Headhunting: FAQs
Dionisio R. Gil, Jr.
Background:

The headhunting or executive search industry has experienced exponential growth over the past 10 years, driven mostly by the growth of BPOs and Call Centers. There are now 70+ search firms of which no more than 20% are SEC-registered. Be aware that the rest are fly-by-night outfits and cannot be accredited as professional and ethical search firms.

These FAQs are intended to help both client companies and executive talents understand how best to deal with executive search firms.

1. What is executive search?
  Executive Search is methodical process in identifying high caliber executives who are deemed suitable for specific positions as well as “culturally-fit” for the client.
  The client company in need of an executive talent appoints an Executive Search firm whose processes include fully understanding the client’s requirements, the culture of the company, expectations of the “boss-to-be”, challenges of the job and career track.
  The core process is a thorough and exhaustive “talent market research” to surface qualified candidates. Face-to-face interviews are conducted and assessments of qualified candidates made. The best 3 or 4 candidates are then endorsed to the client.
  As a value add, the Executive Search firm conducts discreet due diligence or reference checks on the chosen candidate to ensure that the information shared on the CVs and during interviews are true.
  These reference checks will likewise cover strengths and areas for improvements which clients find useful in managing its career and talent development program.
  The above mentioned process takes about 4 weeks to complete.
2. How does executive search get started?
  Executive search is initiated by the Client company by appointing a reputable, reliable and ethical search firm which the Client company can entrust with confidential information.
3. With the advent of social networking media such as LinkedIn, why should companies still engage the services of search firms and pay professional fees?
  LinkedIn is useful in scanning the talent market for mid-level positions. However, it has its own limitations.
  The other limitation is that the core process involving a thorough and exhaustive “talent market research”, screening, interviews, assessments and due diligence cannot be done through LinkedIn.
4. As an executive talent, how much do I have to pay to an executive search firm for their services in finding me a job?
  You have no financial obligation to the search firm. This is because the executive search process is initiated by the Client company. The client pays for the services of the search firm.
5. How can I ensure the confidentiality of my papers? I am presently employed and do not want to lose my job if my boss finds out that I am looking around.
  Avoid dealing with just any of the 70+ search firms. Most of them are known to “peddle” resumes without the knowledge of the executive. Choose search firms that are known for their professional and ethical practices.
6. Is there any law or regulatory agency that protects the confidentiality of one’s CV?
  The recently passed Data Privacy Act (RA No. 10773). This law prohibits the unauthorized processing of private and personal documents, such as resumes/CVs.
  An executive can bring a headhunter to court if the unauthorized release of his resume’ causes damage to his career or reputation.
7. What is a Retained and Exclusive Engagement? When used?

Clients normally enter into a Retained and Exclusive Search engagement for senior or highly sensitive positions requiring utmost discretion and confidentiality. Examples are:

  • An incumbent will be replaced but will only be advised once a replacement is found.
  • A new position has been created but an executive from the outside is required. Company
  • A does not want its competitors to know its re-organizational plans.
  • Company B wants to conduct the hiring discreetly so as not to distract the organization.
Why Exclusive?
  Exclusivity is necessary to keep the search confidential. It makes the search firm accountable for any leaks. Having a non-exclusive arrangement is fraught with leakage risks and makes accountability difficult to pinpoint
What are the fees and terms of payment?
  Overseas firms charge 1/3 of the gross annual guaranteed cash compensation. SEC-registered and professional firms charge anywhere between 20% to 25%; the unregistered and CV peddlers go as low as 11%.
What is a “retained search arrangement”?
  Under a “retained arrangement,” progressive payments are made for each milestone, first upon signing of contract; second, upon presentation of short-listed candidates; and third, upon acceptance of the Job Offer.
Advantages of a retained and exclusive engagement
  • Top-notch talents who are happy in their current situation are usually “not in the market”. They certainly would not want their names to be linked with executive search interviews, lest the information finds its way to their present company.
  • They are therefore quite selective in accepting invitations to explore opportunities. However, when they are contacted by a reputable search firm, assured that the search is a retained and exclusive engagement and therefore very confidential, they are more inclined to accept the invitation.
  • To these executives, a retained search engagement conveys that the company is serious, the positions is critical and the company is not scrimping on professional fees.
  • Retained and Exclusive engagements are always handled by senior and seasoned Consultants. These Consultants not only have the credibility and experience to deal with senior executives, they have the competence to make professional assessments that will help ensure the successful placement of the most suitable and capable candidate.
  • Retained and Exclusive engagements assure the client that the search is done thoroughly and follows time-tested processes. No short cuts are made for the sake of speed.
8. What is a Success-based (or Contingency) Search Engagement?

This is an engagement where the search firm gets paid only if the firm successfully fills a requirement.

When is it appropriate to use?

Ideal for non-confidential and mid-level requirements. Also appropriate for generic positions which are likely to be found in the search firm’s data bank.

How best to use this search model:

It is best to partner with only one, or at most two, search firms.

Should you adopt this model, it is best that you give the search partner a deadline, failing in which you should have the option to select a second or third search firm. A reasonable deadline is four weeks.

A second model which is quite common among companies not familiar with search processes is awarding the search simultaneously to several search firms.

This model, known as a “horse race”, encourages speed at the expense of process. Since they have no assurance of getting paid, their priority is to send as many CVs to claim ownership and they increase their chances of winning the horse race.

The above-mentioned model has been one of the culprits behind malpractices in the industry. When there are no processes, it becomes a hit-and-miss affair. When firms are encouraged to compete based on speed and when they have no assurance of being paid, short cuts happen and the big loser is the client.

Yes, the loser is the client.

Not only does it not have any assurance that they are getting the best candidates, the client also incurs the hidden cost of screening, interviewing and assessing – tasks which should have been done in the first place by the so-called search firm.

9. Guarantees: Do search firms provide guarantees for the quality and suitability of the candidates they place?

Yes, but make sure this is included in the contract to protect you from unscrupulous search firms. The usual guarantee is 6 to 12 months during which time the Client company should be in a position to determine whether to regularize the executive, extend his probationary period or let him go. Should the executive be asked to leave within the six-month period for performance reasons, the search firm, is under obligation to replace the executive at no extra cost, except out-of-pocket expenses.

Please note though that the guarantee will not apply if the departure of the executive is a result of an unplanned relocation, unplanned re-organization, take over by another company or changes in responsibilities or designation which were not spelled out in the job offer.

10. Off Limits: What are “off limits” in the search industry?

A candidate placed by a search firm should never be enticed by that same search firm to pursue other opportunities. This is one of the most common malpractices which recently caused the black-listing of a high-profile but notoriously unethical search firm.

11. What are other examples of malpractices?
  • Recycling of candidates: Placing the same executive in other firms several times.
  • Fee splitting: This is done by two search firms to go around the “off limits” restriction on one of the search firms.
  • Peddling of resumes: This is resorted to by search firms as a selling tool, on the off chance that clients will find suitable candidates from the peddled resumes. In most cases, the owners of the resumes are not aware that their CVs are being peddled. This practice not only opens the clients to being complicit in the violation of the Data Privacy Act, it also is a betrayal of the executives’ trust.
  • Conflict of interest: This happens when a search firm does not fully disclose working for a competing company.
  • Short cuts: This happens when candidates are endorsed without the benefit of interviews, assessments and due diligence.
12. As the CEO or HR Head of my firm, how can I help prevent these malpractices from spreading and hurting us?

First, ensure that you have an accreditation process for service providers. This way, you can ensure that they are SEC-registered and therefore not the fly-by-night types.

Second, ensure that in the accreditation process, they present their own Code of Ethics. If they do not have any, have them sign an undertaking that they will abide by a Code of Ethics.

And finally, we invite you to become one of our growing list of Corporate Advocacy Partners. There are no fees. Just a commitment to deal only with ethical search firms as well as your permission to have your Company’s name and logo to be part of our Advocacy Partners.

Mr. Gil is the President and Co-Founder of PAESPI. He is also the Chairman of Amrop Philippines.