Effective C-Suite Succession: A Comparative Case Study on Executive Recruitment
Hei-Ran (Hei) Park, in her role as chief human resources officer (CHRO), found herself in a difficult situation. The president of her company had announced his resignation due to long-term family obligations, giving himself three months to help transition his responsibilities on a part-time basis. The urgency to find his successor was compounded by the lack of ready internal candidates. The company’s vice presidents (VPs) were either new to their roles or had been hired from outside, and were not yet integrated enough into the company’s operations to assume the presidency. The chief operations officer (COO), although qualified for the role, had no interest in leading the company. The rest of the senior leadership team, including the chief finance officer (CFO) and chief sales and marketing officer (CMO), were not qualified to lead on their own. Consequently, Park and the board of directors were faced with the daunting task of finding a new president externally in a short time frame.
Download the case study to follow along with Hei as she learns about different types of executive recruitment and alternative options her organization could consider in order to find a strong succession candidate for the president’s role.
What is Executive Recruitment?
Executive recruitment, or executive search, is a specialized recruitment service used to find highly qualified candidates for senior-level and executive positions across various industries. It involves a systematic process to identify, attract, and assess potential candidates for leadership roles, including CEOs, CFOs, board members, and other top executive positions. Executive search firms are hired by organizations that want to fill these critical positions, but may lack the internal resources to conduct the search themselves, or seek the confidentiality and expertise that an external firm can provide.
Executive search is also commonly referred to as “headhunting.” The term headhunting underscores the proactive and targeted approach these firms or consultants take in seeking out individuals who are not actively looking for new opportunities but possess the specific skills, experience, and leadership qualities that match the client organization’s needs. Unlike traditional recruitment, which often focuses on filling vacancies with active job seekers, headhunting involves a deeper level of engagement with both clients and potential candidates to ensure an ideal fit for high-stakes roles. While headhunting can be used for almost any position, executive search is a more specialized service that focuses specifically on recruiting for c-suite, VP, and other senior management positions.
Different Types of Executive Recruitment
There are three main types of executive recruiting firms; each operates on the basis of a different contract. In addition to considering budget and timing, organizations must consider which type of contract they are most comfortable with before engaging a search firm.
- Retained search firms. These firms operate on an exclusive basis, preventing other search firms or recruiters from being involved in the search. Retained search firms are paid a flat fee, regardless of the outcome, and they specialize in senior executive search.
- Contingency search firms. These firms are compensated only upon the successful placement of a candidate. This model means their commitment to each search may vary, often prioritizing speed and accessibility of candidates over finding industry-leading talent. Typically, they target individuals who are actively seeking employment, rather than scouting top performers not actively on the job market. Contingency firms may serve multiple organizations at once, and may present the same candidate to multiple employers, including competitors. This practice can elevate candidate compensation demands, which in turn increases the contingency placement fee, which is typically a percentage of the first-year salary.
- Hybrid retained-contingency search firms. These firms, often called “container” or “retingency” firms, combine the benefits of both retained and contingency models. While they operate on an exclusive engagement basis similar to retained firms, their fee structure is more flexible. Clients pay a portion of the fee upfront, akin to a retained search, but the remainder of the fee is contingent upon the successful placement of a candidate, mirroring the contingency approach. This model offers a blend of commitment and performance-based payment, appealing to organizations seeking both exclusivity and financial flexibility.
Download the case study to learn about the fee models and expected costs associated with each type of executive recruitment firm.
Alternatives to Executive Recruitment
Beyond working with an executive recruitment firm, Hei explores a few alternative options her organization should consider:
Adopting Hiring Software.
Hei’s organization could invest in — or temporarily subscribe to — hiring software that may help them complete the executive search process on their own. A quick Google search indicated that such software typically ranges from $30 to $100 per month. However, researching, selecting, and learning to use the software would require additional time and effort. This option, similar to working with a recruiting research firm, would also leave Hei and her team with a lot of work that she didn’t think they had the capacity for this quarter.
Starting with an Interim Executive
As an alternative, Hei’s organization could hire an interim executive, affording them more time to seek a permanent successor on their own. Hei’s research suggested that an interim executive could be hired for almost any length of time, or even on a part-time basis. ,
In terms of fees, interim executives are usually quoted at an hourly, daily, or monthly rate. According to the “1% rule,” an interim leader’s daily rate should equal 1% of a permanent candidate’s annual compensation. This would imply a daily cost of approximately $2,000, or $360,000 for six months, significantly exceeding the salary of a permanent president, making it an effective yet cost prohibitive option.
Consulting with a Succession Planning Expert
Lastly, Hei considered working with a succession planning consultant, specialists in evaluating, selecting, and developing talent. Such consultants could assist in creating a leadership pipeline for the president’s role and other key positions, addressing immediate needs and preventing future crises by preparing an internal talent pool. The starting price for these services is close to $20,000, which is a much more feasible price point for Hei’s organization. The only problem is that she still doesn’t have any internal talent who are ready and willing to step into the president role. Hei decided to explore the succession planning consulting option further to see whether a consulting engagement could help her organization bridge the gap.
Download the case study to read Hei’s findings.
The Decision
A week later, Hei found herself seated in the boardroom with the board of directors. She briefly explained each of the solutions she had explored, ultimately focusing on the two alternatives she believed merited their consideration. Download the case study for a complete explanation of each alternative, as well as tables that break down the expected costs, pros, and cons of each option.
Ready to Get Started?
If you’re ready to start your succession planning process, learn about SIGMA’s Succession Planning Launch. Our services, available both in-person and online, will mobilize your leadership team to create a plan that aligns with your organization’s needs. Our consultants can condense six months’ worth of succession planning into two half-day sessions. By the end of the Launch, you will have a detailed and customized 12-month succession plan for each member of your leadership team. Contact us for more information or reach out to our consulting team below. We’re always happy to chat!
Speak with a Consultant
Glen oversees SIGMA’s sales and marketing activities. As a skilled presenter and trainer, he has designed and delivered engaging workshops and webinars for senior managers and HR professionals around the world. Glen knows our material inside and out, and can tell you first-hand stories of the work SIGMA has done with its clients. If you are interested in learning more about SIGMA’s succession planning services, schedule a call with him today.