The process of selecting a new chief executive attracted a lot of attention last week when Walt Disney Co.'s board elevated company President Robert Iger to be Michael Eisner's successor after apparently considering only one other candidate.
The Burbank-based media giant was criticized for not mounting a more broad-based search, given that Iger will be running a media conglomerate with $31 billion in annual revenues. The boards of other major companies now looking for a new CEO, including Boeing Co., Fanny Mae, Hewlett-Packard Co. and American International Group Inc. likely will face criticism in their selections as well.
The thing is, conducting executive searches is not like completing a quarterly report: it's a lot less precise.
"Recruiting is a science and an art," said Caroline Nahas, managing director of Korn/Ferry International's Southern California operation. "The science is the process one follows. The art is determining whether an individual's background, personal style and aspirations fit."
That said, headhunters have established procedures to conduct searches for all kinds of managers, including those at the very top. It's a process that can stretch for months, involve hundreds of candidates, and cost a company big money in the case of placing a chief executive or other top officer.
And as a series of recent corporate scandals has taken down many chief executives, it also has turned search firms into private detectives as they scrutinize candidates more than ever. "It's always been a challenge to find great people," said Nahas. "But the scandals only heighten your awareness of the need to be diligent on behalf of our clients."
The process begins, of course, when a client company contacts a search firm to fill a position. Agreements are often on a contingency basis, with the standard fee being one third of a candidate's first year salary and bonus. Search firms generally avoid stock options as part of the fee deal because their fluctuating value adds complexity and risk. However, an emerging company run by executives whose pay is mostly stock options may be an exception.
"Very often, stock options might be worth nothing," said Gary Kaplan, president of Pasadena-based Gary Kaplan & Associates.
Once the financial agreement is struck, the two sides move onto the business of discussing the post to be filled and the type of candidate who might be a good fit.
Headhunters need to know a variety of criteria the client wants, from the desired level of education, to the experience level, to the salary range. That often takes just one meeting, given that the recruiters usually know their clients and industry.
"You spend a lot of time really becoming familiar with the hiring organization and with the parameters of the position," said Kaplan. "We're not employment agents. We're not out there representing individuals looking for employment."
Also key: establishing the time frame for the search. It's often 90 to 120 days, requiring firms to move along quickly to the second phase of the process: establishing a viable list of potential candidates that might be interested and qualified.
Establishing that list requires knowledge of the client's industry, with small search firms tending to specialize while the mega-firms cover a swath of industries with individual units focused on specific sectors.
A variety of methods are employed to hunt down candidates. Firms will scour the Internet and newspapers, attend trade group conventions and stay in touch with industry officials to keep tabs on rising stars. They also might contact the top executives of down-sizing companies for recommendations among those soon to lose their jobs.
A key issue can be convincing candidates to consider cross country moves. "What you want is the best and the brightest, many of whom are not considering a move," Nahas said. "So you hopefully can present a compelling opportunity that entices them."
That kind of digging typically turns up lists of 20 to 30 candidates for top executive positions and as many as 200 for mid-level jobs with the goal of narrowing the number down to five to seven finalists.
The list is initially trimmed by candidates not interested in the position, perhaps content with their current job. What's left is perhaps a few dozen candidates ready to go on to the next step.
That step involves a thorough check of resumes to ensure that candidates are who they say they are. Such attention to detail saved Beverly Hills-based Bench International Search Inc. from embarrassment five years ago.
The firm was in the process of scheduling an interview of a research and development employee at a pharmaceutical company for a position as a senior executive at a competing firm. But a background check showed that the candidate's medical license had been revoked in Illinois, where he previously worked. A further check revealed he had actually spent that period in the state penitentiary for the attempted murder of his wife.
"He tried to smother her with a pillow. Needless to say, we pulled his application after we found out he misrepresented his background," said Steve Williams, executive vice president of Bench.
Checking a resume can take just a few days, but then it's on to the most critical phase of the process: candidate interviews.
They are conducted in restaurants, airline lounges, at home or even through video conferences. Companies will often want recruiters to ask as many as 100 specific questions, testing an applicant's intelligence, work habits, level of ambition, job enthusiasm and how they work under pressure.
Headhunters will go to great lengths to see their candidates face to face.
Consider Brian Thaler, president of L.A.-based Scott-Thaler Associates Agency Inc., who met a senior logistics executive at a relative's funeral the only time he would have been able to see him. "He had a rough schedule," Thaler recalled. "He said, 'The only place I can meet you is the cemetery.' I said, 'I'll be there.'"
Interviews are often a key cutting point. Kaplan once eliminated a higher education department head from consideration after asking him to describe his most significant accomplishment.
"His response was that he survived, that he kept a low enough profile to keep his job for 20 years," said Kaplan. "In other words, the guy had done nothing but keep his job. He was not very motivated. It was pretty damn hysterical."
Headhunters also watch for personality quirks that might not be readily apparent in a formal interview process. Consider two candidates Bench was interviewing: one become surly with a waitress and the other berated a flight desk attendant when his plane was delayed.
Those making the cut, though, still aren't done. Before a candidate is passed onto a client, headhunters often will conduct lengthy interviews with as many as seven references.
"References are confirmatory for a candidate's self-assessment their technical skills, their accomplishments, the way they interact with peers, their perceptions of themselves as a leader," Williams said.
A key issue is maintaining confidentiality, something critical to the reputations of the firms. "We have tricks to the trade that are perfectly legal," said Thaler. "(Companies) will never know. When we call in, we don't leave messages and wait until we get the right person on the phone and explain to them what we are doing."
Finally, there is the step of whittling down the contenders to a list of five to seven candidates who are presented to the client. Headhunters say that process reflects not only the entire search but the head hunters own experience. "You might have some instincts but you can confirm those instincts with assessments and references," Nahas said.
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