How to Choose the Right Executive Search Firm or Recruitment Partner for your Start-up or Scale-up
Guidance for Founders and Hiring Managers
Coming from an executive search firm and ultimately switching to the Venture Capital world, “choosing the right search firm” is a particularly puzzling topic that still fascinates me. I decided to lay out my thinking and experience on the topic to guide others in navigating best hiring practices for their start-ups or scale-ups. In our case, once we make an investment, we aim to help Founders in our portfolio choose the right executive search partners to work with throughout their journey.
For starters, a Founder’s initial question might be “why should we consider choosing a recruitment agency or external search partner?” There could be several answers to this question:
- You have limited HR capability/staff inside the company
- The role is a niche role that requires a special, pre-established network
- The role involves a hard-to-find candidate and needs a bespoke “executive search” approach
Now that you know why you need to work with an agency, how do you decide which firm is best for you?
Here are some considerations to help you reach a decision:
1. Stage of your business
If you are a seed-stage company, you likely need to be budget-conscious. You simply cannot pay €100k for a search. For a role reporting directly to a Founder, you can allocate a budget around €20–25k. A solution may be to find an agency that would work with you in a flexible fee structure where you pay a small portion of the fee upfront, and pay the rest once the role is filled. I would recommend that you avoid a full-contingent fee structure because you need an agency who will be committed to the search and prioritizing your needs. And in order to be fully committed, agencies need to feel that they are your sole provider for this important search. This means that they can use their energy full-force.
For ventures at the Series-A and Series-B stages, you are probably now at a point where you can choose your agency from a pool of executive search firms.
At Series-A, your company starts to have layers (one layer between Founder and the employees), meaning that apart from having strong and smart hustlers, you will start looking for leaders who can lead teams anywhere between 5–20 people. To find this kind of leader, you might consider allocating a total budget of around €70–80k. But again, for this level, you need a flexible fee structure where you will pay 25–50% of the designated fee upfront, and pay the rest once the role is filled. There are a handful of executive search firms across the EMEA region which focus on this specific-level of hiring. These are boutique executive search agencies, not big brand or corporate names. (Please feel free to reach out to me for any recommendations.)
Beyond Series-B, the level of seniority for the leadership roles will increase. You will start targeting leaders who have already led larger scales, revenues and teams. In order to find these leaders, you need to be ready to allocate a total budget around €100k for SVP/C-level roles. Ideally, boutique executive search firms would still be the right-fit for you at this stage.
For leadership-level roles (VP/Head/SVP/C-level), anywhere starting from Series-C, you can now consider working with SHREKs. SHREKs are the oldest and largest executive search firms across the globe namely, Spencer Stuart, Heidrick & Struggles, Russel Reynolds, Egon Zehnder, and Korn Ferry. Personally having a background at one of the SHREKs, I can say that their fee structure and way of working are rather more rigid and pre-defined compared to the boutique ones. So you need to be ready to give a sizable upfront fee (€60–90k), and you might need to make sure that your lead Consultant attains a flexible approach towards the search process.
2. Seniority-level of the role
Above-mentioned recommendations are based on an assumption that you will search for a leadership-level role who reports directly to Founders. These kinds of roles usually are named as VP/SVP/C-level/Director or Head.
What if you search for a mid-level and/or an individual contributor (IC) role? In that case, you need to make a decision between the two quadrants: Quality vs Quantity. There are typical IC Recruiters who work on contingency-basis fees (meaning you pay only if they find a placement). If they have the relevant experience on the specific function or domain that you are looking for, then you might consider working with them.
They often tend to have a strong pipeline; you will usually have candidates in your candidate funnel however the quality of the candidates needs to be something you need to assess, and you might need to spend extra time on evaluating candidates. Alternatively, you also have an option to favor Quality over Quantity and could consider working with a headhunting-focused recruitment agency with a small portion of retainer fee. These kinds of agencies approach IC and mid-level candidates with an executive search mentality. The quality-level of these suggested candidates would be high, but the candidate funnel might be weaker in terms of numbers — resulting in limited back-up candidates.
3. Repeatability of the roles
If the role you want to search for is a mid-level or IC-level role that you are eventually planning to replicate in the short- and mid-term, then you can consider these roles as ‘repeatable roles’. Accordingly, you might want to build up an internal capability, network, and database for these kinds of roles. To illustrate, these roles could be Developers and/or Business Development Representatives (BDRs) that you would might hire for a ramp-up mission. Therefore, consider utilizing your internal HR function or working with a fully focused outsourced/freelance Recruiter in order to build that internal capability.
4. What other aspects should you consider?
Before detailing each criterion that we look at when assessing the right Recruiter/Executive Recruiter, it’s worthwhile to underline that we always work with scorecards, both in selecting/assessing shortlisted candidates as well as with search firms. You can find a scorecard template that we use for headhunter selection, here.
a) Existing network in the relevant industry or the function
Has the lead Consultant with whom you will work performed relevant searches? If yes, when? It will not count for much if the relevant experience is older than 2 years because of the pace of the talent market. Does s/he know your industry well? Will s/he have the capability to conduct reputation checks for the candidate? You need to be comfortable enough to answer the above questions before selecting your headhunter partner. However, there is a downside of this: the Consultant might have off-limit clients who might be your direct competitors that you would like to recruit from. So be aware of this and always ask the off-limit clients before initiating a search.
b) Startup/tech world experience (clients whom they have worked with and relevant positions they successfully filled)
Be sure to assess your headhunter agencies’ culture-fit to your company. As a start-up/scale-up or growth-stage company, you should expect your best-fit agency to be flexible in terms of thinking and biased towards action. Your agency would need to understand your culture for two main reasons: firstly, they will assess candidates according to your culture and secondly, you would expect your projected headhunter to have similar abilities; flexibility in terms of thinking, being proactive, and acting quickly.
c) How much does the agency want this job? Are they excited? Are they willing to share benchmark profiles beforehand?
Working with start-ups and scale-ups is tricky. Most of the time, roles are not well-defined and you might have a couple of zigzags along the way in terms of coverage, seniority and scope. Additionally, Founders are not necessarily easy to work with compared to corporate leaders. They have higher expectations. And sometimes, they are first-time Founders who simply don’t know how to work with an executive search firm, which means that the search Consultant needs to be able to coach them while s/he is executing the search. A tough job, and not everyone is up for it. The best way to assess the motivation of the agency is to look for the signs. Do they seem excited by the opportunity? Are they willing to share benchmark profiles before the mandate is given? How responsive are they? How fast do they get back to your emails? Are they reachable?
d) Experience of the Consultant (how senior, articulated, and convincing will s/he be in front of the candidates?)
Another important component that is mostly disregarded is the seniority and the personality of the lead Consultant. Even for IC and mid-level hirings, seniority/personality of the Consultant matters. If this is a role for which you need a headhunter mentality, then you need a Consultant who is persuasive and appears trustworthy. It is important that you can imagine him/her instead of the candidate, advising the candidate through the process as a career Consultant.
If you are planning to hire a C-level, then it is also important to consider whether your Consultant is experienced and articulate enough, who can help you with the offer negotiation, and who can sense the inner motivation of the candidate.
In sum, I hope these tips will help you land the right talent at the right stage!
Below are useful resources for hiring executives and exceptional talent: