pflint

At some point in the life cycle of a company it would be surprising if an executive recruiter was not needed to help fill a position on the management team.  While most of us who sit on Boards work with our management teams to leverage our networks to hire that perfect executive…it does not always work.  And candidly there are times when going right to the retained search just makes sense.

To begin with there are a number of really good executive recruiters who know how to support venture backed companies.  And these same recruiters are not Darth Vader looking to take advantage of your business just to earn a fee.  OK maybe there are some who do…  Having been an operating executive for 15 years who was on the candidate side being recruited, as an executive recruiter and now as an investor I have seen the best and the worst of them.

Here are a few guidelines that I would suggest people follow to have a successful retained search experience:

1.  Pick the right recruiter for your search.  Don’t pick the firm pick the Partner who will be doing the work.  I tend to like the smaller firms who are more concerned about doing great search work rather than the fees.  Ask the recruiter for references and what searches he/she have done that are directly relevant to yours.  For example have they worked in ecommerce and successfully recruited a VP Marketing?  Ask who will be on the weekly calls and who will be talking with the candidates?

2. You get what you pay for!  Retained search is not inexpensive.  Most firms will want a retainer that equals 33% of the estimated cash compensation of the new hire (base+targeted bonus).  There are some really good firms who will ask for a flat rate and may also ask for equity.  I personally like the equity component as it gives the recruiter added incentive.  These recruiters DO NOT work on contingency.  You will pay them even if the search fails.  The good news is that if you do your homework and manage the search properly it will be successful.   And if you hire a great person the cost of the search should be more than covered by their contribution to  the business.  BEWARE of allocated expenses!  Larger firms charge an additional percentage for their overhead.  Don’t pay it if at all possible.

3. The Process.  Create a job description that accurately and specifically outlines your requirements.  I would suggest that you list the 4-5 key initiatives that this person will work on in their first 12-18 months and then 5-6 specific skills and experiences you think the ideal candidate should have to address the initiatives.  The more specific you can be the easier it will be for you and the recruiter to get on the same page.  This should be the road map for your search!  Additionally I would suggest having weekly update calls and you should share the written updates with your Board…they might know some of the candidates which will save time.  During update calls be prepared.  Review resumes in advance and ask questions to make sure the search firm is asking the right questions and really qualifying the candidates.

4. Interviews and the close.  When it comes time to interview candidates I would suggest that you remind yourself that in most cases you are recruiting them.  These candidates probably have other opportunities that they are looking at so it is really important that in your first meeting you are selling and evaluating.  Give them time to get their questions answered.  When you narrow down the field to your top 2 then you can start asking the tougher questions and bring in your team and appropriate Board members to help evaluate.  Also by this time the recruiter, you and your Board should have conducted a few behind the scenes references.  When you are ready to close the real referencing can take place and the compensation discussion begins.  And this should be a conversation not a negotiation.  DO NOT send out an offer letted until you have a verbal agreement on the key points! Talk through the issues.  Is the candidate more cash or equity motivated?  Is there is relo involved?  Get it all on the table and then come to a mutually agreeable plan.  I would also suggest that you not the recruiter have this conversation directly with the candidate.

This post turned out a little longer than I had anticipated but this is a really important topic.   Talk with your peers and your Board about their experiences and above all make sure there is a sense of urgency at all times especially during the interview process.  If candidates sense that this search is a priority for the company and investors they will take is more seriously.

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