In-House Executive Search

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1 In-House Executive Search Changing The Senior Leadership Recruiting Game

2 In-house Executive Search Will it be a game changer in executive search? Explore why companies are building internal capability Building an in-house search function Measuring performance and results Successful in-house search models Starting the journey to build internal search capability

3 How many companies. Quick Poll 1. Currently have an in-house search function to support executive level position searches? 2. Are in the process of establishing an in-house search function? 3. Are still trying to determine if you should create an in-house search organization?

4 Objectives for this presentation: Share experiences from companies in various industries that have built internal executive search capability: Technology Hospitality Media and Entertainment Consumer and Durable Goods Financial Services Defense Private Equity Review the structure, people, processes and technologies required to have an effective in-house search organization Provide insights on how to build an internal search capability

5 Definition: Game Changer 1. A person who is a visionary 2. A company that alters its business strategy and conceives an entirely new way to do business. This type of company switches up and forms a new business model in order to compete directly and indirectly with competitors. A game changer changes the way something is done, thought about and made. Source: Investopedia Game Changers challenge the status quo

6 In-house executive search capability It is not new, but continues to grow Has received press coverage The Wall Street Journal Oct More Executive Recruiting Shifts In-House Bloomberg Businessweek - Jan Executive Headhunters Squeezed by In-house Recruiters The Economist Aug Searching for Answers Will be a game changer for senior level searches, but will not put the search consulting industry out of business

7 Top four reasons companies build in-house search capability: Reduce recruiting costs Improve candidate quality Reduce search cycle time Improve retention and performance

8 Top four reasons companies build in-house search capability: # 1 - Reduce recruiting costs: Establish more favorable search fee structures Reduce the number and risk of failed retained searches or cancelled searches Leverage alternative candidate sourcing channels to recruit at lower costs Engage the right external search firms only when it is necessary

9 Top four reasons companies build in-house search capability: # 2 - Improve candidate quality: Better alignment of leadership fit with the company s leadership competencies Build long term relationships with passive candidates who will bring unique expertise and value to the company in the future Improve diversity representation of candidate slates

10 Top four reasons companies build in-house search capability: # 3 - Reduce search cycle time: Have the ability to deploy established internal search processes, resources and access to pre-qualified candidate profiles Launch and conduct confidential market analysis in advance of an actual search Build candidate pipelines for anticipated needs, particularly for multiple incumbent and reoccurring search assignments

11 Top four reasons companies build in-house search capability: # 4 - Improve retention and performance: Search performance improves when internal search resources create and use best search practices Factors such as reorganizations, divestitures, change in leadership impact retention regardless of source of hire Data analytics within some companies show higher rates of new hire retention and engagement of non-search aided hires Linking recruiter and in-house search function performance to executive retention and succession is challenging

12 Top four reasons companies build in-house search capability: # 1- Reduce recruiting costs # 2- Improve candidate quality # 3- Reduce search cycle time # 4- Improve retention and performance Companies with mature in-house search expect more than these four reasons

13 More reasons to build in-house search capability: Improve the linkage between external executive recruiting with internal leadership succession Improve candidate assessment and selection Build better relationships and understanding of the talent markets where they recruit Create executive search center of excellence to provide improve search execution, reduce risk exposure and enhance brand equity Acknowledgement by the senior leadership team that they don t have the time required to manage high touch searches

14 Building in-house executive search capability requires a business case that includes: Purpose & Objectives Technology Sponsors & Investments In-house Executive Search Capability Business Processes Structure & Relation-ships People Resources

15 Purpose and Objectives: Why build in-house search capability? Increase in senior level external searches Missed opportunities to capture desired talent Internal hiring client dissatisfaction with current capability, processes and results Audit identified risk exposures and compliance issues Lack of internal senior level recruiting expertise Define the vision and value proposition for the function and the company Establish measurable short and long term objectives

16 Sponsorship and Investment: Attain the highest level of organizational support (CEO, COO) Don t let it be another HR solution designed by HR for HR Analyze historical data to build the investment case: Recruiting costs incurred over at least the past two years Costs that could have been avoided (fees and expenses for failed /uncompleted searches) Compare costs for hires from other non-search firm sources Evaluate search cycle time, candidate quality and new hire retention Establish a reasonable pro-forma recruiting plan based on the upcoming recruiting year to gain investment approval

17 Structure and Relationships: In large corporations, the internal search leader should report to the CHRO or HR Executive responsible for executive talent management across the enterprise In PE or VC firms, this person may report to the Head of Human Capital or Partner in charge of business services There needs to be a high level of respect, trust and communication to enable the senior search leader to have access to and work effectively with the C-suite team Companies need to define roles and responsibilities for key stakeholders (hiring managers, HR business partners, etc), involved with searches

18 People Resources: Most in-house search functions have a Executive Search Consultant / Leader and an administrative support resource As the function matures and demand increases, researchers and additional client-serving recruiters are added to the team Most search leaders have a combination of search firm consulting and corporate experience Strong business acumen, analytical, detail oriented Can work up, down and across the organization / not appear to be an elitist Recognize that he/she can not perform every search in-house Must be willing to handle the administrative minutiae

19 Business Processes: The in-house search process is a business process that should be mapped, reviewed and approved by key stakeholders A well defined business process for in-house search will improve the execution of repeatable and sustainable search actions, reduce potential risk exposures and improve search performance and results The process should identify the people Responsible, Accountable, need to be Consulted and need to be Informed. Known as a RACI chart Business process mapping takes into account People, Technology, Tools and Communications

20 Technology: High performing in-house search capability must be supported by technology to: Build candidate databases and retain research Prepare search reports and candidate profiles Capture organization, compensation and candidate details Have multiple user access and interface Standard ATS software will not support senior level searches Executive search systems such as FileFinder ease the resolution of IT issues such as hosting, security, personal privacy and cross border candidate file sharing

21 In-house executive search capability model Purpose & Objectives Technology Sponsors & Investments In-house Executive Search Capability Business Processes Structure & Relation-ships People Resources

22 Alternative in-house search models Corporate funded staff function with specific annual performance targets (positions filled, positions filled by source, speed of search, zero-risk exposure) Search costs passed back to hiring organization (search fees, candidate interview expenses, background, reference checking and drug screen, etc.). Typically managed by central search function to track and report on costs. Internal flat fee charged per search to cover incidental expenses and search fees, if incurred, are paid by the hiring organization. Internal fee charged per search which offsets corporate budget coverage. Uncertainty of search volume year-to-year makes it difficult to manage.

23 Alternative in-house search models Centralized: Recruiting resources are located in the corporate HQ location; but support executive searches globally. Distributed: Recruiting teams are located in the markets where the greatest volume of projected searches occur. Blended: Corporate executive team members are based outside of HQ, but partner with staffing teams in the local markets for executive hiring (offer letters, on-boarding). Growth in searches in emerging markets has increased the use of Distributed search staff model

24 Best in Class In-house Search Models: Why the in-house capability was created Types of executive search assignments they support Obstacles the in-house search leaders have encountered Future in-house search models Comments and feedback from interviews with nearly 20 In-house Search Leaders

25 Why the in-house capability was created Search firms were not capable of identifying and engaging the special engineering talent we needed for future product development Our CEO was disappointed with the quality of the candidates presented on several searches and observed how an in-house search organization had worked effectively in another company where he served on that company s Board An in-house search team with one division of a global firm demonstrated their capability to support other divisions, which created corporate global search function delivering faster, cost effective, and high quality searches. Our senior leadership team did not have the experience to recruit senior level external candidates and had spent several million dollars with search firms in the prior year with poor results. Our CEO was frustrated with the pace and quality of the search services provided by firms and the internal HR team, and wanted to create a Shared Services Search model and team to manage senior searches.

26 Why the in-house capability was created (continued) We want to have unfiltered access to people who may be critical to our new businesses we need to cultivate long term relationships with great talent We will continue to use search firms for confidential searches and opportunities in emerging markets, but we reduced our dependency on search firms for finance, marketing and other staff assignments, which accounted for most of our search fees. LindedIn has leveled the playing field in terms of Candidate ID, so we don t need to use or pay third party firms for this work.

27 Types of searches in-house search conducts: Top 1% of the executive positions within the company, with the exception of direct report positions to the CEO and confidential searches (CPG) All Director and above searches, excluding the CEO position and any searches the Board wants to engage an executive search firm to perform (Durable Goods) All Director and above searches, including the CEO search and interaction with the Board HR Committee on search strategy (Financial Services) All C-suite positions within the portfolio companies; including assessment of leadership talent during the acquisition stage. (PE Firm) Typical compensation for searches performed by the in-house teams have a base of pay of US$ 175,000. plus short and long-term compensation participation Some in-house search functions perform searches on their own and manage search firm engagements on behalf of clients

28 Obstacles and challenges encountered: HR Business Partners who want to retain control over the search and don t want to engage with the internal search team Rouge Hiring Managers who feel obligated to using a search firm due to prior relationships, but are not the best firm for the search Search consultants who have not adopted strong assessment skills to match the sophistication of a client s new leadership expectations Lack of diversity representation on candidate slates from search firms Knowing when and how to say no to an in-house search request to avoid failure Lack of internal processes which slow the search and cause unnecessary delays

29 Future in-house search models: Staffed with social media savvy search researchers Be capable of conducting talent mapping of candidates for future needs Create and promote an employment brand that differentiates the company from competitors and is viewed positively in the market place Continue to refine the quantitative and qualitative elements of the in-house search model (it is more than cost savings) Have a customer focus on candidates; be responsive, build goodwill and treat them the way you would like to be treated Explore the application of crowd-sourcing for senior level search candidate referrals. This assumes the company has a strong brand reputation to create a following by people who respect the company and leadership.

30 Summary To change the search game, you will need to: Build the business case for an in-house search function including: Clear purpose and objectives Secure sponsorship and investment Establish the right structure and relationships Staff the function with the right resources Establish the business processes Acquire and install the necessary technology Find new ways for recruiting and retaining leadership talent

31 James A. Mueller Founder and Managing Partner cell office All rights reserved. This presentation or any portion thereof may not be reproduced or used in any manner whatsoever without the express written permission of Executive Search Advisory Partners.

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