Headhunters -- or search or staffing firms, as they're more formally called -- are often a hiring manager's best remedy for a staffing crisis. Whether you're retaining a search firm to find the perfect chief technology officer to formulate your start-up's development strategy, or paying a staffing agency to hire 20 engineers for a product launch, the right outside recruiter can make the critical difference. But with search firms demanding commission as high as 50 percent of the target position's first year salary, hiring a headhunter is a major commitment from a purely monetary standpoint. Plus, you can ill afford to discover months later that the work was shoddily done.
How do you find the right headhunter, then make sure the firm delivers what you need? Experts and hiring managers concur that, in a sense, it comes down to being a headhunter of headhunters. You must make sure the agency knows your needs and your business just as well as it knows the talented people you want to hire. In other words, you must build good relationships, with frequent communication, flexibility, understanding, and a little schmoozing.
Meet your new business partner
There are two main types of headhunters: retained (you pay a percentage of the open position's salary, regardless of whether anyone is hired) and contingency (you pay a percentage of the salaries only of those who are hired). Some firms offer hybrids, says H. Michael Boyd, director of human resourcing strategies at International Data Corp., a market research firm in Framingham, Mass. Fifteen percent of the target position's salary is the lowest fee nowadays, but one-third is common and 45 to 50 percent is not unheard of, Boyd says.
Retained firms, such as Heidrick & Struggles International of Chicago and Korn/Ferry International of Los Angeles, generally aren't interested in doing searches for jobs that pay less than $150,000. In IT, that means CIOs, CTOs and above. Both companies run Websites targeting a lower-salary middle market for positions earning between $100,000 and $150,000. Numerous staffing firms place IT jobs at that level and below. Some firms, called boutique agencies, are small but effective because they focus on a specialty like the fast-growing bioinformatics field.
"Like any business, there are good, top-notch service providers, and there are crooks," Boyd says. "Good agencies like to establish a relationship with a company and become an extension of the company. They're really your recruiter, and they're out there representing you in a very positive light."
Due in part to the labor shortage, the industry has its share of sweatshop-style agencies and unscrupulous fly-by-nighters. How do you tell the good from the bad? Network. Ask your CIO buddy who it was that got him or her the job. Talk to IT consulting or venture-capital firms: they often use headhunters themselves or know who their clients have used. And when you're talking to a particular staffing firm, ask for its client list. Make sure you call those companies.
Boyd adds that most states have headhunter associations, such as the Massachusetts Professional Placement Consultants (MPPC), that publish membership lists and codes of ethics. There are also state boards that arbitrate disputes between hiring companies and headhunters, or between firms that claim commissions for the same placement, says Boyd.
Negotiate the fee. Seek a long-term relationship, but make it contingent on getting a break from the standard fee, Boyd advises. If you're hiring a lot of people, ask for a volume discount.
Look for a refund policy. According to Lou Rubino, director of staffing at Braun Consulting, an IT firm in Chicago, "most of the firms will give you anywhere from six months to a year" to decide if a new hire is working out. If you decide that he or she isn't, "they'll give you a full refund or they'll replace the person for free."
Make sure the headhunter's off-limits (antipoaching) policy is to your liking. The strongest ones prevent the headhunter from hiring away anyone from your company for at least six months after the placement. But some firms try to limit these restrictions to certain departments. If you're not sure, run the policy by your lawyer.
Keep your human resources department closely involved. The reason: IT managers with discretionary money for headhunters may be more likely to cut a bad deal due to inexperience, says Boyd.
Always have an internal person managing the process. Otherwise, it will break down, Rubino warns. "If someone isn't doing that on a timely basis, the search firm can't calibrate itself," he says.
Boyd says that job seekers who want to make themselves known to headhunters should do the same research that he recommends to companies, and prepare marketing collateral that will help the agency sell them to its client companies. Most of the headhunters also encourage résumé submissions at their Websites.
Here again, knowledge is power. Two keys to building positive relationships with headhunters are to have a realistic view of your career so you don't seek jobs you aren't ready for, and to know which headhunters specialize in your field. That's the word from Kalvin Thompson, a partner in Heidrick & Struggles' global practice for CIO and CTO recruiting. "'Candidates' need to make sure they get to the right person who deals with that business," he says.
Boyd says working with the wrong headhunter hits job seekers doubly hard because of the side effects of the wasted time. "For most job candidates, wasted time translates into dissatisfaction, self-doubt, and depression," he says. "It causes the person to feel like a bad candidate."
Voices of experience
Karl Brensike, CEO of NetHesive, an Internet software developer in Torrance, Calif., says he couldn't have launched his one-year-old company without headhunters. He desperately needed a chief software architect to plan and manage development. "The first time we started, we tried the Internet and we couldn't find anyone," Brensike says. The situation became so serious that Brensike ordered his six top sales and technical people to drop everything and find headhunters and candidates. NetHesive worked with more than 60 headhunters; eventually, one found Mark Winkler, who had made a name for himself at Shopping.com, later selling it to Compaq. NetHesive also found its vice president of product development through a headhunter.
Brensike believes that above all else, you need to make sure headhunters understand your business, which can be especially tricky for dot-coms and other start-ups with unusual products or business models. "In the back of their head, they've got to be thinking, 'Mark would absolutely love working here,'" Brensike says. "You really have to sell them on your business model and how you're going to make money." More so than established companies, start-ups must do this effectively or they might not have a business. "I talk to the venture capitalists," Brensike says, "and one of their biggest concerns is, 'Are you going to be able find good people, and keep good people?'"
Brensike tells cautionary tales about the smaller contingency firms. "The hard part is that since you haven't paid them yet, they'll just flood your fax machine with résumés," he says. But that's not necessarily a bad thing, says Rubino, who ran worldwide recruiting first for Digital Equipment Corp. and then for Compaq after it acquired DEC. "The cost you pay is [that] you have to go through that paper," he says. "But in the end, if you like that candidate, you'll probably get your money's worth."
Most of these experts can cite horror stories -- thankfully rare -- about unscrupulous headhunters. Here are some folks to watch out for:
Inexperienced employees of staffing firms. A good example would be the poor sap who violated his company's own off-limits policy (possibly accidentally) by calling NetHesive's vice president of operations, who recognized the phone number on his caller ID. When the headhunter denied it, the VP kept asking questions, till finally the man cracked, sputtering "Hey, I'm calling from a headhunter firm, I'm new, and I don't know what I'm doing," Brensike recalls with much amusement. Now NetHesive has a procedure for screening such calls.
Managers who are on the take, OKing a hire and getting a kickback from the headhunter.
Headhunters in cahoots with people who change jobs frequently.
Headhunters who withhold negative informative and stick you with a poor employee.
Rubino's advice: "Always do the due diligence."