A well-run organisation has the ability to proactively anticipate and recruit leadership talent in order to meet the strategic goals of the business. The majority of organisations in the developed nations will need to recruit a record number of external leadership candidates in the years to come, due to the aging demographics. Marguerite Granat considers the options for those looking to recruit.

According to the US Census Bureau, by the year 2010, 25% of the US population is projected to be at least 55 years old and by 2030 the number of Americans over 65 will outnumber youths under 18 in several states. In Japan more than 20% of the population is 65 or older and boomers account for approximately 8.6% of the workforce. Developing innovative recruiting practices will prepare organisations facing this talent shortage.

One approach to meet the future demand for outside leadership is to develop an internal executive search capability. There are a variety of approaches that can be used to attract external leadership into an organisation. Some organisations use external or internal resources exclusively, while others use a mix of internal and external resources. For some organisations, utilising traditional executive search exclusively may be too costly, especially now during this recession, and the results may or may not be desirable. This has fuelled an interest in either strengthening current in-house executive recruiting functions or exploring them as a viable option.

The biggest challenge to ensure the success of an internal executive search function is to prove to the internal hiring managers that it is capable of delivering results. The team needs to build credibility quickly by demonstrating an understanding of the business, its strategy, objectives as well as how to develop and implement search strategies that deliver the right talent at the right time.

"You're only good as your last search, so you have to be rigorous in executing a great process every time," says David Lord, founder of ESIS (Executive Search Information Services), a consulting service assisting organisations to improve executive search effectiveness. According to Paul Marchand, VP of global talent acquisition at PepsiCo, the talented team needs to have a predominant background in the executive search business. He says that "the line managers need to trust this organisation since they are used to reaching out to external search firms."

In order to attract the right executive recruiters to join an in-house function, the compensation package needs to be comparable to what these individuals are making as external recruiters. This compensation model may be difficult for an organisation to accept. With an incentive compensation model mirroring an outside firm, it is feasible that an executive recruiter may be earning a higher income than what a vice-president is making at the same company.

The investment of time and effort required to attract top candidates who are not actively seeking opportunities requires that executive recruiters work on no more than three to five assignments simultaneously, with the right support from researchers who assist the recruiters in identifying target companies, the names and titles of potential candidates, organisational structures and competitive intelligence. In a corporate environment, this may or may not be viewed as an acceptable workload. If the executive recruiter is expected to carry a higher workload the quality of the searches may be compromised.

Another challenge is asking Human Resources to remove some of the bureaucracy that is prevalent in most organisations. Most of the potential candidates that are approached by an executive recruiter of this calibre are not actively seeking opportunities. When approached, these individuals are in an exploratory stage. The process that is in place for the majority of open positions will not work for this type of recruitment. Forcing a candidate to fill out a lengthy application or asking for a resumé before the individual is ready to make a commitment may backfire.

Each organisation needs to determine the right mix of internal and external resources. Maintaining the appropriate balance between searches performed by the internal group and searches outsourced to external search firms will vary based on each organisation's needs and internal capabilities. When the internal team is overloaded with searches, an outside search firm can be hired to augment the internal team's capabilities. If the open position is so unique that it is outside the internal team's expertise, then it is time to seek outside help. John Goldberg, who conducts internal searches for Coca-Cola's core capabilities, mentioned that they would likely rely on one of their strategic search partners when the search is more specialised.

According to David Lord, before the internal team takes on an assignment, it needs to be 99% certain it can complete the search effectively. He adds that the team needs to know where the potential candidates are and whether they can be effectively accessed. Another area to look into is whether there are obstacles that would prevent the group from conducting the search directly.

David Lord says that if the team can not get past these three criteria, "then an external firm is indicated." Paul Marchand believes that the internal team is more effective when the organisation has the ability to plan in advance and that search firms struggle when there is no opening against which to match the candidates.

The quality of hire is the most important measure of success. John Goldberg, director of executive talent acquisition at The Coca-Cola Co., prioritises quality as the most important measure of success. He emphasises: "Our mandate is to continually increase the quality of our hires along with the speed of execution in each of our assignments. In doing so, we expect to realise progressively greater cost efficiencies as well. Importantly, the preceding elements are in prioritised order, quality first, followed by speed and then lastly cost. Cost is an important benefit, but not significant enough that you would do this work internally if either of the first two components were compromised." David Lord says that the organisation measures the success of its internal function "ultimately, by the success of the executives it recruits. Of course this takes time to play out."

Quality of hire is a subjective metric and there are various ways to approach this. One way is to look at how the business measures success and how the new hire is directly contributing to its success. For instance, if the new hire is in a business development role, what portion of new business was directly related to this person's performance? If the leader is put in charge of a business unit with high turnover, a measure could involve 360-degree evaluations and the rates of turnover.

Another important measure is looking at the retention rates of candidates placed through the internal search function. Client feedback from the internal clients and candidates can prove helpful. The time to fill the positions is another measure. The number of offers extended that are accepted will determine the internal team's ability to negotiate and close deals. David Lord says that something to keep an eye on is the completions rates, the percentage of searches conducted that are ultimately completed. The credibility of the internal search team will suffer if it takes on a search that is not completed. And cost, of course, is a measure that comes into the equation, according to David Lord; the difference between what the organisation would have paid an outside search firm and the costs to conduct the searches internally.

The benefits of an in-house executive search function are not just about cutting costs for an organisation. The goal of an internal executive search group is to achieve or exceed the results obtained from executive search firms. The team will focus all of its resources and look out for the interests of a single client. If successful the quality of hire will improve because the in-house search team will live and breath the corporate culture, will understand the ins and outs of the business and ensure each new hire is the ideal fit.

Marguerite Granat has expertise in both in-house and external executive recruitment and is a member of International Association For Corporate & Professional Recruitment.
Email:marguerite.granat@q.com

This article originally appeared in the September issue of Soft Drinks International.