In the world of exec recruiting, in is in and search professionals with outside experience are hot.
Human Resource Executive, 16 June 2000, by Darrell L. Browning - ©2000 Human Resource Executive® - You don't have to tell Diana Meisenhelter, vice president of staffing for Wyndham International, about the tight job market. With 32,000 employees and nearly 300 upscale hotels spread throughout the United States, Canada, the Caribbean, Mexico and Europe, Meisenhelter presently has 280 management-level positions open across the U.S. alone.
To fill these positions, the nation's fourth largest hotel chain, with roughly $2 billion in annual revenues, looked to its internal recruiting department and recruiters, many of whom have been snatched themselves from outside search firms. By leveraging the department's capabilities and recruiters' experience, the Dallas-based company has turned a wannabe into an industry leader when it comes to finding the right people.
Nor is Whyndham alone.
In a first-of its-kind survey of 158 HR executives at Fortune 500 companies, almost half have established an in-house executive search operation and hired recruiters from outside search firms to staff it. In addition, roughly 57 percent of the respondents said they believe professionals with retained executive search experience were desirable for such a department. Experience in contingency work was viewed favorably by 22 percent of the respondents.
Though not everyone agrees this is the way to go (23 percent of those surveyed said an in-house executive search operation doesn't make sense), many HR executives suggest there are compelling reasons to establish such a function and staff it with professionals who have executive search experience.
Inside Edge
Janet Jones-Parker, author of the study and managing director of Jones-Parker/Starr in Chapel Hill, N.C., notes that two business models most closely emulate the practices of search firms. One involves setting up an internal recruiting profit center and operating it as though it's a business within the business. The other looks for people who have wide recruiting experience and adds them to an existing HR operation.
At Wachovia Corp., a full-service financial services organization with 24,000 employees, recruiting is now run very much like an outside business.
Walter S. Kuchinski, senior vice president of strategic staffing for the Winston-Salem, N.C.-based company, believes that recruiting specialists are much more effective than generalists. "As soon as a fire starts, [generalists] aren't recruiting anymore," he said. "[Recruiters] need to be left alone, put in a corner and make calls."
Kuchinski, a former head of Bank of America's professional and university recruitment and a principal in the New York executive search firm Gould, McCoy & Chadwick, Inc. adds that this is especially true for executive-level searches.
Harry Wilson, a First Union vice president who also manages the company's executive search group, points out that "search these days is at an absolute premium."
First Union first recognized the need to build an in-house executive search capability when the Charlotte, N.C.-based financial service company, with roughly 70,000 employees, was rapidly growing through acquisition.
Wilson, a rainmaker with 14 years' experience in retained executive searches, says one of the biggest advantages of internal recruiters is their understanding of the organization's core values. He reports that failed searches, previously commonplace at First Union, are now rare.
As a result of this strategy, Wilson claims the company has been able to save roughly $6 million over the past six years.
If companies want to maximize their internal recruiting function, notes Jones-Parker, they need to be able to measure performance. Companies, she says, must set "realistic goals and track progress - just like [search firms] do on the outside."
Some of the measures, she says, should include time to completion, percentage of searches completed, number of qualified candidates presented and longevity of hired candidates.
At the same time, Jones-Parker advises, companies should develop a compensation plan that gets much closer to a search-firm model. First, she says, companies would select a base salary - say $150,000 to $200,000. On a quarterly basis, they would then take the total salary, back out costs and put 50 percent of the amount into a bonus pool. From that, the company would then pay quarterly bonuses to those who have "sold" or "executed" searches. The remaining 50 percent would then be used to cover departmental expenses.
Speed and Execution
Roughly 39 percent of the Jones-Parker/Starr survey respondents agree that cost is a major reason for bringing executive search consultants in-house. As a rule of thumb, Jones-Parker says, outside search firms cost at least 33 percent more than an in-house search operation.
But for executives like Rick Devine, managing director of recruiting at Wayne, Pa.-based Internet Capital Group, the reason for building a strong internal recruiting capability at ICG were "speed and execution," not cost.
Devine, a former heavyweight search partner in Heidrick & Struggles' Wayne, Pa., office, notes that ICG considers human capital a fundamental part of creating value for companies. "We have to take control of those resources," he says. "Our agenda is to leverage human capital across our group of partner companies versus relying on outside firms."
The 140-employee Internet holding company recruits for 69 partner companies. It currently maintains office in San Francisco, Boston, Seattle and London.
Ikon Office Solutions of Malvern, Pa., is also investing in its internal recruiting function.
Nearly one-and-a-half years ago, Ikon, which employs 40,000 employees at 1,000 locations around the world, began moving from a holding to an operating company. What began as one Houston-based corporate recruiting team in the company's Business Document Services group - one of four Ikon divisions - was soon emulated at other divisions.
"We wanted them to cross all business lines," notes Inga Schmitzer, Ikon's West Florida HR manager. To accomplish that, Ikon created recruiting teams focused on four areas: sales, management, information technology and collegiate. In just six months, Ikon built a group with more than 50 recruiters. Of them, roughly 60 percent come from outside agencies.
Schmitzer points out that Ikon recruiters are focused on recruiting and don't get sidetracked with time-consuming "employee relations" tasks. Recruiters, she explains, use a different skill set than HR generalists. "It's more a skill set and motivation that a salesperson might have," she says.
At the same time, internal Ikon recruiters have to compete with outside firms, since hiring managers have the option to "go outside" for searches.
Like Schmitzer, First Union's Wilson also sees competition as a good thing. At First union, hiring managers are not required to use the internal recruiting unit's services, thereby encouraging "shootouts" with outside recruiting firms.
Wilson believes internal recruiters have an advantage over outside firms have an advantage over outside firms because they have a better grasp of the organization's needs.
Some companies, meanwhile, have taken what's described as a "hybrid" approach.
Ken Norris, managing director of A.T. Kearney, a leading executive recruiting firm based in Chicago, points out that Motorola moved to a recruiting team arrangement in late 1998.
Norris notes that Kearney works with Motorola along traditional executive search lines, but also works closely with Motorola's internal search operations.
"Someone that might fall below our radar screen may be in their sweet spot," explains Norris. For example, he says, a candidate for an executive spot may be considered unsuitable for that position, but that same candidate may be perfect for another position at a lower level.
As a supplier to Motorola, Norris tries to identify such talent and refer them to Motorola's recruiting team.
For Motorola, which employs 140,000 employees worldwide, forging an alliance with an outside recruiter makes good sense Norris says. "Any company that is growing quickly strips its bench strength internally," he explains. "A partnership with an outside recruiter alleviates that pressure especially when a firm brings in high-impact, experienced recruiters."
Experience Wanted
Whatever the approach, most observers agree there are real benefits to staffing internal recruiting functions with recruiters who have outside search experience.
HR executives surveyed by Jones-Parker/Starr identified outside search executives' ability to work with top management as a chief reason for bringing such executives in-house.
Retained executive recruiters, says Jones-Parker, are often accustomed to working in complex situations with top management. Such experience is crucial, she says, since one of the first things an inside recruiter must do is establish a good relationship with internal managers.
At the same time, she adds, most bring "superb listening skills and objective judgment to the task."
Adds Ikon's Schmitzer: Recruiters with outside experience often see a fit in places many HR generalists might miss.
Of course, no one's suggesting that executive search firms are going to disappear.
Indeed, the Jones-Parker/Starr survey reveals that the vast majority of respondents - 93 percent - still feel that external consultants attract better talent at senior-management levels.
Executive search firms screen, interview and refer candidates who usually aren't even looking for a position, point out Ron Coleman, a principal of Coleman-Patrick Inc., a national executive recruitment firm.
"All of the work is done before they show up," explains Coleman, whose firm has offices in Philadelphia and Boothbay, Maine. "That's a whole lot cheaper than flying in a bunch of people and finding out some of them shouldn't be there in the first place."
Likewise, Motorola's Norris sees real benefits to using retained executive search firms, not the least of which is their ability to identify potential recruitment trouble spots within the company.
But that said, HR executives and others suggest that search firms can expect to see more competition in the future from internal recruiting operations - both for their business and for their talent.
Learn more about Human Resource Executive at http://www.hrexecutive.com. You can also read the results of the Jones-Parker/Starr survey on in-house recruiting.