The Recruitment Industry - An Overview From an Insider

REmatrix Interview with Forbes J. Rutherford, President of Rutherford International Executive Search Group Inc.

April 14, 2007 – Toronto, Canada

 

Topic: Personnel Agencies, Recruiters & Executive Search – An Overview

Forbes Rutherford has provided specialized HR consulting and Executive Search services to both national, international property and investment firms for the past twenty-three years. Having dealt with a broad cross section of the industry’s senior executives and rising stars, Mr. Rutherford is in a unique position to observe the changing macro trends and oncoming challenges facing the Canadian and International real estate community. Additional information on Mr. Rutherford’s background may be viewed at the following web links: www.rutherfordinternational.com or http://www.linkedin.com/in/rutherfordintl

REmatrix.com www.rematrix.com
What do you do?

Forbes Rutherford
I was much younger the last time this question was asked of me. A client posed the question while we were riding up an escalator. I started to stammer out a litany of services when he turned, locked his eyes on me and admonished me for not being able to describe my value in fifteen words or less. “If you can’t say what you do in fifteen words Forbes, then there is a high probability that you don’t know what you’re doing.”

One needs to recognize life lessons whenever and wherever one might be – even when the lessons are “ever so subtle” as the aforementioned. The quick response to your question is, “I create wealth for clients by matching talent and ideas with capital.”  The fact that I create wealth applying my knowledge in “Board, Executive, Partner, Venture Capital Search and Leadership Assessment”…well, you’ll just have to Google my site to get the longer version.

 

REmatrix.com www.rematrix.com
Your service offering covers a broad spectrum of search, recruitment and human resource advisory, what differentiates your firm from an employment agency?

Forbes Rutherford
Wow! Are you just doing me the courtesy of a “set-up” question, or are you assuming some of your readers just don’t know the difference between a personnel agency and a search firm. That’s a bit like asking a senior audit partner at KPMG how his firm differs from Abdul’s Bookkeeping Service!

 

REmatrix.com www.rematrix.com
Sorry, but we asked the question as there is a great deal of confusion on the street about the services your profession offers.

Forbes Rutherford
Let’s not rub the salt any deeper; perhaps we share the same vocation insofar as being a human resource intermediary but certainly not the same professional standards. If we’re excluding current job board technology, there are three basic service providers that assist firms with the hiring of staff. They are “Personnel/Temporary Employment Agencies, Recruitment firms and Executive Search firms.”

A “Personnel Agency” generally works at staff and lower management positions and employs limited due diligence in determining the skills of the candidates, although this isn’t true in the case of some agencies that cater to specific sectors such as accounting. Quite often agencies will compete with each other on the same position. Since compensation is “contingent upon success,” firms for the most part, are motivated to broker candidates and let the “client” sort them out.

The client believing they’ll cover the market more effectively will engage multiple firms without necessarily telling the third parties that they’re competing. It’s a “mugs game” for everyone involved; and primarily played when the ratio of candidates for the function is high and candidate mediocrity is acceptable.

The ultimate objective for the Agency in this environment is to get the “Job Order,” work it while it’s fresh and move on to the next. There is nothing particularly wrong with completing an assignment expeditiously; however agencies measure their agent’s daily performance with the number of “job orders” written, and number of “send outs” made. (A Send Out is a candidate interview with a client.) The “Send Out” needn’t be a perfect fit but simply approximate client preferences. For the Agency, it’s a number’s game as the operational goal is to maximize “Send Out’s,” for the very simple reason that every seven to nine “Send Out’s” equals one “Job Order” filled.

 

Most agencies offer the client a guarantee, but it’s made of “Swiss cheese” and is usually pro-rated on a “Just In Time” zero credit basis. Just around the time you discover the new hire was a “schmuck” the warranty has lapsed.

A “Recruitment Firm” methodology varies only slightly from the “Personnel Agency.” They employ more active recruitment strategies such as trolling the resume data base of major job boards as well as their own. They will also pursue passive candidates via referral networking. Their fee structure is also contingent on “successful” completion of the assignment. It’s likely the Recruiter has an exclusive mandate with perhaps a modest upfront or cancellation fee as part of the assignment terms.

However self interest and “time on account” still plays a part in the process even if a nominal fee has exchanged hands; the client/consultant didactic is still transaction versus consultative advice. One simply can’t be sure the candidate market has been thoroughly canvassed; “time on account” requires the recruiter to shift focus once two or three acceptable candidates hit the medium/short list. This model isn’t conducive to unique and difficult assignments where broad search coverage is required.

The agency and recruiter business models are cloaked with “self-interest,” and as in any contingent transaction “broker interest” usually trumps “client interest.”

The “Executive Search” methodology is a solution driven process that can be utilized strategically such as advising on reorganization, staffing the CEO’s resource plan or facilitating the insertion of “new succession leadership.” A tactical application might well be the targeted recruitment of a competitor’s key employee thereby undermining a competitor while gaining a competitive advantage. The executive and board search consultant operates best when he or she is allowed to actively participate in the organization’s resource and organizational plan

 

The Executive Search consultant starts the consulting engagement with an “Assignment Analysis”, which constitutes a clarification of objectives, organizational and departmental structure, compensation, managerial dimensions, the drafting of a position description and developing a psychometric profile of the ideal candidate. To effectively determine hiring fit, the “Assignment Analysis” should also include a psychometric assessment of the position’s direct report and downstream subordinates.

Once this phase is completed, the process moves into communicating need through third party referral, recruitment, interview, candidate assessment and client meetings. Reference checking normally takes place before client interviews, but some industry sectors such as commercial real estate are too intertwined to jeopardize a candidate by speaking to his or her  references without having ascertained that they have a better than even chance of successfully being hired.

Optimally, the executive search consultant is striving to become a trusted adviser to the client; and in so doing, the fee is designed to set aside consultative self-interest and is based on completion of project milestones.

REmatrix.com www.rematrix.com
What about the candidates? Are they handled differently by the three recruitment models you’ve described?

Forbes Rutherford
You will get shoddy “customer” or “candidate” service with all three levels, although the “Executive Search” firm is less likely to try and drive a square peg into a round hole. “Expediency” is a tenet of all three service providers; however “accuracy and fit” will take a back seat to “self interest,” which again is more evident in a contingent environment.

For me, the achievement of “accuracy and fit” is critical to both parties; ninety percent of the candidates we place are promoted within the first year of employment or remain with their employer for more than three years. That’s a critical factor to consider when calculating the overall cost of a new hire.

As for candidates, Rutherford International and my related companies aren't isn’t in the business of steering a person along a career course that we don’t believe will benefit them in the long run. We take the time to counsel candidates on how they might be able to develop their careers regardless of making it to our short-list. If they’ve taken the time to come and meet you and share their aspirations, the least one can do is provide feedback and counsel. Some may find our candor to be an intrusion; however most interviewees appear to listen. We know this, as well over 50 percent of the prospects we interview/counsel leave their employer within the next twelve months. Overcoming the fear of “considering” change is much harder than the “act” of actually going through with the change.

REmatrix.com www.rematrix.com
What risks must a corporation consider when using a third party to help staff an employee or a senior executive?

Forbes Rutherford
There are many, but “wrongful hiring” is a growing phenomenon in legal circles and few recruiters and hiring managers are aware of the significant liabilities they could incur when hiring, especially when engaging third party assistance. I’ll say it again, self interest reigns supreme in contingent service environments. Employers assume unnecessary “hiring risk” when they mandate a pack of transaction minded third party agents with the right to legally represent them, and yet don’t make an effort to monitor or control what’s being said on a recruiting call. It’s bad enough being sued for wrongful dismissal, but imagine paying ten to twelve months severance to an employee that lasted a week because someone misrepresented the position during the hiring process?

REmatrix.com www.rematrix.com
How should a company guard against this from happening?

Forbes Rutherford
Have your corporate counsel bone up on current case law; have only one service provider work on the assignment; and ask to meet the front-line recruiter that will be making the initial recruitment call. Be sure they actually understand your industry. Make sure all parties involved in the search are clear on the job specification and what can be projected forward when describing career potential. Don’t assume the position description, (which is different from the corporate job description) has been thoroughly read by the candidate; and if you’re using a contingent service provider, ask the short listed candidates to describe their understanding of the position to ensure that no misrepresentations regarding the position and career growth have been made.

REmatrix.com www.rematrix.com
Which service provider is most effective for the job seeker?

Forbes Rutherford
Depends on their job level and stature in the industry and whether they’re looking actively or passively.

Executive search firms do not market candidates, so don’t expect a great deal of assistance if you’re unemployed or in an active job search. You should register with them and monitor their career postings if they should publicize their assignment activity, however their business and fee model is not conducive to marketing candidates. They are more keenly interested in the executive or “rising star” that is “passively” seeking opportunities and is open to having a discussion.

That being said, there are times when a person of significant stature seeks your counsel and assistance at accessing the hidden job market. Strategically minded executives generally align themselves with strategically minded Executive Search Consultants. Usually in cases like this, the executive search principal is aware through First Tier executive and Board contacts that change within a corporation could be arranged if the right person came along.

Personnel agencies and recruiters cater to the active job seeker, especially for positions ranging from “staff levels” to “upper-middle management.” Some are effective at introducing candidates to the hidden job market and you need to be circumspect when engaging an agent to market your skills. Try and determine the scope of their knowledge in your industry before you give them the right to be your agent. Some Agents will try and get you to sign a document granting them sole rights to market you in the industry. Run don't walk if you meet this kind of agent. In most jurisdictions, if an Agency sends your resume to a company that’s requested a copy, the Agency has fee rights for up to a year even if you’re hired on an unrelated job opportunity so it's important you keep tabs on where your resume has been sent.

As for the “Open Job Market,” one can successfully source staff and upper middle management job opportunities through adept use of web based search engines and industry specific job boards. In time, web based job board technology will supplant those pure contingent agencies that haven’t been able to rise above their “introductory role” within the hiring transaction.

REmatrix.com www.rematrix.com
You own an international job board, a job advertising agency and a recruitment agency in addition to your executive search firm. Why, considering your apparent disdain for recruitment agencies?

Forbes Rutherford
There will come a time within the next ten years where companies will heed the message that people like me have been saying since 1998 to whoever would listen that the Internet is a democratizor of collective information and that its a disruptive influence on traditional business models. It's brought about a form of creative chaos and forced adaption in both our work and personal lives. I cater to client growth through identification of talent and I cater to my executive clients growth through opening doors to opportunity. Companies need prospects that understand the Digital World, my profession isn't likely to adapt until people like me make it adapt.

So REjobnet.com is a job board that publishes real estate jobs from 53 countries; the real estate job marketing agency called REtalentSelect.com helps internal recruiting departments market their employment brand and jobs to the broader market by using methods that transactional agencies use but we do it at a low campaign cost. This business model is designed to drive transactional agencies out of business leaving more consultative firms such as my NEXTalent.ca more senior and difficult assignments utilizing the support services of RutherfordInternational.com. Through this group of companies, I'm able to offer clients talent acquisition services at different price points along the recruitment value chain.

REmatrix.com www.rematrix.com
And will a senior executives sign up on a job boards or seek positions through recruitment agencies?

Forbes Rutherford
There are certain niche executive boards that attract Upper-middle management and Second Tier executives, however I don’t believe First Tier executives register on these job boards. Some companies may use them as way of “covering all the basis” with their advertising dollar or in the case of NGO's and Government positions where public posting is a requirement. These services won’t affect my executive search practice; but it has allowed me to form a separate division, that will offer clients a means of assessing candidates for staff and middle management functions at half the cost they are currently paying their contingent service providers.