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Executive Search – Retained vs. Contingency - What’s The Difference? - By thecentregroup on Thu, 04 Nov 2010 07:36:00 -0700

One of The Centre Group’s core competencies is retained executive search.  Often, a client will ask, “What’s the difference?  Isn’t ‘retained search’ just recruiting at a higher price tag?”  The objective of both is to find a well qualified executive to fill a key vacancy, but it’s like getting Junior’s bike under the tree Christmas morning.  You can buy it in a box, work on it half the night and show up Christmas morning with Band-Aids on your hands, or you can buy it from a bike shop professionally assembled and properly adjusted.

A difference that causes some clients to resist using retained search is how the service is purchased.  In contingency search, a company pays a recruiting firm only after a placement is made.  In retained search, the fee is paid as a consulting fee during the first months of the engagement.  There’s some difference in the amount that is paid, but there is a lot of difference in the scope of service.

Listed below are some of the key elements of both the retained search and contingency processes.  Let’s start with contingency.

Contingency Search

·         The process starts when a recruiter receives a job order for a company.  This is generally a brief job description with the starting salary range.

·         The recruiter’s interaction is often with the HR department with limited dialogue with the hiring manager.

·         A recruiter may advertise a position, but more typically candidates come from unsolicited resumes that have come from individuals who are looking for a job.

·         A recruiter will conduct phone (or Skype) interviews and refer those who seem qualified to the company. 

·         The company will interview a number of people and make a selection.

·         If the company selects someone who the recruiter has referred, the recruiter will bill the company 25-30% of the executive’s first year compensation.

Retained Search

·         A search consultant helps develop the recruiting profile that includes: technical requirements, required prior experiences, personal characteristics that are required, short & intermediate range objectives for the position, and complementary skills/qualities that will contribute to a candidate’s overall success.

·         A search consultant seeks to understand the unique qualities of a position and a company that will appeal to a candidate.

·         Together, the consultant and the company identify target companies and individuals.

·         A search consultant assertively goes after people who are proven to be successful, whether or not they are looking to change.

·         Through a series of phone/Skype and personal interviews, the consultant narrows the candidate pool to only the most qualified; typically three to four individuals.

·         The consultant prepares a report that includes candidates’ resumes (edited to a consistent format), suggested interview questions, a candidate evaluation matrix, and a brief, consultant’s assessment of each candidate.

·         The consultant assists with the interview arrangements and participates in candidate interviews and selection if requested.

·         The client interviews three to four candidates, all of whom are qualified to perform successfully and whose background and experience have been verified.

·         The consultant checks candidate references.

·         A search consultant assists the company in crafting an offer that will be appealing to a candidate’s unique needs.

·         If relocation is required, the consultant “sells” the community, appealing to the candidate and his/her family’s needs and interests.

·         Should the newly hired executive leave within the first 12 months, the consultant repeats the search at no fee.

·         A search consultant’s fees are set up-front approximately at 35% of first year’s anticipated compensation.  Billing occurs mostly over the first 3 months of the engagement, with the final installment paid upon fulfillment. 

·         The search consultant works on the assignment until it is either successfully completed or suspended.

When to Use Retained Search

Retained search is exclusive and confidential.  It is the best approach when the position is at the upper levels of an organization.  Because search is a “high-touch” process, it is particularly valuable when a company wants to make a statement about the importance of a position.  When a company is looking for the best qualified person rather than a qualified person, search is the best approach. 

As the leader of your organization, when the next key position opens, consider:

·         How your time is best spent?

·         What impression you want to make on your future key executive?

·         Would a predictable process and timeframe be helpful?

If you look at the value received versus the time and money invested, search is an attractive choice.

Pay Equality vs. Pay Equity - By thecentregroup on Thu, 21 Oct 2010 13:40:00 -0700

Pay Equality vs. Pay Equity

A New Compensation Theory

An article in Smart Money describes a new theory of compensation called inequality aversion theory.  The theory states that, “human subjects proved willing to sacrifice potential rewards if they could block others from receiving superior rewards”. To read the article, go to: http://www.smartmoney.com/personal-finance/employment/why-companies-keep-pay-a-secret/

Does that mean that maintaining equality between employees’ pay is more important than differentiating pay based on performance?  As it applies to those in this study, the answer is “yes”.  They would rather have everyone paid a similar amount than have pay differentiated.  In fact, they would actually sacrifice personal gain to prevent others from receiving more.

What about Pay-For-Performance

This theory is disturbing to pay-for-performance devotees who believe that individual rewards should be commensurate with results.  Employees should have a clear understanding of what’s expected of them and results that are being measured. When results are achieved, they should receive an appropriate reward.  This scenario follows expectancy theory, which ties together effort, probable outcomes, corresponding rewards, and the perceived value of the rewards. This “If-Then” approach is the backbone of merit compensation design.  Here, we’re trying to achieve equity, not equality.

Times Have Changed

Behavioral research shows that contingent rewards are ineffective in achieving high performance when the nature of the work calls for complex problem-solving and creativity.  In such knowledge-based work, the whole is greater than the sum of the parts.  To differentiate rewards is contradictory to the overall purpose.  In this scenario, we have a "Both/And". Based on overall results, the reward is equal and, for the team, it is also equitable .

The fact is, more and more work falls in to this category – knowledge work. Maybe pay-for-performance advocates should to take a new look at pay plan design.

“Pay Down – Motivation Up” - By thecentregroup on Fri, 01 Oct 2010 11:35:00 -0700

In a recent edition of “Report on Salary Surveys’, published by IOMA, it is reported that salary ranges for executives are budgeted to increase only 2.9% in 2011.  That covers about 56.2% of companies that actually anticipate increasing ranges in 2011.  The remaining 43.8% of companies do not anticipate increasing ranges and some project decreasing ranges.

In terms of actual salary increases, the 2011 forecasted increases for executive is 3.6%.  This is the lowest budgeted increase in the history of this survey.  Still, it is above the average actual reported increases for 2010 of 2.5%.  For comparison between 2010 budget and actual, the budgeted increases were 4.0%. 

Salary freezes and reductions in pay were common in 2010.  Although there may be mounting pressure to increase pay, the economy is too unstable to loosen the reins very much.

So how are you expected to attract, retain and motivate executive talent and your broader workforce during times of economic uncertainty?

Engagement is becoming synonymous with “motivation”.  That makes sense since high-engagement organizations, measured by responses to organization-wide employee opinion surveys, are more productive and more profitable.  In his book Drive, Daniel Pink presents an excellent analysis on motivation and the forces that drive it.  In three words, his message is: Autonomy, Mastery, and Purpose.

The use of incentive compensation continues to increase.  Hay, the global HR consulting firm, reports that 66% of US companies use variable pay plans and 26% intend to increase the proportion of pay that is derived from such plans.  Properly structured incentives can have a positive influence on performance, helping focus attention and limited resources on common goals.  When designed properly, incentives can be funded totally out of above-expectation financial results; making then truly self-funded.

Rewards are not limited to pay and benefits.  Engagement (motivation) is the result of the whole work package.  Yes, that includes pay and benefits, but it also includes effective leadership, opportunity for self direction, career advancement, personal and professional growth, a sense of teamwork and community, and a sense of purpose that brings individual and organizational aims are in synch.

In the past, pay and benefits represented our primary focus when it came to increasing motivation.   This economy along with some powerful behavior science research, have given us an array of creative options to develop an engaged, high-performance workplace.

Employee Engagement – Putting Your Organization into Overdrive - By thecentregroup on Mon, 23 Aug 2010 07:22:00 -0700

I just finished reading a great book titled Drive, by Daniel Pink.  I took my time reading it because I wanted to stop and consider each idea that was presented before moving on to the next.  This book presents intriguing concepts about what motivates us and why theories that we’ve used – perhaps overused – in business and in life don’t work all that well.

Test something with me.  Recall a time when you were in “flow”.  That is, when you were totally absorbed in a task; when you lost all sense of time; when you were oblivious to what was going on around you; when you were totally focused on what you were doing.  How did you feel? 

I’ll bet you felt great.  Your energy was high.  Physically, you weren’t tired – in fact, you were charged-up.  You were applying your creativity, stretching your abilities, increasing your base of knowledge - learning.  You were in the moment, not concerned about who was watching or what you would get out of it.

Wouldn’t it be great if your work life, and the lives of those with whom you work, were spent largely in “flow”?  How much more would you accomplish?  How successful would your company be?  What would be the climate or culture of your organization? That’s what this book challenges you to imagine.  Daniel Pink calls it "Drive".

We call it "Employee Engagement".  According to Gallop in world-class organizations, the ratio of engaged to actively disengaged employees is 9.57:1.  In average organizations, the ratio of engaged to actively disengaged employees is 1.87:1.  Lack of engagement has many negative consequences; poor productivity being one of the most significant.  Within the US, the cost of lost productivity may be as much as $300 billion.  That makes it an overwhelming good business decision to learn what your engaged/disengaged ratio is and to take steps to improve it.

Learn your ratio by conducting an engagement survey that measures employee attitudes about autonomy, learning and alignment of purpose.  Take steps to improve your ratio by focusing on improved communications, purpose-driven training, continuous process improvement and on instilling a passion for customer service.

-Joel

The Centre Group - By thecentregroup on Fri, 23 Jul 2010 07:03:00 -0700

For more than 30 years, The Centre Group has worked to help business leaders learn how to motivate and engage their people. We believe there is no substitute for running a company from the inside-out. No more powerful strategy for operational excellence. No clearer path to customer satisfaction. No stronger business development plan.

We do this work because we love it. We do this work because it is important. Our client list is made up of companies that share our belief that their ability to reach their organizational goals, by and large, is in the hands of the people they have on board...It's that simple.