firm program can actually go on the website, apply directly to the hiring manager, send the resume directly and copy us. Now, the way we work with search firms, such as Rains International and others, is that we allow the search firm to actually post the job on our Friends with the Firm's site. Resumes will go directly to the search firm. If they want to submit that candidate for a job, they can. We ask for no commission fees, no part of the fee. Our only ask is if you place one of our Friends of the Firm with the members that you let us know. And the beauty of it is we're basically banking on the goodwill, the goodwill of getting someone an introduction or an opportunity to interview for a job. And, hopefully, if they get that job the goodwill is that if EisnerAmper is able to place you and does not cost the company a fee outside of working with a search firm. Hopefully we saved them $50K, $60K, $70K and that comes back where if they have tax issues or need an audit, they at least give us a shot.
MK:That's great. So if there is an organization that we work with or is interested in EisnerAmper and they want to participate in Friends of the Firm, how do they learn about us?
NP: Great question. They can contact me directly. Again, I'm on LinkedIn, I'm on the website: eisneramper.com/fof
MK:Excellent. Thank you for that information. So I'm going to change gears for a minute and I want to talk a little bit about the methodology of recruitment. Now I'm a big fan of the STAR model. STAR stands for situation, task, action and results. And I use this when I get into behavior-based interviewing and I use behavior assessments to find the cultural fit for the candidate and the organization specifically. Nkrumah, we talked about this looking for non-family members and family businesses, right? So that's where I get really involved in the methodology of the STAR model, but Alan I would love to hear from you, what methodology works for you that's really successful.
AG:When you think about interviewing, there's a variety of methodologies. Certainly, the behavior model works and it's very effective, but there's also a traditional type of interview where you're talking about chronologies and the whys and wheres, but there's also telephone interviews. There's also group interviews. So there's a variety of different methodologies. We like a thing that's called top- grading. There is a psychologist, Ph.D. in Atlanta, his name is Jeff Smart and he wrote a book on one of his colleagues called Who The A Method of Hiring and essentially it's how do you hire A players, which is what search firms are paid to do it. And we talked earlier about the leadership-type of level that a search firm is being paid for versus contingency, which are middle-level managers where you're just looking to get a significant number of potential candidates to be interviewed. Whereas with a search firm, you're looking for fewer people, so you want three, four or five candidates at most who had been interviewed and vetted. In order to vet them you need to understand how to interview them. And so we use this top-grading methodology. He wrote a book, not going to plug it here, but it's when you do the whole thing, their method, it's seven hours and they get paid about $10,000 a pop to interview candidates. The final candidates spent a full day down in Atlanta interviewing with these guys and they were very specific about how they interview what the questions are and so on, and we use that methodology primarily.
MK:Excellent. Thank you. So another thing I want to touch upon here is what are some of the pitfalls organizations should look for when seeking candidates? What should they be looking for?
AG:Becoming too enamored of credentials and image and employment history without focusing on the individual for the fit is really the issue. When you get somebody who was working at a top tier company who has credentials from Ivy League schools and a top 10 M.B.A., your assumption they're really smart and they work really hard and so on. That's probably correct, but you also have to evaluate who they are as an individual in order to see if they fit into the company when you're talking about a mid-sized or family businesses. People like that can upset apple carts because they have to be able to read the room and sometimes the first generality you’ve got to accept is that there's no generalities. You have to be careful about becoming enamored of where they're from, who they work for, where they're educated.
NP: That's a good point. I think another piece is not being afraid of the jumpy candidate—meaning every year the person has had a new job. I'm not saying that's not a red flag because sometimes it is, but you also have to remember that different people thrive in different environments. I use myself as an example. In the first part of my professional career, the first five to six years I jumped around quite a bit. But when I found this spot or the organization that could develop me where I could really flourish, I stayed there for several years. My point is if you have a new job every single year, yes, red flag, be aware of that. But that shouldn't preclude someone or exclude someone from an interview. I think when people take chances or they hire or at least interview that A-typical candidate a lot of times from what I've found with my clients and my contacts is that they're surprised and that person does really, really well inside the organization. So my thing is don't always look at their background and all the jobs they've had, but think about what they can bring to the table and maybe that person is a professional consultant. Having a job every year for four or five years allows you to have experiences and networks at four or five different companies, and that can be evaluated.
AG:However, there is a certain amount of maturity that goes into making a decision and sticking it out as supposed to being the first right off the ship. And not to necessarily disagree, but to just put a caution out that if someone changes jobs relatively frequently and when they’ve changed their jobs, they get a promotion but they didn't get a promotion to company they're with. That should be an indicator that you need to be more careful, and it's not to say that you should interview the people, but how long does it take to train somebody to come work for you six months a year? How much of your time and money are invested in that? They are so smart they get bored easily? It really depends upon the environment that they're in and what their rationale for changing is. The other question about them is how sound is their judgment. Well, my company was taken over. Oh, they moved? Or how sound was your judgment when you went there? Did you know that in advance?
MK: Right? Did you do your due diligence?
AG: Right, because if you don't, what are you going to get when you're making decisions for me?
MK: Well, I want to thank both of you, Alan and Nkrumah. This has been a great discussion. I want to thank you for listening to “The Generations of Family Business, Past, Present, and Future” as part of the EisnerAmper podcast series.
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