Executive safari; headhunters: how they work, how they bill, and how to find the right one for you - includes related information, and directory of recruitment firms

Executive safari When Matilda Publications Ltd. of Australia needed an editor two years ago for Sassy, its new launch, the publisher was hard-pressed to find anyone young enough to understand the magazine's teenage readers and yet mature enough to lead a staff. So they turned to Martin Walker, executive vice president of Periodical Studies Service, a consultant and executive search firm.

Within several weeks, Walker came up with Jane Pratt, 24, an associate editor in Teenage magazine's New York office, who was recommended by someone Walker initially approached for the job. Besides Pratt, he identified four or five other candidates with more experience because "I didn't believe they really wanted someone 24."

Meanwhile, Pratt had heard about Sassy, a potential competitor. A call came from a former colleague at McCall's, who told her Pratt had been recommended to Walker. Oddly, one of the reasons she had been recommended was the style of a particular pair of men's shoes she used to wear to the office.

"I thought there was a possibility of applying maybe as an associate editor," Pratt recalls. She was stunned to learn from Walker that the position was for editor in chief.

The initial interview with Walker went well. "Thank God, the problem's solved," Walker remembers thinking at the time. Lunch with Pratt, Walker and Matilda's former president Sandra Yates also went well. Several days later, Walker called to offer Pratt the job. The negotiations that followed were conducted over the phone, always through Walker, who Pratt describes as "fair, easy-going, not overly formal, right in the middle." She also remembers him reassuring her that "of course it would be better for him to get me more" money for the position.

The story illustrates many of the nuances of executive search work. Taking candidates to lunch, for example, is a requirement for positions that represent the company to the outside world, says Charles Stentiford of DeSilva Stentiford & Assoc. Ltd. "You never know who may have terrible table manners," he adds. When Walker initially contacted Pratt, he left his name and phone number but not his company's name, on the off-chance that someone might recognize it as a headhunter. Search firms are often used to ease negotiations. Finally, when else is a headhunter more necessary than when searching for the perfect 24-year-old executive?

The process of executive search has been described as everything from, "corporate king-making" to "throwing enough bodies against the wall that one will stick." It's a business that influences the fortunes of giants and grasshoppers alike, from RJR Nabisco to small trade monthlies like Shopping Centers Today. It's been called "the business of engineering human transplants," of finding people compatible enough to survive within a new employer's corporate culture.

Full of the unexpected

It is full of the unexpected, as any recruiter can tell you--consider the job candidate who fell asleep during an interview, or the career that was disrupted by another recruiter's indiscretion on the phone. It is an intangible business in which confidences are everything, and the only real tools of the trade are ephemeral contacts and countless resumes in files or computer databases.

It's a business in which the best players must split their personalities between intelligence skills and salesmanship, between probing, seeking discrepancies in clients' references and candidates' words, and, on the other hand, convincing candidates that their families will survive a relocation, convincing clients that this candidate is the right one. One recruiter, Al Samuels of Davric Associates, laughingly called himself a "yenta," the Yiddish word for a gossip and meddler. Several compared themselves to the village matchmaker who arranges marriages.

Recruiting is a business in which things are not always what they appear. Some companies will use a search firm once every two years to hire someone--perhaps--but also as an "insurance policy" to prevent the recruiter from approaching prized employees with jobs for competitors. Some searches are initiated not to hire, but to gather market research about who is available with what skills at what price. Some search firms will not-too-subtly drop the names of high-level clients, yet when scrutinized are found to handle only middle- or lower-level positions. At the other extreme are recruiters who say they will never reveal their clients' identities--yet headhunting is a business where one rule of thumb before hiring a search firm is to check with its former clients.

Finally, executive search is a business whose time has come. Mergers, acquisitions, a trend of decreasing investment in management development programs, and an increasingly global market have created an unprecedented demand for executives, according to Business Week's John A. Byrne, author of the 1986 Macmillan book, The Headhunters. Whereas executives once refused to play the headhunters' game, "today, virtually no one hangs up on a recruiter."

High stakes

Most of all, executive search is a business that intersects employees' lives at an intensely vulnerable time and weaves them together with companies whose fates may ultimately be determined by the people they hire. For employer, employee and recruiter alike, the stakes are high.

High fees reflect the high stakes. Even the contingency firms, which receive payment only if someone they represent is hired, typically charge 1 percent per $1,000 base salary, up to 30 percent. That adds up: Finding a $20,000 secretary costs 20 percent, or $4,000, according to such a formula.

Retainer firms tracking down senior level executives are a good deal pricier. An example is Spencer Stuart, the third largest search firm in the world, billing more than $81.7 million last year. Even such large firms do search work in the magazine industry, although it represents a small percentage of their business. Spencer Stuart charges 33.33 percent of the first year's salary, due in equal installments over the first three months of a search, plus fax, phone, travel and other expenses. The firm has a minimum search charge higher than many, at $30,000.

While the basic distinction between contingency and retainer firms is reasonably clear, the details are sometimes blurred. Contingency firms aren't always cheap people-mills, and retainer firms don't always do first-class search work. It is whispered that some retainer firms will occasionally work on a contingency basis when business is down. Occasionally a retainer firm's "search" isn't really a search because the headhunter happened to have a handy resume on file that fit the job description. Sometimes retainer firms will accept unsolicited resumes, much like contingency firms.

Many contingency firms, on the other hand, sometimes do active search work to find candidates. Further, recruiters that "specialize" in one field often accept assignments in other industries. Expensive firms sometimes hunt for middle- or low-salaried personnel, and relatively inexpensive firms sometimes track down top executives. Two firms listed in the directory accompanying this article do work on both a contingency and retainer basis; several additional firms also do both, but the division is sufficiently lopsided to categorize them one way or the other.

The search firms specializing in magazine publishing, most of them located in New York City, are often entrepreneurial companies with fewer than a dozen employees. Intent on their own business, surprisingly few know each other--or the two trade associations serving the recruitment industry, or the newsletter, "Executive Recruiter News," which is published in New Hampshire by James Kennedy, the "guru" of executive recruiting, according to Byrne.

Magazine publishers use such search firms in a variety of ways, some using recruiters only to fill top-level posts, others using contingency firms only for lower and middle positions. "In between, you don't use either [search firms or contingency agencies]," says Christopher Little, former president of Newsweek, now president of Cowles Magazines Inc. 'I always try to promote from within."

A brief poll of non-New York publishers like Meredith Corp. in Iowa, Whittle Communications in Tennessee, and Communication Channels in Georgia, reveals no pattern of increased reliance on New York search firms to find employees. In fact, non-New York firms may use recruiters less than Big Apple folk. One explanation is that when in New York, recruiters "are just one restaurant away," says Ken Mishoe, Meredith's corporate director of human resources development. Many publishers with New York-area offices choose to hire directly sometimes as well, among them Cahners, Gralla, CMP, Consumer's Union, Hanson, Fairchild and McGraw-Hill.

One way for publishers to categorize recruitment firms is by what geographical areas they typically cover, what kinds of positions and what salary levels they typically work with. Even the specialists within the magazine business specialize further by job category and salary level. Some work only for business magazines, some only for consumer. Some handle more editorial posts, some ad sales, others production, still others executive and financial positions. A number of firms, such as Korn/Ferry International, the largest retainer firm in the world, call themselves "generalists," yet still do some work within the publishing field.

Another criterion is size. Although the standard measure of larger recruitment firms is gross billings in a given year, smaller publishing specialists are often private companies loath to reveal such numbers. Most, however, readily tell the number of employees working for the firm. This is a reasonable gauge, particularly when a savvy publisher then coaxes out exactly who does what function within the recruiting firm. Sometimes so-called "researchers" do much of the actual work.

Bigger is not necessarily better among headhunters, according to some sources; neither is specialization. Both criteria can be double-edged swords by which to select a firm. "You may get more attention from a small firm; on the other hand, a large firm may have the resources to do more in-depth research," notes one recruiter. While publishing specialists, with recruiters who have worked in the field for a substantial number of years, are more likely to be able to screen candidates' competence and draw on existing relationships to identify candidates and check-references, such firms are also more likely to be unable ethically to recruit from existing, active clients. Such "client blocks" can eventually handicap a firm, although headhunters say it's not so much a problem in a diverse industry such as publishing, as opposed to money-center banking, a field dominated by perhaps 10 firms. Still, the trend toward consolidation, particularly among consumer titles, can only aggravate the problem.

Most sources suggest that, before hiring a recruiter, you find out which firms the recruiter considers off-limits. While one advantage of hiring a small search firm is that fewer competitors are likely to be off-limits, the coroallary disadvantage is that all the bigger search firms will continue to feel free to recruit from the publisher's employees. Conversely, bigger recruiters are likely to have more competitors off-limits, but the publisher gains the temporary advantage of protection from being recruited from. To recruiters' chagrin, some publishers will hire a recruiter once in a while just to gain such protection.

But, of course, recruiters have their ways of fighting back. Many will represent a job-seeker currently employed by a client if the employee initiates the contact. "If I do a lot of work for someone, I won't represent an employee of theirs who calls," says Walker, of Periodical Studies Service. "If I do only occasional work for a client, I won't recruit from them, but I will represent an employee who contacts me. If they're no longer a client, I'll recruit from them." To protect themselves from a potentially irate client, several recruiters require the job-seeker to put into writing the fact that it was the employee who sought out the recruiter, not the other way around.

Recruiters differ widely on the definition of a current client. If one Conde Nast magazine uses a search firm, the recruiter may consider only that magazine, not all of Conde Nast, as the client. This recruiter will feel free to recruit from the rest of Conde Nast.

Time is another factor. Some recruiters will consider Conde Nast fair game three months after fillings a position there; others, one year; still others, two years.

A general rule of thumb is that the more expensive the search, the more careful the recruiters are not to offend clients. Big-ticket search firms with minimum fees of $25,000 and $30,000 typically say they will not recruit from or represent any employee of a client within two years after completing an assignment there. Even then, breaches occur--one of the largest search firms in the country, with 1988 billings over $80 million, not long ago was reported to have called a First City Bancorp Inc. executive vice president about a job at Unisys, although the search firm received more than $250,000 in fees the previous year from First City Bancorp, according to Business Week.

Despite the fact that some publishers would like to be informed if key personnel approach a recruiter, most search firms say they would never betray such a confidence. "If I learned that a prized employee wanted to leave, it would give me the opportunity to try to convince him or her to stay," says Katherine Smith, president of First Management Services, a personnel consultant who works for several publishers. "If the employee were mediocre, I would do nothing."

However, the tendency among search firms to serve the clients who pay them does not always have such benign consequences: The Association of Executive Search Consultants (AESC) recently censured and fined one of its member firms for checking a reference without the candidate's permission. Eventually, the candidate's employer found out, which was a factor in the executive leaving his firm several months later. Normal procedure dictates that a firm obtain permission before calling any references, explains Janet Jones-Parker, president of AESC. "If you only get the rosy picture of a person, you call the candidate back and ask for more references. If he's reluctant, perhaps it means there's something fishy."

Sometimes maintaining confidentiality requires fancy footwork and a poker face. Elsa Ross, executive vice president of Gardner Associates, once had two candidates from the same firm show up almost simultaneously in her offices for interviews. Normally, people who might known each other are spaced far apart, but a rearranged schedule brought the two together. Unbeknownst to each other, Ross parked one in her office and graciously showed the other to the elevator.

"I have to be careful in Midtown [Manhattan] restaurants," says Helen Martin, senior research associate at Handy Associates. "The natural inclination is to say hello to someone you know, but what are they going to say to the people they're eating lunch with? 'Oh, that's may headhunter'?"

Publishers in the midst of selecting a recruiter must be aware of contractual nuances. Although most recruiters say their rates are standard and like everyone else's, details can make the actual compensation vary by a wide margin. On the retainer side, many recruiters will say they charge "a third" of the first year's salary, but in fact, some charge 30 percent, others 33.33 percent, a few 35 percent. Contingency firms charge 2k percent to 33 percent of the first year's salary.

Some take the percentage from the first year's base salary; others take it from base salary plus commissions--a sizable difference. Some recruiters absorb all administrative expenses; others bill the client back for phones, faxing, overnight delivery charges and other expenses. While most recruiters charge the client for pre-authorized, out-of-town travel, one contingency firm, Jesse Reid & Associates, says it would not. Some retainer-based recruiters bill the client in equal installments during the first three months of the search; others ask for one-third to begin and two-thirds upon completion of the assignment, which could be months later.

Are rates negotiable?

Publishers say recruiters' rates are negotiable. "I usually pay about half what they change," says Bob Malia, vice president of administration of the International Council of Shopping Centers, which publishes a monthly trade magazine and deals often with contingency firms. Recruiters, of course, deny such discounts. "Publishers don't like going off their rate cards, and we don't either," retorts one. Occasionally recruiters will accuse each other of "working for nothing." When recruiters do negotiate, they say it is only for clients with large hiring volumes. While this may be true, such statements also protect the search firm's reputation among clients: "What happens if I give one client a lower rate and another client finds out?" frets one.

On high-level searches, money isn't the problem, says Meredith's Mishoe. "Rcruiters think they're important, just like we all do. We try to treat them right because the next time we give them an assignment, just maybe ourjob will go up on their priority list a notch or two. An extra $5,000 is junk change for some of these people. You're jockying for their attention."

Recruiters have different policies if a search is terminated. On the contingency side, because there's no money up front, the risk for the publisher is minimal. However, for that reason, contingency firms can be selective about who they will work for. One or two have "cancellation charges" to protect themselves from the publishers whose aim is not to hire, but to do market research at the recruiter's expense.

Retainer firms also take different approaches when a search is canceled. Most will keep whatever money has been collected. Many will bill a client for a prorated share of the remaining time, although some admit such charges are difficult to collect.

What happens when a company changes its mind about what sort of person it is looking for? If that means starting a new search from scratch, a retainer firm may charge the client for its time. Contingency firm has little recourse but "to get on the phone and scream," says Adele Ribolow, of Remer-Ribolow & Associates.

A different issue pops up when a candidate is hired, the fee is paid--and the new employee doesn't work out. Although many firms will do another search free of charge to find a replacement, these so-called employee "guarantees" vary widely. Most retainer firms "guarantee" an employee for a y ear, but some guarantee only three months, and some will charge the client again for administrative expenses. None offer refunds, and there are always exceptions.

Several months after placing a friend in a financial position, Carlton "Tony" Thompson got a call. He is managing director, communications industry practice for Spencer Stuart & Associates. "I don't know how to tell you this," the newly hired friend said, "but the guy running this company is crooked, and he wants me to do things I'm not going to do. So I've quit." Thompson felt no obligation to do a replacement search. "We are judged by our clients as well as by our candidates," he notes.

Korn/Ferry International once placed a candidate only to discover six months later that the firm had plans to relocate to Miami. The new employee didn't want to go and hand't been informed of the move before joining the firm. Neither had Korn/Ferry, which refused to find another candidate withoug an additional fee, according to Stephen Israel, principal.

Contingency firms usually guarantee employees for a shorter period of time, if at all. One or two make no official guarantee. "The recruiter's role is to find candidates," says Samuels of Davric Associates. "I can't be responsible for what happens to a person in your shop." But almost everything in recruitment is negotiable, and Samuels admits that if a candidate doesn't last beyond "two or three months," he'd probably find a replacement free of charge. That would be more generous than the stated policies of some other contingency firms, which guarantee a candidate only to 60 days. A few contingency firms will partially refund the fee. Most will only credit the fee toward another assignment.

Why publishers hire recruiters

For all the seeming intangibility of executive search, hiring good employees is hard work, one of the chief reasons companies choose to hire an outsider to do it.

Identifying the candidates is not the hard part, recruiters say. Within four weeks of beginning an assignment, "we know who the top players are," says John R. Boag, vice president of Handy Associates, a search firm among the 15 largest in the country. The rest of the four to six months typically spent hiring a senior-level executive are taken up scheduling interviews with candidates and appointments with the client. "It's a scheduling nightmare," says Handy's Martin.

The typical search is taking longer than it used to, says Boag. Dual-income households have made "people harder to move," and mergers have made people who feel secure in their jobs more apt to remain where they are, he says. "I've had searches take up to a year," says Meredith's Mishoe. Some contingency firms, on the other hand, say a typical search often takes no longer than a month.

The third-party objectivity that recruiters bring to the interviewing process is another reason often cited for hiring a search firm. Most recruiters claim extra-sensitive intuitive abilities, born of vast interviewing experience. Beyond that, however, executives say they appreciate having another set of eyes and ears appraise a candidate.

Recruiters ease negotiations, sources say. "We can talk with the candidate and say, 'They really want you, but you may be shooting a little high on the salary,'" says Walker of Periodical Studies Service. "Or we can go to the client and say, 'He's perfect for the job, but relocating is a big concern, and maybe it would help if you offered some extra perks.'"

Sometimes, a recruiter knows a company better than the particular executive in charge of hiring. Handy Associates once worked with a publisher, newly hired himself, in need of a top editor. "Because we had a long-standing relationship with his employer, we knew the corporate culture of that firm better than he did at that time," says Boag.

One odd example of knowing a firm better than the client: Spencer Stuart's Thompson once was hired by a division president, but soon afterward Thompson was hired by the executive's boss to find a replacement for his client. Such tangled allegiances also occur when companies use a recruiter to find an executive, and later use the same recruiter to find a replacement, spawning feelings of betrayal by those ousted.

"One of the reasons we are able to do what we can do is the absolute confidentiality and discretion with which we work," says Thompson. "Candidates are willing to talk to us because they know we're safe, there's no risk of disclosure. Companies use us to replace people they don't want to know what's going on. They couldn't do that if they risked a leak."

Occasionally publishers think they want one kind of person, when the recruiter knows that they really want something else, search firms say. "Sometimes we have to convince a client that the candidate it needs isn't the one it wants," says Thompson. "For example, sometimes a company says it wants a risk-taker, but you know a genuine risk-taker in that particular corporate culture would never work. It would be too threatening."

The solution in such a case, Boag and Martin say, is to find a candidate or two in the mold that the company thinks it wants. In interviews with such candidates, the disparity "quickly becomes self-evident. We don't need to say anything," says Martin.

Clients and candidates alike are often in need of education about their niche in the marketplace, headhunters agree. "Clients will say, 'I want this and this and this experience, and I want to pay that.' I'll tell them, 'Okay, I'll look but you're not going to find it,'" says Ross of Gardner Associates.

"Clients don't know who they are in the marketplace," says Walker. "If you're the top book and you can afford to pay people well, you can get anyone you want to work for you. If you're the fourth book down in a field of four, you may not be able to get the people you want." Any hint that a company could be a takeover target will kill most candidates' interest, says Boag, a problem he faces frequently.

Another service rendered by recruiters is helping publishers determine what sort of person they really want to hire. Job descriptions are usually vague, recruiters say, sometimes indicating that the boss may not have a clear idea about what skills he or she wants the new person to have. On the other hand, recruiters complain that some publishers will list very specific kinds of experience a candidate must have, an approach that can lengthen a search unnecessarily and rob a company of the fresh ideas and cross-fertilization that new employees can bring, recruiters say.

The best relationship between client and search firm should be "frank and tough-minded," says Cowles' Little. "A search firm should be able to say to a client, 'You don't really understand this particular people market.'" Little places less emphasis than some on using a firm with a lot of experience in publishing. Little also insists that an in-house staffer check references, as well as the search firm. That way, "If the reason a person doesn't work out is that he or she appeared to have the right management style but didn't, that's the client's fault. If, on the other hand, someone doesn't work out because they're not who they were represented to be, that's probably the responsibility of the search firm."

With common sense and a straightforward approach, relations between headhunters and their clients are usually amicable. "I don't hear of many cases where search firms and clients end up angry with each other," says Little.

"The only time we get into trouble is when someone comes in and says, 'Guess what I did today?'" says Mishoe. When an executive hires a firm on the spur of the moment without any checking, "then the search will take forever, but we won't hear about it because the person who hired the firm doesn't want to admit he made a mistake."

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