A tale of two …points of view?
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness……we had everything before us, we had nothing before us”.
With apologies to Charles Dickens for misappropriating his words, I’m trying to make a serious point. I’ve worked in Life Sciences executive search for 8 years and all too frequently I meet people who think about talent acquisition in quite a narrow way. In doing so, they run a risk of failure that can damage the business that they’re working for and cost hundreds of thousands, or even millions, of dollars.
Any business needs three pillars for scalability: science or technology, financing and talent to execute – I advise and consult on the latter. One recent example is a candidate who received an annual compensation of USD 500,000 and after a little more than two years in position had restructured the global channel to market, reversed a single digit sales trend to a CAGR of 20% and upskilled the commercial structure. As a result, he had helped to generate incremental sales of USD 300m and an EBITDA of USD 60m. It is never just down to one person but in this specific case, the search fee was not even considered as a cost – more of an insurance premium to drive change and increase enterprise value.
It’s self-evident that if a business hires the wrong person into a senior leadership role then there will be hard financial costs associated with that mistake and soft costs linked to motivation, reputation and brand. What is often less well recognised is the scale of those financial costs and the steps that can be taken to maximise the chances of a successful hire.
Failure is (really!) expensive
Firstly, we think about the costs of getting it wrong and how they add up. At first glance, the costs are simply those associated with the hiring process itself – the fee paid to the search firm and internal resources to assess the executive. In reality, there are many more components and this is where the costs can sky-rocket:
Fee paid to the Executive Search firm
Salary for the total period of employment
Total cash compensation – all other benefits
Settlement fees or severance – all costs associated with termination
Cost of maintaining – all other employment related costs
Missed business opportunities
Damage to value of the enterprise itself
Disruption of business
Market Cap influence
Total cost of failure = many times the Executive Search fee, often at least 10x the fee
This long list adds up to a sizable bill and it’s clear that most of the financial costs are internal and often on an altogether different scale to what many people think of as the ‘cost of the hire’. This illustrates the difference between thinking about senior level recruitment as a simple procurement exercise and the recognition that it’s a vital business investment requiring the same care, strategic thinking and due diligence that you would apply to any other corporate transaction. As such, our approach is to help define the value proposition, reduce bias in the selection process and to look at talent acquisition as a due diligence-based exercise using all the due process and care that you would associate with that term.
Be strategic and reap the rewards
Due Diligence will help you to understand your new leaders in every regard. You need to know their strengths and their weaknesses, so that when they join, you can support them in exactly the right way to enable them to achieve the goals that you’re setting for them.
Rather than technical skills, it’s the softer aspects of the candidates’ personalities including coachability, cross-cultural awareness, emotional intelligence, motivation and temperament that are frequent contributors to people failing in their roles. The due diligence preceding the interview helps to ensure that the subsequent assessments of candidates have the right focus.
With thorough due diligence, you can maximise your chances of success and add value to your organisation:
- The more you understand the candidates, the more informed decisions you
- The more the candidates understand you, the more likely the right one will
- Demonstrating a genuine interest in candidates helps them engage with you
Due Diligence for hiring is not a nice to have, it’s a necessity.
If you’d like to hear more about our Proof of CandidateTM methodology and how it can help you, do contact me.
Thomas Schleimer, Partner & Head of Commercial Excellence