On paper, it sounds like the ultimate in rhetorical questions. With so much data freely available, the rise in social media and access to the right skills and technology, why would any company pay a headhunter tens of thousands of pounds to source a senior executive?
Businesses are already making huge savings on agency fees by increasingly bringing both volume recruitment and more junior hiring in-house. And while the effectiveness of in-house recruitment will be debated endlessly, surely any efficiencies it offers are equally applicable at executive level?
More and more firms are setting up dedicated executive talent functions to bring the science of headhunting under their roof. Roles such as chief talent officer and head of senior hires are often filled by individuals drafted in from search companies. But while the brief seems straightforward – getting to know the talent and attracting them to your brand – the complex courtship of candidates that the likes of Michael Page or Morgan McKinley have perfected over decades is far from easy to replicate.
When Capita set up its own senior talent function two years ago, there were high expectations of what it could achieve, particularly in terms of savings. “One of the challenges is that we’re a diverse organisation with lots of different businesses and we also operate globally,” says Aaron Webster, director of senior talent. “We hadn’t looked at leadership behaviours in a consistent way before, so we didn’t know what good looked like. Also, when we set up, we were using 25 search providers. Now there’s just three, including our own team.”
That team has grown from six to 10 people and 85 per cent of senior hires take place directly, but it’s been a gradual process. It can now deliver talent insight to the rest of the company and has created an executive talent pipeline based on nine types of role. “Ultimately, we want to put ourselves out of business because we’re recruiting more people internally,” says Webster.
Andrew Mountney of Aspen In-house, which sources and trains senior recruiters for in-house teams, says one of the challenges direct executive recruitment carries is the expectation that it can save huge amounts of money, when actually it’s a slower and more strategic return. “The decision to do direct recruitment often lies with the finance or procurement functions because they look at the fees search firms charge and think the return on investment from doing it internally will be quick and aggressive,” he says.
“But it can take anything from 18 months to three years to see that return [at senior level] because there’s more that goes into the set-up, the infrastructure and the tools – outsourcing research, for example.”
But with executive search fees coming in at anywhere between £75,000 and £150,000, it’s hardly surprising that businesses want to reign in costs and regain control.
Senior-level hiring also differs from ‘business as usual’ recruitment as there tend to be fewer positions, and potential candidates can be less visible: not every top exec is on LinkedIn and many do not want to advertise that they’d be up for a new role. This means anyone looking for their next chairman or CFO needs to build a detailed picture of who’s out there – known as ‘market mapping’, where researchers draw up charts of who works where, who’s linked to who, who’s referred someone they rate and so on.
“Historically, we added value because we knew where everyone was and how we could get them,” says Chris Smith from search and consulting company Korn Ferry. “Now, everyone can produce an organisation chart of a competitor.” But it’s not as straightforward as scraping data from LinkedIn or browsing annual reports – researchers in the executive hiring market (whether in-house or agency) spend time speaking to executives about their history and connections, attend countless networking events and stay in touch with candidates to keep on top of the ‘map’ for their industry.
Nicki Dexter, VP of HR for product and technology at media firm Schibsted, is in the early days of building this expertise in-house, so still relies heavily on external search. “We’re competing with the likes of Google and Amazon for senior product and technology talent. They’re cash-rich and their brands are well known, while ours is not,” she says.
“We use executive search companies because, as they recruit for similar roles, they bring insight that can help shape requirements for new positions. We’re working on mapping our own executives’ networks but this is longer term in nature – there are relationships we need to cultivate. I don’t think we’ll ever get to a point where we could guarantee 100 per cent of roles being recruited in-house.”
Indeed, some of the most sensitive roles should always be outsourced, argues Lorraine Thomas of search company Metzger. “We might be asked to find a replacement for someone who doesn’t even know they’re leaving, so a lot of what we do is under the radar,” she says.
There are other things professional firms bring to the party, too. They can call on their contacts to get references, referrals and advice. They deal with much of the bureaucracy of recruitment. And they often conduct research that underpins their search criteria.
And then there is their mammoth networks of contacts, which can take years to build up in-house. “If you’re in retail, you’ll tend to source from your own industry, when the best candidate might be in utilities – we can widen the network of candidates we look at because of the breadth of network we have,” says Jo Sweetland, managing partner of Green Park. Thomas calls this drawing on the “unusual suspects” – added to which is the fact that many search firms now offer value-added services such as psychometric assessment, coaching and support with onboarding.
If you do decide to build an in-house executive search function, it’s important to draw boundaries, advises Mountney, because, once hiring managers across the business see how successful it can be, they’ll want to use the service too.
Many organisations use a salary cut-off of around £100,000 to determine where executive hire begins, and staff this team slightly differently, too. “This is a different type of person from your business-as-usual recruiter – they need to be able to manage the research, the process, the relationships with the candidate and the hiring manager. Do you have those skills internally or can you develop them?” says Mountney.
One of the reasons in-house executive recruitment is on the rise is the availability of technology that can streamline the process of sourcing and assessing candidates. Nurole, for example, is a platform hosting the details of more than 10,000 ‘board ready’ executives who can be matched to roles via an algorithm, according to founder Susie Cummings.
AI systems can sort through thousands of data points (such as personality assessments or social media posts) to suggest the most relevant candidates. “We aim to enhance, not disrupt, the recruitment industry,” says Cummings. “Man and machine can work together, and organisations will always need that human, advisory side. But why pay a headhunter to do the matching part if it can be done by an algorithm?”
With the business climate and the types of roles changing at an alarming rate, any route to sourcing the right executive talent is tough at present. David Grundy, founder of Invenias, which produces software for executive hiring, argues that getting the best talent is “the number one strategic enabler of a business”, which is driving the emergence of roles such as chief talent officer.
But executive talent functions can’t sit in an ivory tower – they need to collaborate and network across the business and beyond. “What sets great talent functions apart is that they’re called out at a very senior level in the company as having a critical role in its success,” says Grundy. “They know it’s more than bringing a couple of super-brains into the executive talent team – it’s more about having an executive hiring culture in the business.”
So while cost may be the initial driver for your push towards hiring more executives directly, the long-term pay off could be adding real value to the business. The challenging part is getting there.