- helmikuuta 16, 2023
How to Ensure a Successful Executive Search Engagement in the U.S. – Key Take-Aways Based on Experience
The article provides a description of executive search as a service in the United States and highlights some differences from European practices. It shares key points to get the search right, based on practical experience conducting search engagements in the U.S. for well over a decade.
The current economic environment is a bit perplexing even to many experts and business executives, and various chief economists’ views differ considerably from each other. The inflation in the U.S. is at 6.4% on an annual basis, unemployment at 3.4%, and economic growth was 2,9% in the 4th quarter of 2022. At the same time, the January 2023 Chief Economists Outlook by the World Economic Forum forecasts weak economic growth in the U.S. and moderate to low risk of high inflation. The risk of recession is seen lower in the U.S. than in much of the rest of the world. The outlook translates into a cautious approach in hiring although there are many fast-growth pockets in the U.S. market as new technologies are being applied due to their dramatic effect on improving business processes and opening up new markets.
Broader longer term trends in the U.S. employment market include the shifting power balance between job candidates and employers where companies must sell themselves to candidates as many of them have multiple options for employment. Employers must increasingly find effective ways to brand themselves and their corporate culture. This is further driven by the entry of growing numbers of millennials into C-suites.
In the past several years, especially large companies have been beefing up their internal recruitment teams in an attempt to be more self-sufficient and less reliant on external search firms, which are often perceived as an expensive service. It has worked better for the junior ranks but it is not, in comparison, as effective in recruiting senior executives and high-demand technical experts due to long-time search consultants’ business knowledge, skill in navigating executive recruitment, and ability to directly access source organizations (for example competitors). DEI (diversity-equity-inclusion) has seen significantly increased attention with specific senior executives being placed to oversee the implementation of the initiatives to help build more diverse workplaces.
Due to advanced technologies, geography does not matter nearly as much in recruitment anymore, and in the U.S. context, due to the country’s relative cultural similarity, its effects are much smaller than in Europe. The U.S. employment market is also experiencing important changes as new rules and regulations are being applied in more and more jurisdictions. For example, asking about candidates’ current salaries has been prohibited in many states and/or large cities, and similarly many jurisdictions mandate disclosing the salary range when publicizing positions. All these local or state-wide rules must be checked on a case-by-case basis when conducting a search.
Typically, in both small and large search firms, a search engagement is performed by either an individual or a small team. Therefore, it is important to understand the specific experience of the individual/s doing the search. If a search firm lists a group of clients in its marketing materials, one needs to verify when selecting a search firm, whether the people assined to the search to be started actually worked on a search for those specific clients. If the search firm’s other consultants worked for those clients (maybe even in another country), it is not relevant for the task at hand. The search consultant’s business knowledge and understanding, coupled with hard work, is the key to a successful search. This includes global experience and the ability and experience to find, engage, and evaluate superior candidates. The approach, while evaluating whether to engage a search firm or not, is critical in gauging the search firm’s ability to ”sell” your company to outstanding candidates.
Depending on the nature of the search and decision makers’ personal preferences and experience, some people like to engage a generalist search firm and some prefer a more specilized search firm. Because the U.S. is such a huge and relatively homogenic market, whilst the majority of search firms can be classified as ”generalists”, there are more specialized search firms than in Europe. Both approaches have distinct benefits. A generalist search firm may bring in more best practice transfer across industries, engage more of the best candidates across industry-segment lines, be better able to shake up current beliefs and norms, place less emphasis on the usual suspects (”inside” crowd that often meet each other at trade shows and other industry events), and be less reliant on recruiting from competitors. A specilized search firm, on the other hand, due to its more focused industry experience, may be able to extract unique insights of the candidates, identify ”industry” candidates faster at the early stages of the search, and be able to conduct a deeper technical assessment of the candidates.
The search firm and the client company must be in sync regarding the search approach as well as the values they are promoting and cultivating. From a broader perspective, experience shows that openness and pre-search preparation are very important. The position and its requirements must be well-defined although suffcient flexibility needs to be maintained to accommodate any new realizations and information during the ongoing search. It is important to be transparent with the candidates, as smart people sense any misalignment and the probability of a successful search is higher when the candidates understand the challenges they would be facing in the new position.
Salaries in the U.S. tend to be significantly higher than in most European countries. It is common that the same position in the U.S. pays about twice the salary in the U.S. as the same position would pay in Europe. Sometimes the ratio is smaller but it can also be signidicantly larger. This is in large part because people in the U.S. are, to a greater extent, personally responsible for paying more for their healthcare, education, and retirement costs. Consequently, search fees charged in the U.S. are also generally higher than in Europe.
When making an offer to a candidate, it is better to make your best (or close to best) offer upfront rather than trying to game the salary-setting. It signals fairness and creates good will, speeds up the process, and serves as a positive start for the employee-employer relationship.