Headhunters: They Can be Good For You

No, I don't mean the kind of headhunters that want to shrink your severed head (sorry for the graphic nature of that statement in light of recent events); I mean recruiting firms. A few friends of mine (and I) are looking around so I figured I'd put this info here so everyone can read it.

First, though, the Korean perspective. Koreans, from what I know, don't really use recruiters much. Much of the economy is run on relationships and word of mouth (and soju and other stuff...) and executive placement seems to be no different. When we look for a senior manager here my boss usually gets someone from his network/tangle of friends rather than hiring a professional firm. I'm not sure which way is better, as a recruiter may not attract the best people over here and it's difficult to judge reputation from a resume, but that's now it is. From what I understand, the foreign firms here use them more as it shortens their search time and allows a local, third-party entity to check things out as well. In the U.S., a recent study by Coopers & Lybrand found that 64% of executive positions are filled through recruiters so it pays to have your name with them as well as traditional ad-searching and networking.

So, here's your primer on recruiters. I didn't make this all up, much of it I got from "Rites of Passage" a book I read about 4 years ago. I also read Kennedy Information's Directory of Executive Recruiters (you can likely get a copy from the library rather than buying it). The directory has a North American and World version and lists hundreds (thousands?) of recruiters and sorts them as retainer/contingency, geographically and by specialty. The most important difference is of they are retainer-based or contingency firms.

Contingency Firms: These recruiters are by far more numerous. They normally fill lower-level positions (non-executive and/or up to semi-skilled). Their business is something like a hunter. They see a position in the newspaper or through a contact or from an approach from an employer and then they (as I know it) throw as many resumes as possible at the human resource manager so that they have the best chance of getting a 'hit' (their applicant gets hired). For this reason many larger firms will state "No agencies." in their ads--contingency headhunters can really bog down the process of the human resource people if many of them are sending umpteen-million resumes to them all the time for multiple positions.

The reason they send to many resumes is contingency firms are only hired if their applicant is hired. The fee is 25-33% of the first year salary of the position. Thus, if it takes 25 resumes to get 1 applicant a position and they make 30% of a $30,000 position ($9,000) then it takes them about 250 resumes to make $90,000 a year: or one every business day. The odds, however, are probably more like worse than 100:1 which means 4+ resumes a day to send out and follow up on. Subtract all the costs of doing this work and you have a colossal pile of paper/emails to get out the door everyday.

Now to get these applicants, though. If you have 10 applicants' resumes in your roster you sure as heck can't send them out to every possible position (unless you're really, really specialized...but even then). To make matters worse (or better, as you'll read) many headhunters are generalists and cover a lot of ground. Back to getting applicants. This is where contingency firms earn some of their bad reputation (as I have heard from those in the business). The #1 thing on a contingency headhunter's mind is "get the resume!"; once they have it they can send it out to appropriate (and inappropriate) positions. They may or may not say that they will get an applicant's permission before submission, but I understand that this is a verbal contract--and not worth the paper it isn't written upon. So what? Well, because they are paid a good chunk of dough for giving a firm your resume and if you apply for the same position on your own the hiring firm may toss your resume in order to keep from having (i) to pay the recruiter a whack of money for hiring you and/or (ii) having a conflict of interest if they want to hire you assuming that your resume got to them first and having to take on the wrath of the recruiter when/if they find out.

Retainer Firms: there is another option (the one extolled in the Rites of Passage book above): use a retainer-based (or retainer) headhunter/recruiter. These firms are 'retained' by the hiring firm (much like a lawyer is) with some or all of its fee being paid at the outset. They also normally have exclusivity on the search and after they've done internal (database) and external (newspaper and other advertising as well as networking) searches (including checking the candidates' references and such) they present 3-4 individuals to the hiring company. They then do their own interviews and perhaps choose one.

The good thing about retainer firms for candidates is: (i) their information is only passed on to employers (and the public) after clearance from the job-seeker (which is good if you're looking while working and value discretion); (ii) candidates will only be presented with opportunities that match their skills and experience (unlike the many useless calls they may get from the shotgun approach of a contingency headhunter); (iii) if the hiring firm receives their name from the retainer firm as well as directly from the job-seeker the hiring firm may be more positive toward it (because it already passed the recruiter's screening process and there is little/no additional fee if they hire that person); (iv) retainer consultants seem to have longer and more specialized experience in the area; and (v) retainer firms generally work with senior positions ($100,000+)--this could be limiting if you're looking for entry-level assignments, but if you're in the experienced category it is nice to not be lumped in with the new graduates category.

There are downsides to a retainer firm, though: (i) each consultant in the firm will have its own clients (hiring companies) and potential candidates (applicants, e.g., you) in their files. If they get a search then they only look through their database and contacts to get suitable candidates. If your resume is with another partner or consultant at the firm then you'll never get exposed to that opportunity. Also, (ii) once a retainer firm closes a job for a hiring firm they will not 'poach' candidates from that firm for a year (or more). This means that if you work for a large company that likely has multiple concurrent searches (plus the time lag) then you may be effectively out of the market if your consultant is with a firm that handled one of those searches in the last while. And, (iii) consultants come and go and their firms merge, divide and go belly-up from time to time (actually the industry is famous for it) so if you're hoping that a consultant is working for you 2 years down the road you may be sore;y mistaken.

For these reasons you should always do your own searching as well; don't rely on the firm to do it all for your. You can't give your particulars to more than one consultant in a recruiting firm, but you can get them to multiple firms (in Asset Management, Investment Banking and related fields I found 140 retainer firms just in the U.S. and Canada). You should also touch up and resend your resume and cover letter (stating your current and desired position and salary range) and 'touch base' with each recruiter every 6 months or so. You can also send an update earlier if you get a raise, a promotion, get a certification or skill-set or change geographic or other preferences.

As you might have guessed, I prefer the retainer firms. They have some drawbacks, but at the end of the day you can mitigate much of these problems by doing a little more work. Also, the discretion they afford as well as the higher-perceived-value service they perform (the hiring company already paid them...they are not the recruiting equivalent of ambulance-chasers) are quite important.

If you contact a firm, ask them which one they are. If they say contingent for some positions you can assume they are all contingency. Pure retainer firms are very up-front about what they are and how they do business, as are many contingency firms. My idea is to only use retainer firms except in the rare case where a position is extremely tempting. However, you should know that some contingency firms will advertise a position they have no exclusivity one (perhaps they just saw it in the paper, much as you might)

Ok, that's enough for now...I just read Yusheng's comment from yesterday and figure this is enough for you right now.

Later.