How Effective Executive Recruiting Improves A Company's Bottom Line

Executive hiring decisions have a dramatic economic impact on your company's bottom line. At the president and vice president selection level, a right decision is a money maker. Put the right executive in a job and he or she will successfully translate their talent and knowledge into generating activities. A poor choice can bring severe financial penalties. However, the real penalty to your company of a wrong decision is the "cost" of lost opportunity, lost time, lost market image, and negative impact on morale. These hidden costs can show up on your company's bottom line for years.

The process followed in recruiting senior executives is the greatest contributing factor in determining success or failure in any executive search effort. By applying several conceptually simple, though important techniques, you gain:

• consistent success in identifying and attracting senior executive team members;
• more efficient utilization of your recruiting dollars;
• the opportunity to increase bottom line performance.

	Step 1. Executive Role Definition - The Right Way
	Step 2. Identifying the Quality Candidates - Finding the Right People
	Step 3. Candidate Evaluation - Selecting the Best
	Step 4. The DOs and DON'Ts of Successful Reference Checking
	Step 5. Candidate Selection - Making the Right Choice
	Step 6. Developing a Winning Offer

Now lets bring this discussion of the impact of executive recruiting on your company into the realm of reality. Success in executive recruiting, and thus success in improving your bottom line, is not a matter of chance. There is a right way to do it.

Step 1 - Executive Role Definition - The Right Way

Does this "fictional" case history describe your company? Silicon Valley Computer Corporation (SVCC) sets out to recruit a Vice President of Sales. Some informal meetings result in the job being loosely defined as having responsibility for all sales and marketing. Likely candidates are described as being just like Jim Smith, who is with a competitor. A few people are named as possibilities, but little thought is given to how candidates are going to be identified and contacted. When several candidates finally appear, there is disagreement on whom to hire. As the time pressure builds, a compromise selection, which no one really favors, is made. Shortly after starting on the job, questions arise whether SVCC's new Vice President is cutting it. Sure enough, the compromise hire's performance lags. Inevitably, termination takes place. After the fact, everyone comments on what was wrong with his management style and abilities. No one bothers to look at the reasons why the wrong person was selected in the first place. (Also, the costs associated with a wrong hire are never considered.) With greater resolve to do it right this time, the recruiting process starts all over again. By the way, SVCC is now on its fourth Vice President of Sales. Is this executive recruiting scenario overstated? Perhaps. Is there a better way? You bet! SVCC continued to fail in its recruiting efforts because senior management did not properly define their true needs and objectives. Every event and decision made in the recruiting process is derived from the definition of the job and essential candidate characteristics. It is difficult to reach a destination if the road map has not been laid out. The executive recruiting process must begin with a thorough and formal definition of role and responsibilities, position objectives, and personal and professional attributes necessary for success. Just as important is identifying the environmental factors setting your company apart from all others. But you say you have heard all this before, and, in honestly trying to apply these concepts, you still haven't succeeded in hiring the right executives.

The key to successfully defining the role and appropriate candidate qualifications is the degree to which the significant components listed above are thoroughly articulated, then applied throughout the process. In dealing with people and personality types, nuances are important. By the time you complete preliminary internal discussions on role definition, everyone participating in the selection decision should have a sense that they will know the person when they see him or her.

Here is what you should do to define the role correctly:

• All decision makers participate in describing the job content and objectives, performance measure, essential technical and management skills, and most appropriate, personal skills.

  Do the following:
  Talk through the job at length. Lay out the specific activities involved. Is it a new job or an existing one? Where are the contact points with other positions? Does the role require a person to carry on with the established foundation, or start from scratch?
  Define successful performance. Establish and agree upon realistic six-month, one-year, and two-year objectives.
  List experience requirements in detail. Must candidates possess experience in your industry? To what degree must they have been in a comparable role in the past? What specific experiences are an absolute must, versus nice to have?
  Define essential personal qualities. Think through your company's environment and the personal styles which work in your organization. Decide the degree to which a compatible style is of importance. Or do you want a person who will be counter culture? What is the management style of this person's boss? What styles work with him/her? If the job requires a high degree of contact with customers and outsiders, think through the image and approach that works best with them.
  Specify all of the elements of the compensation package. Gather objective competitive market data. Think about the upper limits of compensation if the absolutely perfect candidate came along. What besides base salary do people in your company receive? Would you pay relocation costs?

  At the end of this process, you and the selection team should have a balanced and consistent profile of the job and qualifications.

• Create a position specification documenting the agreement reached on job and qualifications. All decision makers are to agree and sign off on the job spec.
• Agree on the decision making process. Decide who will participate in the interviewing cycle, how the final decision will be made, and who will make the final decision.
• All decision makers should review the most critical variables prior to interviewing each candidate, and again prior to a final decision.

Executive role definition, or any part of the executive recruiting process, may not be an activity you can successfully undertake without assistance. The role of the executive search consultant is to execute the search process, bringing together ideas, people, personalities, and perceptions. The result is an end product that exactly meets the needs in your organization. Good search consultants are unique. They are able to bridge the gap between the "science" of a well defined, methodical search process and the "art" of getting two parties, who are in essence strangers, to decide to join together.

A final note. Process, in this case role definition, doesn't guarantee that you will end up with a quality product. However, without the process, you are placing your bottom line in the hands of pure chance that an appropriate selection will be made.

Step 2 - Identifying the Quality Candidates - Finding the Right People

The tasks of the CEO are to define the business and products, establish the internal environment (i.e., "culture"), and staff the management team. Our view is that this last key task is not a one-time activity. Rather, with or without a specific vacancy, the watchword for the CEO is to be prepared when the need does arise. Here is now this can be accomplished:

• Actively Work To Build A Contact Network. The smart CEO actively thinks about the composition of his/her management team, and its strengths and weaknesses. At every appropriate event, particularly at industry meetings, a conscious effort is made to build upon one's network. Potential candidates spotted should be systematically noted and tracked. Conference, trade show and industry event rosters of attendees should be saved for future referral.
• Continuously Work To Develop A Following. A highly regarded CEO will receive a steady stream of unsolicited resumes. You should operate to cultivate the positive attitudes of others. Having competitors' senior people believing "the grass is greener" in your company can be a decided plus in recruiting.
• Track The Better People In The Industry. As part of competitive data gathering, have your people identify and track the better people in your industry. Be sensitive to when your competitors' best people are ripe for a change.
• Utilize Your Human Resources Department. A skilled human resources group can save big dollars by having a proactive attitude on recruiting. A priority should be training the Human Resource people in good recruiting techniques. The head of Human Resources should be aware of alternative resources to identify senior management talent.
• Utilize "Pointers." One's personal industry network and network among Attorneys, Investment Bankers, Accountants, Venture Capital groups, etc., can oftentimes be a prime source of people to contact. Take the time to ask. These people are usually more than happy to help when you have a need.
• Advertising. At the executive level, advertising generally does not produce the desired result. If you are curious, try it and then monitor the results. If you find it works for your company, use it.
• Search Research Firms. Search Research firms target an industry and provide listings of people to call as potential candidates. They may take the process through the candidate contact and interviewing stage, if so directed. These services can be of value, and be very cost effective. A shortcoming is that typically no one in the company takes ownership for the necessary follow-up. Also, the listings produced may be lengthy, but may result in no qualified candidates being developed. If it works, use it, but be prepared for a considerable amount of work on your part.
• Contingency Recruiters. These firms are paid for making a "placement." The advantage is no up front financial commitment on your part. The downside is that their incentive is to make a sale, without considering in any depth the true needs of your company. When a recruiting effort looks as if it will take along time, there is no incentive for these firms to "work the problem."
• Executive Search Firms. Executive Search firms operate on a financial retainer to undertake the search process from beginning to end. Their services are most effective where they have the time and attention of the key decision makers. (Without the commitment of your time, don't bother spending the money.) The value of a search firm is found in the knowledge, judgment, efficiency and objectivity it can bring to the whole recruiting process. The better firms have a very high success ratio, and will guarantee to work on your project until completion.

Answering these questions will lead to a conclusion on the most appropriate recruiting approach for attracting senior executives.

• How much time is available? How urgent is the need?
• How open is the market for candidates?
• How adept is your organization in finding and attracting top talent? Is there someone inside who has the time and skill to undertake the search project?
• Are there inside candidates who should be considered, though it is not clear if they are the best choice?
• How senior is the position? (Executive search firms are more adept at recruiting senior management, and less effective at the lower levels.)
• Does the search need to be kept confidential?
• Do you want to recruit from a competitor?
• How good is your organization at evaluating senior executives? Will you recognize a good one, or not so good one, when you see him/her?
• Do you need a highly refined, unusual or particularly difficult to find skill set?

As a rule of thumb, the greater the need and the more complex the search, the more likely your money will be well spent if an executive search firm is employed.

Candidate Identification - A Final Word

Is there any magic in finding talented executives? Is there necessarily one right way? The answer to both of these questions is, of course, "No." There is not one particular formula in finding and attracting executive talent. The secret to good executive recruiting is found in hard work, follow-up, good judgment, and attention to detail on the part of everyone involved in the process.

Step 3 - Candidate Evaluation - Selecting the Best

Has this situation ever occurred in your organization? Jim Smith, a candidate for Vice President, Marketing possesses a career record and resume that is ideal for the job in your company. Once on the job, however, Jim is a failure. Performance in no way matches expectations. Smith is terminated at great expense in terms of cost, impact on others in the organization, and time.

While there can be many reasons for this situation ending in failure, a better "front end" screening process can help you avoid expensive mistakes.

The successful candidate evaluation techniques all focus on the critical elements of a job and company environment, and the degree to which a given candidate can respond to those elements.

Executive candidate evaluation should assess:

• A candidate's skill set in relation to the tasks to be undertaken.
• A candidate's fit within the relationship structure of the organization.
• A candidate's interest in undertaking the job at hand.

Here's how it is done:

• Define the Role and Critical Requirements

  Prior to the initiation of every search, bring together the people who have a direct stake in this individual's success. Work through and bring about consensus on the key objectives to be accomplished, job content, and behavior patterns (i.e., management and personal styles) that work in your organization.

  A word of caution: Don't underestimate the importance of this definitional task. No matter how many times your organization has recruited candidates for a given role, the elements of the position or the required background of candidates constantly change. It is never the same way twice.

• Interview To Those Defined Characteristics

  Listen to what the candidate is saying and how he/she is saying it.

  • Does the method of presentation "feel good" and make a positive impression?
  • Is this an individual who stands out from others you have met?; is there a demonstration of analytical skill?
  • How incisive are their questions about your company?

  Make sure someone goes over the candidate's complete resume and background. What has he/she done? Does it meet your needs? Is the candidate's story credible and does it "hold together."

  • Determine accomplishments.
  • Question inconsistencies
  • Check out dates.
  • Look for subtle clues - i.e., vague answers to direct questions.
  • Get specific answers; if not specific, then keep digging.
  • Look for personal situations which may impact on-the-job performance.
  • Determine areas of job satisfaction and dissatisfaction.
  • Find out why each career move was made.
  • Keep asking yourself - does it make good sense? -Was it a quality situation?
    -Did the candidate make reasonable decisions?
    -How clearly did he/she see the situation?
    -Was there steady career progression?
    -Do the same things that were negatives in earlier situations exist in your company?
    -What is to be learned from the length of tenure at each company?
    -Where are the holes in his/her story?
    -Is there anything unusual about the person? (Be careful here; unusual qualities, if used appropriately, can be real assets.)
    -What are the driving forces in a person's career and life?
    -Does this person respond in ways that will work in your organization?
    -After the interview, does the person continue to "wear well" as time passes?
  • Listen to your stomach and instincts, but only as a guide. If your stomach tells you something is wrong, check on it.

• Compare Notes With Colleagues
  • Does everyone feel the same about the candidate?
  • Are the reasons for selection or disqualification appropriate?
  • What further questions need to be asked?
  • Does the job you want done, the candidate's skills, and things he/she want to do all conform?

• Contact References

  Reference checking is absolutely essential to gaining a thorough understanding of the candidate. Before initiating a reference call, be prepared. Ask open-ended questions. Be concerned and probe in depth any information you receive which may present a concern. Be thoughtful and thorough.

• The Psychological Appraisal

  Is the use of a "corporate shrink" worthwhile? Our view is that when properly employed, the psychological appraisal process is a tool of great value. A psychologist is trained to look for the personal characteristics which spell success or failure in your organization. Where the psychologist has an ongoing relationship with your company, and an understanding of the environment and characteristics of the executive team members already in place, this technique of candidate evaluation will enjoy its greatest success.

The End Product

Dedicated, enthusiastic, candid and objective recruiting has proven itself time and time again. The end product is directly related to the time and interest you devote to a recruiting project. We have said it before, good recruiting is not a mystery. Rather, it is a lot of hard work.

Step 4 - The DOs and DON'Ts of Successful Reference Checking

Making reference calls

The prime goal of every reference investigation is to help you make the right selection decision. But don't stop there. Keep in mind that references can also provide insights on managing the candidate once he or she is on board.

Is referencing worth the time and trouble? Absolutely! The wrong executive hiring decision will cost you plenty in out-of-pocket dollars, lost time and lost morale.

The Do's And Dont's Of Candidate Reference Calls

In recruiting senior executives, reference calls are a must. It is during the reference investigation process that a candidate's actual on-the-job performance and behavior can be viewed through the eyes of past and current associates. You can confirm or deny your interview impressions and judgments through the reference check. The key is to focus your questions on the essential elements of the job and your company's environment, and to convince each reference source to be open and candid.

DO The Following In Your Reference Calls:

• Always make reference calls. The best case is when the hiring executive makes some or all of the calls personally.
• Ask the candidate for references who can comment directly on his/her past performance. Ask for references who can provide information from diverse points of view.
• Be wary when all the names provided are people who were not close to the person.
• Before calling references, be prepared. Reread the job specification, think through the interviews, figure out those areas in which you want more information about a candidate. Make a list of specific topics and questions. Relate your questions to the requirements of the job and organizational culture.
• Call multiple reference sources. Seven to ten or more is not too many, particularly when your questions are not fully answer, or if you have lingering doubts.
• Remember that few, if any, successful people are universally loved and admired. Ask the candidate for references who are likely to be uncomplimentary.
• To open up reference sources, ask probing, evaluating questions. Then, ask questions to delve deeper into a topic area. Stay away from questions which elicit a simple yes or no answer.
• Listen to what a reference is really saying, and how it is being said. Read between the lines of the conversation. Look for subtle clues. Be sensitive to what isn't said, or how enthusiastic or unenthusiastic the reference source is.
• Have face-to-face meetings with the most important references. Such meetings are well worth the time and expense when a critical hiring decision is to be made.
• Ask references for the names of other people to call. (However, if you are dealing with a candidate in confidence, avoid the temptation to pick up the telephone and call these people immediately. Review these names with the candidate first.)
• Track the data to see that the information provided by one reference source is consistent with information provided by others.
• Verify college degrees and professional credentials a candidate claims to have. If things don't check out, find out why.

Here Are Some DON'Ts:

• Never hire a candidate without checking references.
• When dealing with a candidate on a confidential basis, avoid calling references without the candidate's knowledge. Should word get back and the candidate be fired from his/her current job because of your calls, you may be in line for a lawsuit.
• Avoid the temptation to rush to judgment or to be fooled by limited information. No one is perfect. Some less than positive comments should crop up.
• Vague answers to your questions tell you something. Don't accept them, dig further.
• Ask questions which make the reference think and describe events and characteristics as they really are. Do not telegraph the "correct" answers.

The End Product

After talking to the references, you should have information on:

• Significant accomplishments
• The depth of feeling, plus or minus, about a candidate
• Management guidance or further professional development required
• Management and personal style
• Relationships - internal and external
• Depth of technical/professional skills
• Career progression, and career interests
• Reasons for changing jobs

Your job is one of judgment. With the reference data at hand, do you think that the signals indicate that the candidate will fit into the job and your company? Think through the information you collected. Use it in conjunction with your interview impressions. Read between the lines. Consider what the people are really saying.

Step 5 - Candidate Selection - Making the Right Choice

In most searches for senior executives, making the final go/no go selection decision is a challenge. It is the rare search where the decision to hire a candidate is absolutely clear. And, the more critical the position, the greater the impact of a wrong decision. So, after all the interviews and mating dances are done, how does the CEO go about making the right selection decision?

There are a number of factors, when considered together, that can lead to effective candidate selection. Here are the things to do:

• Review The Job Specification

  Go back to the job specification looking at the objectives set out for the position. Does the final candidate's experience truly match up with the specific function of the role? Will the individual's background allow him/her to accomplish the objectives you have established for the next twelve months?

  Go back to the critical success factors defined early in the search process. To what degree does the candidate meet, exceed or fall short on those factors which you defined as being essential for the job? How much time are you honestly willing to devote to this person in helping them be a success? What tasks must be accomplished and how soon? How much risk are you willing to live with? (Note: As a general rule, for executive level positions we rank functional knowledge, managerial skill and leadership ability as being of greater importance than specific industry or product experience.)

• Consider Environmental Factors

  Does the candidate's personal style fit the situation? A candidate who has spent his/her career in situations where their role has been to continually say "no" to requests for resources is not likely to work out in a high growth situation where the thinking needs to be saying "yes" to spending required to build an organization. How do these "environmental" factors in your company compare with the environments the candidate has been in previously? Does the candidate have a mental framework compatible with your situation? What really got done under the candidate's direction in the past?

• Gather The Opinions Of Others

  Get feedback from others who have interviewed the candidate. What do they see to be the pros and cons? If hired will the "new kid on the block" be accepted and supported by the rest of the team? Who are the naysayers and why? Are objections logical and reasonable?

• Does The Candidate Really Want To Do The Job Being Offered?

  What are the candidate's motivations for taking the job? Does he/she really want to do what you need done now? Does this job and your company fit the candidate's career path and interests? Are there influences in the candidate's personal life which are likely to impact on-the-job performance?

• Gather The Opinions Of Outsiders?

  Does the reference data confirm your judgment about the candidate? What are the inconsistencies?

  What is the opinion of your executive search consultant?

  If used (and we wholeheartedly recommend using them) what does the Industrial Psychologist say about the fit between your team, the job, your company's environment, and the candidate?

• Listen To Your Stomach

  What is your judgment? Are the concerns raised about the candidate substantive when related to the situation in your organization? Have you developed a level of trust in this person? Are you a believer? Will your company truly be better off if this person comes on board? Do you sense that a deal can be struck that is generally in line with the compensation levels of the rest of the team? Where will your company be in one year, two years? Will the candidate's abilities stay ahead of your company's growth curve? (Be careful in considering this last factor. We believe in solving today's problems today. Projecting a candidate's fit with the company three years ahead is not reality.)

As with any decision, not every base can be covered. The key is understanding in detail the job and environment in relation to the skills, background and personal qualities of the final candidate. Doing so will put the odds of success in your favor.

Step 6 - Developing A Winning Offer

Your whole team has interviewed a candidate for a senior executive position and said, "thumbs up." References have been checked. Your Industrial Psychologist said "great candidate." Now is the time to develop and negotiate an offer. Right? Well, actually that answer is wrong.

The time to have started the offer development process was during the very first interview. By subtly approaching the offer stage early on, the critical "stumbling block" or even "deal killing" issues could have been identified and some thought directed at how these issues could be addressed before a formal offer is made.

Your hit ratio on offers can improve by following some basic rules in developing and then negotiating a winning offer. Here they are.

• Translating Relevant Factors Into An Offer:

  The successful offers are those that account for the needs of the individual as well as those of the company. Where deals are struck that are one sided in favor of the company or in favor of the candidate, the relationship is often short lived. The lesson is that you can squeeze a candidate or a candidate can squeeze you for every last nickel, but the residual effect of a win-lose proposition is a relationship which is unlikely to hold together.

  The keys in developing an appropriate package:

  • Consider the needs of the individual as well as your company's needs and existing compensation structure.
  • Know the candidate's primary motivation for wanting to join your company, then structure the package to reinforce that factor.
  • Ensure the offer is competitive with the outside market, and equitable internally.
  • Be creative as needed. Such things as sign-on bonuses and extra stock options can push a candidate over the edge in your favor while not creating undue disruption inside the organization.
  • Make sure the candidate fully understands all the features of your company's compensation program. Often times we find a company has a better program than the hiring executive or candidate realize.
  • Know in general terms what it will take to complete the deal before you enter into formal negotiations. Don't wait until you extend a formal offer to find out that you weren't even close.

  Throughout the interview cycle communicate with the candidate about compensation. Be particularly sensitive to comments which come up in conversation, such as: my wife/husband will not relocate; we have an unusual house which cannot be duplicated; we have a child in high school; we have a child with special education requirements; I have a large bonus that won't be paid for six months; my stock options are only partially vested; etc., etc.

  Such comments as these are red flags that should be explored immediately to determine their true impact on a candidate's decision.

• Developing A Winning Offer

  Once the groundwork has been done to define the issues and decision points in a candidate's mind, and your company's compensation parameters are understood, a pay package can be developed.

  • Five Elements of Compensation.

    In any pay package, there are only five basic elements of compensation to consider: base compensation, bonuses, insurance, perquisites and equity. Of course, within these elements there are countless permutations, combinations, and variations. However, to help structure your thinking regarding the way a compensation program should be developed, these are the only major elements you will need to consider.

  • Factors to Consider in Compensation Plan Development.

    In developing a specific offer the factors to take into account are:

    -the importance to your company of getting the "right" person in the job;
    -the degree of difficulty inherent in the position;
    -the candidate's current compensation package;
    -market rates for comparable positions;
    -rates of pay for peer level executives in your company;
    -your company's compensation policies;
    -other factors which will influence the candidate's decision (e.g., future professional growth opportunities, risk in your company, future reward potential such as bonuses or equity appreciation, amount of dislocation in the candidate's life, the candidate's need for the job and strength of interest in joining your company, the amount of risk you are taking in hiring that candidate, etc.); and lastly,
    -sheer wants or desires on your part or the candidate's part to which no logic or objectivity can be attached; these are needs that you have or the candidate has and no deal will be done without addressing those requirements.

  • Putting the Package Together

The offer developed for the candidate combines the elements discussed above and your good judgement on what specific items to put in the offer. Ideally, the goal is to make the package a win-win.

One piece of advice. Put aside rigid thinking on compensation for the really strong candidate as the leverage gained from the extra dollars spent to attract a top performer can be huge. In compensation plan development reason should prevail, but don't get caught being "penny wise and pound foolish."

A Final Word

The development of a winning offer requires consideration of multiple factors, some of which are obvious and some subtle. The single most important factor in successfully recruiting senior executives is your continual involvement with the candidate at each step of the process.