Executive Search Firm

What is an Executive Search Firm?

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Definition:

An executive search firm is a company hired by an organization to recruit applicants, select finalists and assist in the hiring decision for certain high-level positions.

How Executive Search Firms Are Used:

The fee charged by an executive search firm is usually based on the anticipated or actual salary to be paid to the person selected for the position. Contracts are usually structured so that the firm is paid some of their fee upfront and the rest when the selected candidate begins work.

Some contracts include clauses where the candidate must stay for a specific period of time. The firm will rebate a portion of their fees if the employee leaves before then.

The word executive is used because the positions organizations need executive search firms for are the top handful of leadership positions. Private companies use the firms to fill C-level positions such as chief executive officer, chief operating officer, chief finance officer and senior vice presidents.

State and federal agencies use executive search firms to assist in the recruitment of agency heads and highly-specialized, highly-paid senior staff. Local governments use the firms in the hiring process for top public administrators, such as city managers and school superintendents, and for department heads with highly specialized functions, such as police chiefs, fire chiefs and city attorneys.

The firms are used to hire chief executives -- both in public and private organizations -- because the boards supervising these positions do not have the time or expertise to devote to the hiring process.

The boards can purchase the services of an executive search firm quickly and can almost ensure a better outcome than if they had tried to complete the hiring process on their own.

Using an executive search firm gives the appearance of fairness and openness to outside observers. If a firm is used and if an internal applicant is hired, those affiliated with the organization as well as outsiders can have some measure of certainty that the chosen candidate stacks up favorably to others in the profession.

Because so much salary is devoted to employees in senior positions and because those employees have such a large impact on the direction of the organization, it is critical that hires for these positions are a good as possible. One bad hire can waste significantly more money than would have been paid to an executive search firm.

Also Known As:

  • headhunters
  • headhunting firm
  • executive search consultants
  • executive recruiter

Examples:

A city council has just received the city manager's resignation letter. The city council members are paid a small stipend for serving on the city council, but it is only a token of gratitude written into the city charter. All of the city council members have full-time jobs in order to support themselves financially.

None of the city council members have the time nor expertise to be much help in the search for the next city manager. The city council decides to hire an executive search firm to recruit applicants, conduct reference checks, and select finalists. The city council will interview the best three to five finalists. The council will consult with the firm before making an offer of employment to their top finalist.

The city has agreed to pay the firm an equivalent of the new city manager's first three months salary.

The city will pay the firm one month's worth of the former city manager's salary before the firm begins work and will pay the remaining fee once the new city manager starts his or her first day of employment. The firm and the city also agreed to a contract stipulation that the firm will rebate the city 25% of the total fee if the new city manager is fired for cause within the first year of employment.