Allen Austin | Search Firm Strategy

Search Firm Strategy

Facilitating a match that is truly going to work for company and candidate alike should be the primary goal of every executive search. We exist for the purpose of adding significant value to our client companies through our human capital consulting effortsand to enhance the lives and careers of our candidates (as well as our consultants). Our passion is facilitating matches that work and last.

Having spent twenty-four years in industrial management and nineteen years in executive search, I have made lots of great hires and a few bad ones. I have seen every conceivable hiring mistake. I have seen the same hiring manager make the same hiring mistakes over and over again. I have seen entire companies make the same mistakes over and over and over again.

I have read literally hundreds of books on hiring, search, selection, interviewing, reference checking, background checking and the like. Most of the material I have read is of very little use, either because it was entirely anecdotal and without basis in fact, or because it was purely theoretical in nature with little basis in reality.

Here is an actual example of a garden variety search to which I was a witness. The names have been changed to protect the guilty. Some literary license has been taken; yet the representation of relevant facts is substantially accurate.

John Q. CEO decides he is unhappy with Jack C. VP Operations' performance. Jack has been on the job for just under eighteen months and is a very hard worker. John is not able to clearly articulate just what it is about Jack he doesn't like; he simply says that things aren't going well. He calls David C. Headhunter to schedule a meeting. Dave comes to mind first because he works for one of the top firms downtown; he has also bought John's lunch twice, has taken John to play golf at the top course in town and he sent John tickets for a sold-out play.

John and Dave get together for a luncheon meeting at the country club. They talk for an hour or so but not much is said about the search. Just prior to the conclusion of the meeting, John hands Dave a Job description for the VP Operations position. Dave thinks the job description sounds familiar. It should. It is the same description given to Dave twenty months prior when he began the search which produced Jack C. Dave doesn't bother to seek specifics in terms of performance problems.

He shakes John's hand enthusiastically and with all the confidence that generally comes with ignorance he says "Don't worry John, I know you and your organization, I'll find you the right guy." Dave is still looking John in the eye while thinking "Does he remember I placed the guy he is about to fire?" and "I know two guys who would be perfect."

Dave gets back to his office and throws the job description on Greg C. Senior Associate's desk and instructs him to put together a search specification. Greg asks if anything has changed at John's company. Dave replies that everything is pretty much the same and instructs Greg to do some "cutting and pasting" to produce the "new spec." He also asks Greg to have a data base query run even though he thinks he already knows who the finalists will be. Greg runs the query and produces two more candidates who appear to fit the "new spec."

During the course of the next three months, Greg spends some time on the search but he is working on seven others concurrently. Dave decides to go forward with the four semifinalists and schedules video conference interviews with each. All four interviews go well, but Dave elects to eliminate candidate number 4. He just doesn't have the personal presence of the other three, nor does he have a prestigious MBA as do the others. Dave prepares interview notes and presents his three finalists to John. John is very happy with the credentials he sees and asks Debbie, his administrative assistant, to schedule face to face interviews at corporate. Debbie will have to coordinate interview times with George K. CFO, Mark F.CIO, Mike D. CMO and Sam D. EVPHR.

The interviews begin the following week. All three candidates are invited to corporate to interview with John, George, Mark, Mike and Sam. There is a schedule for each senior officer, but no structure has been established nor discovery objectives assigned. George's interviews go fine although he could only spend about twenty minutes with Candidate 2 because he had a bank meeting that ran late. He favors Candidate 3 because he makes a strong personal presentation, has a Wharton MBA and likes the Tampa Bay Buccaneers. Mark is only able to see candidates 1 and 3 because of an emergency meeting called with one of the firm's software vendors. He likes both candidates. He sees them as "pretty equal." Mike keeps all three of his appointments and tries to give each candidate careful consideration. He has concerns about candidate number 2; he seemed nervous and uncomfortable in the interview. His eye contact was not as consistent as the other two. Sam keeps all three of his appointments and uses a structured interview questionnaire. Sam determines that candidate number 2 is the most solid performer and is truly a good fit, but doesn't think he'll pass muster with the others because his interviewing skills are weaker than his competitors.

When the powers meet, the decision is made to extend an offer to candidate number 3. The prevailing reasons - John thinks he is the most impressive; George likes his presence, his Wharton MBA and his affection for the Buccaneers. Mark would go with number 1 or 3. Mike doesn't voice much support for number 1 or 3, just his concerns about number 2. Sam makes a case for candidate number 2, given his track record but is quickly shot down by the others.

The offer is extended and accepted by candidate number 3, Tom Jones, starts work four weeks later and everyone is happy, as is Dave the recruiter, who has just sent his final invoice, bringing his total revenues for this search to just over $130,000. Everyone has high expectations of Tom.

Why? Why would the management team and the search consultant have any expectations of Tom? All they really know is that he seems to be a nice guy, has a Wharton MBA and is really impressive in person. What are the chances of Tom's success? Somewhere between 50% and 55%: marginally better than a flip of the coin.

I have witnessed these kinds of activities and the often disastrous results they produce more times than I care to imagine. Who do I blame? Well, the answer has either got to be no one or everyone. I guess I could blame our educational system. That seems to be popular these days.

The fact of the matter is most executives do not know how to conduct an effective search. A surprising number of search professionals haven't had any formal training in terms of how to conduct an effective search. Most of us are very good at everything we do except the search, selection and hiring process. Once again, this should be no big surprise. Consider my background - twenty-four years in business with responsibility for two divisions with revenues in excess of $700 million each, combined with ten years in undergraduate and graduate schools. How many courses have been offered or required to complete in academic institutions on hiring, selection, interviewing and the like? Zero. How much instruction was given during my twenty-four years in industry? I took one course on interrogation to determine whether or not the subject was being truthful.

A study published in a 2006 edition of the Harvard Business Review indicated that two of every five recently placed chief executives failed within eighteen months. Other surveys we've read in recent years suggest that somewhere between 46 and 50 percent of all newly placed senior executives are fired or resign within two years. Such statistics and dismal results have prompted us to study the myriad of things that often go wrong during the executive search process. I should also add that quite a number of internal placements and promotions turn out badly as well.

Almost every business day since August 2, 1996, the day I founded Allen Austin, I've tried to isolate one failed executive placement and determine the reason for that particular failure. At the time of this writing, we've examined 3,033 failed CEO and executive level placements that failed. Here are some of the verbatim comments we've noted:

The placement went awry because:

THE HIRING AUTHORITY...

didn't establish specific performance objectives for the new executive in his specific role
didn't understand and/or didn't articulate the true drivers in the business
didn't understand and/or was not able to clearly articulate the values of her organization
made judgments and decisions too quickly, too emotionally and placing too much emphasis on resume, first impression, appearance, affability, articulation, charisma
made hiring decisions based solely on educational credentials and credentials, tended to hire "in his own image"
didn't focus on the candidate's consistent and predictable pattern of relative success or lack thereof.
failed to establish necessary critical skills, attributes or values such as team building skills, organizational ability, commitment, work ethic, technical expertise, advocacy skill, or any number of other necessary attributes.
failed to understand the candidate's true strengths, weaknesses and proclivities and how they potentially influence the candidate's success and the organization as a whole
did not understand the difference between management and leadership
thought that a candidate's primary attitudes, values and propensities could or would change
did not clearly articulate organizational nuances such as resource allocation, departmental influence or dominance, silo management and the like.
did not clearly articulate what kinds of behaviors are valued and respected within the organization
did not establish that the new candidate's career goals and objectives are aligned with those of the organization and that the new relationship represents a win-win for candidate and companydid not insure a smooth integration of the new executive in to their new role (applies to both external hires and internal promotions)

THE NEW EXECUTIVE...

was hired because of his sales prowess and we do need revenues. In the process of focusing on sales he let the rest of the operation go
was arrogant, thought he had all the answers, did not consult his team for possible ideas
didn't take the time to determine how we got where we are and what we looked like when things were working well
just didn't seem to understand what drives the business; was focused on acquisitions that just didn't make sense for us.
alienated several members of the board, didn't seem to understand the concerns of the board members
couldn't get a real grasp on the operations of the company. Was never in full realization of what changes in strategy effected the shop floor
didn't understand enough about the business to know when the numbers were starting to go awry
couldn't get his team right. He had two misfires in a row in the same EVP position. The board just lost confidence in his hiring ability
did not take responsibility for his or her own integration including selecting appropriate mentors
did not win the respect of his or her peers, subordinates and the board
did not understand the importance of learning the dreams, goals and objectives of his team members
had a command and control leadership style and couldn't gain consensus among any of our constituencies
failed to establish a go-to network for different answers and challenges within the organization
could not unite his troops; they were always confused about priorities so key performance metrics suffered
didn't realize or did not admit that he or she is human, mistakes will be made and that they need to be quickly acknowledged and apologized for
wasn't sensitive to the needs and goals of all the organization's stakeholders
achieved quick results, but couldn't sustain results because of his short term view
found the company's financial position was not as represented
found the company was mired in the past and that senior leaders were not receptive to change
was a very nice man and was well liked, but he just couldn't move the numbers
was very strong in many areas, just not any that would help us
was just not honest; he would always offer bull____ answers to questions to which he didn't really have the answers, when he should have just been honest and said he didn't know
was really just kind of lazy. This is a hard charging organization. He is really smart but won't do what it takes to get the job done when it requires extra effort
had a cavalier attitude toward just about everything
couldn't articulate a clear vision and cause the troops to move in his direction; kept talking about the way his old company did things.
wasn't the kind of coach we need here. We've grown so fast that we have a bunch of inexperienced people who need a lot of teaching and coaching
had a style that was just incompatible with ours and it turned out to be a big issue. This is a very formal buttoned-down organization and he was very informal and laid back. Our customers didn't relate to him
wasn't a quick study. You have to learn quickly around here. Nobody is spoon-fed.
just couldn't solve problems or conflicts. When she found herself under pressure she would simply yell at others.
seemed to be much too quick to assign blame, seldom accepting responsibility
always got bogged down in the details and never could see the forest for the trees.

Between 45 and 50% of all executive hires fail within eighteen months. Of the 3,033 failed CEO and executive level placements we've examined, over 90% of those failures fall in to these categories:

Poor fit. The CEO had been promoted beyond his or her level of competence. There was nothing in the candidate's background, experience, references and/or credentials that supported the candidate's ability to do the specific job or the business model may have changed. Pay close attention to the phase in which the company is operating: startup, growth, turnaround, etc.
Poor fit. The CEO or C-level executive was misled or inadequately informed about the nature of the job, the condition of the company, the culture of the parent or stakeholder group or other material or critical success factors.
Failure to objectivity evaluate members of the leadership team. New CEOs have tendency to want to replace key leaders before determining the best possible and prudent course of action. Less common, but still problematic, is a tendency to be overly loyal to the existing team.
Not understanding the total operation including strategy, people and more commonly, operations. New CEOs must become intimately familiar with the nuts and bolts operations of the business in order to be able to ask the right questions, and know when the organization is on track and moving in the right direction
Task Orientation. This failure is the opposite of the item above. CEOs who are particularly strong in one area, typically operations, ignore or minimize the big picture items.
Failure to hire well. New CEOs may or may not have experience in building a leadership team well suited to carry out the organization's objectives.
Lack of discipline. Poor discipline leads to growth strategies that don't make sense and failure to understand the true drivers of the business. New CEOs must quickly grasp the essence of the operation in order to establish strategic priorities.
Failure to recognize the possibilities. This lack of vision or emotional intelligence often causes the new CEO to become chained to an old business model or original vision, product line, marketing strategy, etc.
Failure to bond with the existing team. New CEOs need to win the confidence of the existing team even if changes are eminent.
Failure to gel with members of the board. Boards are comprised of individuals, each of whom have unique concerns and require an individual communications strategy. Board members must remain confident in the CEO's ability and willingness to make tough decisions with clarity and realism while communicating transparently and effectively with each board member.

There are other reasons that newly placed CEOs and senior executives fail. Eliminate these and you will most certainly stack the deck in your favor.

The unfortunate reality is that in many cases where failure has been the outcome, there was nothing wrong with the candidate and there was nothing wrong with the company, the hiring manager or the opportunity.

The very best hiring practices examine as many variables as possible. While no process involving human beings can ever be perfect, the consultants in our firm seem to have broken the code when it comes to avoiding the most common hiring mistakes.

Many searches are destined for failure from the outset because many, if not most of the important variables, are neglected. Many searches are executed with little more than a "job description." The typical job description is nothing more than a list of attributes all based on background, experience and credentials, i.e. ten years of this, an MBA in that, etc. The job description is an important component of a comprehensive search specification. It does not, however, provide an adequate or appropriate roadmap for an effective search.

Getting it right is not always easy. Here is a quote out of Execunet's October 2007

e-newsletter:

There is mounting frustration with the pace of many executive search assignments, and these days, it's being voiced largely by executive recruiters who can't seem to get enough organizational commitment to keep the momentum on search assignments.

Just consider the surge of responses to a question about why searches are getting stalled that came in from corporate hiring executives who count themselves among the members of ExecuNet's exclusive Human Resources Executive Business Roundtable.

One discussion contributor who just left a senior HR role confirms that the pace of executive search assignments has indeed been slowed by a variety of organizational pressures.

"The pace of activity inside companies is frantic. New fires develop every day that require immediate attention. Executives are overbooked and priorities are juggled. Their availability is limited. Executive recruiters find their calls going unreturned," says the longtime HR officer.

"Another factor is evolving job specifications," he says. "Senior executives frequently think they know what they want in a candidate, but their perspective changes as they react to resumes and initial interviews. From first-hand experience, what started as a search for one set of experiences turns into something only loosely associated with the initial specs." And no matter how stretched management may be, executives will apparently take whatever extra time they believe they need to select the perfect candidate.

We are mindful of the pressures hiring managers face and are careful to be empathetic. This awareness is critical to developing and enhancing client relationships. This kind of empathy is also critical when working with clients and candidates at every stage of the search.

Every physician takes the Hippocratic Oath before he or she can graduate from medical school, become licensed and begin to practice medicine. Unfortunately there is no such licensing or certification process for retained executive search professionals, nor is there any such mantra or sworn oath. In our judgment, there should be: MAKE NO ASSUMPTIONS. Every senior level search should start with a clean sheet of paper. Relying on the by-products of recently conducted similar searches in order to present yet another list of the usual suspects is a practice which should be avoided at all costs.

Remember that the "business as usual" approach to hiring CEOs and senior executives leaves much to be desired.

"Business as usual" questions in selecting search firms include:

How many searches have you done in this industry?
How many similar searches have you done during the last twelve months?
What does your network look like in our industry?
How many CEO searches have you conducted in our industry?

Brooke Masters wrote and published an article in the Financial Times, March 2009 edition highlighting the career of Kevin Kelly the CEO at Heidrick & Struggles. This is an excerpt from that article.

Since taking the helm in 2006, Mr Kelly, 43, has sought to move the firm away from pure recruiting to offering a suite of services that help its clients attract, retain and promote top management. The work was sparked by a recent internal study of 20,000 Heidrick searches, he says. "We've found that 40 percent of executives hired at the senior level are pushed out, fail or quit within 18 months. It's expensive in terms of lost revenue. It's expensive in terms of the individual's hiring. It's damaging to morale.

The most prestigious search firms in the world are typically strong proponents of asking these kinds of boilerplate questions, principally because they are prepared to answer them. I am not sighting this article as a disparagement of this firm or any other; more as a suggestion that there might be a more meaningful set of questions to which you might want answers.

Questions like this suggest to me that the buyer might not have a full appreciation of exactly what it is they are seeking. It seems to us that the questions should be much more outcome focused. A set of more relevant questions might look like this:

What is the firm's successful delivery rate? Or...what percentage of the firm's engagements is considered successful by the client?
Does the firm track its performance and/or retention rate?
What is the total number of searches the firm has conducted and over what period of time?
Is the firm accredited by the Association of Executive Search Consultants? (Less than 200 firms worldwide are certified by the AESC)
Does the firm conduct comprehensive primary research on every search or do they depend primarily on databases and informal networks?
What does the firm's needs-analysis process look like and what are the key discovery items it seeks to unearth or reveal?
Does the firm understand performance based search methodology?
How many personal contacts will be made and who (Partner, senior associate or research assistant) will make them?
How many of your competitors are off limits to the search firm as a result of their existing client relationships?
What kind of analyses or metrics will the firm measure potential candidates against?
Will the firm require its candidates to complete a self-appraisal?
How will the firm know that your opportunity is ideal for the candidates they select and present?
Does the firm utilize structured interviewing and who (Partner, senior associate or research assistant) will conduct the interviews?
Will the firm conduct just cursory reference checks or comprehensive 360's in advance of presentation, who (Partner, senior associate or research assistant) will conduct them, and what form will they take?
Will the firm be able to coach me on team fit and effectiveness?
Who conducts background investigations and in what manner?
How long will the search take?
Is the firm flexible, focused on me and willing to customize my search?
What is total cost of the search including direct and indirect expenses?
Will the firm be capable of assisting me in the successful integration of the newly hired executive?
Will the firm provide me with meaningful market information collected while conducting my search?

I've thrown a lot of "stuff" at you just to get you thinking. The failure rate among newly placed executives is alarming and it is getting worse. In my opinion, this trend is nothing short of a crisis. Every time one of these "mis-fires" occurs, lots of bad things happen. The most obvious and most talked about is the loss of financial performance at the client site. Somewhat less obvious is the disruption and/or loss of momentum within the client organization. The total cost of mis-hires and or mis-promotions has been estimated (depending on which study you read) at somewhere between 5 and 10 times the executive's annual compensation. Based on my real-world experiences, I believe the cost to be substantially greater.

Something that doesn't get talked about or lamented over near enough in my opinion, are the lives of candidates, spouses, children and family that are needlessly disrupted, sometimes permanently, as a result of poorly executed hiring processes. The pages that follow contain suggestions that have worked for us.