Not long ago McKinsey & Co. published a sobering assessment of the converging challenges of lower financial returns and the unprecedented complexity of souring great talent. Just a moment when investment returns are likely to be lower than they have been since the 1980s large employers confront a skills and demographic crunch. Out of necessity and desire, McKinsey pointed out, baby boomers are working longer. Their experience is an incomparable resource. But will they acquire the technical abilities suited to a world where change only accelerates? Will they expect ever-rising compensation? What about millennials, who look up see older workers in their way? Won’t they be perpetually on the lookout for better opportunities—especially at startups?
With so much at stake it is a waste of energy that tension between in-house recruiters and executive-search firms continues to persist. We should be well beyond this. Because the question is not, Which is better? The question is, How do both parties make a partnership work? How do both create something with parts greater than the whole?
I am a partner in one of the world’s leading recruiting firms. It won’t surprise anyone to hear that I believe in what we do. Recently I was moved to think more deeply about this by a client, the global head of in-house recruiting who decided to go it alone for a crucial hire. She lined up a terrific candidate and made an accepted offer. Then three weeks before the new executive was to start he phoned to say his current employer had countered and he was staying where he was. He thanked her and hung up.
In-house recruiters have an internal insight no executive recruiting firm can ever match. Compared to that, they sometimes say, search firms are expensive and disruptive. Certainly lots of people have heard about the “Uberization” of the recruiting business. By this is meant that technology and the Internet are commoditizing search. Imagine all the money to be saved in fees by using a talent algorithm.
But nothing in an algorithm reveals potential. Or motivation. No technology tells you when someone wants to move, what makes them happy or unhappy. LinkedIn, for instance, is a fantastic resource. But it isn’t going to make an organization ask uncomfortable questions about matching talent to strategy in this wide and volatile world.
Talent for tomorrow. The future workforce in every industry will be fluid. It will be more like an organized market for independent contractors (or for teams of them) than today’s traditional one-to-one employment relationship. Our clients will need talent strategies that enable consistent organizational purpose. The way they source talent therefore needs to change right now.
Refilling a critical position is expensive. Usually it takes time to recognize a hiring error. Meanwhile organizational performance suffers. This is why our firm's clients think so hard about "fit". They want to avoid mistakes.
The trend among in-house teams has been to source new talent from employee referrals, LinkedIn and networking. There’s nothing wrong with this. It is less expensive and sometimes more appropriate than hiring executive search. More positively, referring employees have personal knowledge of who they are recommending, with all that can mean for "fit".(They are more likely than not to be conservative in referring personal friends in case things don’t work out.)
Preparing an organization for a changing world begins with a talent pool not just wider or deeper but genetically different. Many of our clients, for example, are making efforts to graft Silicon Valley talent to their ways of working and thinking. The grafting is awkward at times but the strategic impulse is correct. They are trying to recruit for potential success, not just immediate performance. Our clients are trying to make sense of the qualities that produce success in an operating environment that won’t stop changing.
To this effort at sense making a good recruiting partner brings competitive intelligence. In our firm, for example, we average 18,000 conversations a month around the world. We are distilling intelligence from those conversations all the time. We marry it to competitor mapping and strategic profiling.
In-house and search-firm partners should not be gentle with each other. They need to ask the hard questions (which surprisingly often no one has ever asked before, at least not explicitly). Everything touching talent needs to be on the table—operational structure, corporate governance, culture, business goals, results, leadership composition—everything.
Then the partnership gets tactical.
Getting tactical. A good in-house recruiting team has an unmatchable interior knowledge of organizational strategy. The job of a firm like ours is to measure the correspondence of strategy with talent functions—management assessment, HR process, coaching, leadership training and so on.
In this a good executive search firm has the advantage of what I call “forensics”—predictive analytical tools informing an industry perspective wider than an in-house team usually owns itself. These tools are powerful. But nothing works so well as a human interviewer screening for talent, body language, motivation and fit.
By “fit” I mean something even more important than cultural congeniality. I mean suitability to the operating environment that’s arriving, not the one that already exists. In this respect recruiting firms can be intrusive in ways in-house teams necessarily find difficult. A good search firm, for example, puts a candidate through a boot camp of sorts to see how that individual works under stress.
The confidence factor. Finally, a search firm should build a wall of confidentiality protecting both the in-house recruiter and candidates.
Recently, for example, a UK firm commissioned a research company to poll C-level executives and directors at medium-to-large organizations. They asked whether these senior executives would prefer being contacted by an in-house team or by a search firm about a new employment opportunity. The response overwhelmingly favored search firms. The reasons were all to do with the promise of confidentiality.
Firms like ours manage a great many replacement hires. That includes everything from third-party reference checking to the right way of submitting a resignation. If we are not circumspect our reputation suffers. It is simply harder for internal recruiters to maintain a comparable level of circumspection while the interviewing process is proceeding. If they stumble the candidate is compromised. The hiring side is left open to potential litigation from the candidate’s current employer.
Sourcing high-value talent is challenging. But where there’s trust, and where the partners understand how to leverage each other’s strengths, all the things that can go wrong need not.