Corporate leaders are responsible for such things as strategic initiatives, shareholder value and shaping a company’s culture, yet the choice of who gets to make these decisions is often brokered by an external agent: the executive recruiter. In his new book Deciding Who Leads, Joseph McCool examines how executive recruiters drive, direct and at times disrupt the search for leadership talent. McCool recently spoke with Workforce Management staff writer Gina Ruiz.
Workforce Management: You say executive recruiting firms have failed at pushing diversity into the C-suite because they often poach from the same small, elite circles. How can employers who are committed to diversity get around this hurdle?
Joseph McCool: Hiring companies should look at the diversity that exists within the search firm that they are interested in retaining. Executive search firms today are not nearly as diverse as their clients. I believe we would see some positive movement in the diversity challenge if search firms themselves became more diverse.
WM: Why do you believe recruiters are contributing to inflated executive compensation and how can companies combat this problem?
McCool: Recruiters drive executive pay skyward because—unless there is a flat-fee arrangement in place—they are going to get more commission as the executive candidate’s compensation balloons. So they have a vested interest in pushing for higher compensation. Employers would be better served by agreeing on a fixed fee before any executive search begins.
WM: You mention that corporate leaders should be in the trenches recruiting. What percentage of their time should they spend recruiting and what would that do to executive search firms?
McCool: They should spend at least 25 percent of their time on talent management issues. Succession plans should be living and breathing efforts—updated at least quarterly. Business would not necessarily dry up for executive search recruiters. Leaders who are invested in talent management will look to build pipelines, which would require their external services.
WM: Sometimes the most qualified executive who can fill a vacancy is an internal candidate. Can an executive recruiting consultant be trusted to deliver this type of objective recommendation?
McCool: Executive search consultants get compensated regardless of whether their recommended hire comes from within the company or outside. There is plenty of room for potential conflict of interest, but not necessarily in this area.
WM: Where can conflict of interest arise?
McCool: The biggest one relates to client blockage—or the hands-off policy. This is tantamount to an oath in which recruiters promise not to poach executives from a company that has retained them to fill vacancies. They are bound to these agreements anywhere from six months to a year after a recruiting assignment is complete. The biggest recruiting firms have over 5,000 client companies—that places a lot of restrictions on where they can or cannot search for talent. This may mean that employers are not necessarily getting the best available talent in the market.