Client Blockage Cripples Executive Search


How Client Blockage Cripples Executive Search (And What to Do About It)

Client Blockage Explained

The world’s leading retained executive search firms have a client blockage problem. A big one. And that problem makes executive search buyers and the leading retained search firms a bit wary of one another. That’s because client blockage makes executive search less effective. It’s like searching with one hand tied behind your back.

Client Blockage is Crippling

If you are a retained search buyer, chances are you already know about client blockage. You may have even haggled over the fine print of those off-limits agreements. If you are new to retained search, buckle up. It is a gnarly issue.

Search Buyers Have Options

Regardless of whether you are a seasoned retained search buyer or a newbie, I am not just going to tell you about the crippling problem of client blockage. I am here to share insights on what you can do about it. In fact, client blockage, managed well, can lead to a better search experience.

What Retained Recruiters Do

Companies retain executive search firms to recruit top-performing senior executive talent. That’s because executive search firms are adept at reaching, engaging, and luring away the best-of-the-best leaders — the so-called rock stars.

Why Search Buyers Get Worried

While on one hand, the companies love that retained search firms can do this, on the other hand, it leaves them a bit unsettled. In the backs of their minds, they worry that we might turn around and poach their talent. So, to sleep at night, search buyers started including off-limits clauses in retained search contracts.

Enter Off-Limits Agreements

Whenever a retained search conducts an executive search for a client, the client usually insists that the search firm not poach its employees. In fact, most retained search firm contracts include off-limits language to retained search firm contracts. Off-limits clauses prevent a search firm from recruiting the employees of the clients they serve. Usually, that client is off-limits for two years after the last completed engagement.

Off-Limits’ Unintended Consequences

Originally designed to protect clients’ interests, off-limits restrictions have had unintended consequences. While search buyers may no longer worry about their retained search poaching from them, they now have a new worry.

Enter Client Blockage

While companies love insisting that a search firm not recruit from them because they are a client, they hate it when that search firm can’t recruit from a competitor because that competitor was once a client. In other words, the more client blockage a search firm has, the less that search firm is able to recruit from all of the client’s favorite target companies. Client blockage makes it harder for the search firm to complete a search because they have fewer companies from which they can recruit. that leaves search buyers wondering, “Will off-limits restrictions keep my search firm from recruiting from the companies I want to target?”

Some Client-Blocked Search Firms Mislead

Of course, it is a reasonable question for search buyers to ask, Yet is not one that search firm partners are eager to answer. Naturally, some partners are reluctant to reveal the extent to which their hands are tied. They know they will lose business. So they do not disclose their off-limits limitations or, worse, lead clients to believe they have few restrictions when that is simply the case.

Client Blockage at 2 Major Competitors? Say Nothing

One client recently complained that she didn’t learn that two of her top target companies were off-limits until after she had retained a firm. The retained firm hadn’t bothered to tell her it could not recruit for her two largest competitors. She was absolutely livid. She probably still is.

The Larger the Firm, the Greater the Blockage

The larger the retained executive search firm, the longer the list from which a search firm cannot recruit. The largest search firms are Spencer Stuart, Heidrick & Struggles, Russell Reynolds Associates, Egon Zehnder, and Korn Ferry (SHREK). Because the leading global retained search firms have more partners and conduct more searches, it is estimated that the number of off-limits clients easily exceeds ten thousand companies.

Naturally, retained search partners at the leading global retained search firms chafe against the restrictions. Their irritation is understandable. The more they master executive search in an industry, sector, or function, the harder client blockage makes it to be successful.

If Your Company Is Not a Client, You May Be a Target

As a result, many of the leading retained search firms do what they can to ensure they can recruit the talent they need. They do so by setting a strategy of not recruiting for certain companies so that they can recruit from them.

If You’re an Academy Company, You Are a Target

Usually, the intentional non-client companies are “academy companies,” those known for cultivating great leaders. Consequently, if a leading retained search firm is not doing business with your corporation, beware. They may have set you as a target from which to recruit . . . frequently.

Story Time: A Lesson in Client Blockage

I first learned about client blockage when I joined a leading retained executive search firm in New York. I’d just left a successful career as a TV journalist and investigative reporter and was eager to apply my investigative skills to executive recruiting. But for several weeks, I’d go to work expexting to hear the hum of executive search in action. Recruiters working the phones. Partners meeting with candidates and clients. Team discussions on how each search was going. Instead, the office was eerily silent.

The Search Firm Had Just Been Acquired

Search partners and lawyers were meeting behind closed doors. The retained search firm had just been acquired by a larger recruiting conglomerate. As a result, there were multiple off-limits lists, one for each retained search firm that had been acquired. As they desperately attempted to sort out what companies were off-limits, they were forced to postpone search engagement launches. It was an absolute mess.

The Acquisition Created an Off-Limits Nightmare

Retained search partners from one firm did not want to be kept from recruiting from ideal target companies that were clients of another firm. But since these firms had been rolled up into a single company, they’d also rolled up their off-limits into a single nightmarishly long off-limits list. The partners were absolutely beside themselves. They now had far fewer companies from which they could recruit. The work of search was not getting done, all because of client blockage.

What To Do About Off-Limits

Some Select Search Firms as a Defensive Measure

Some say the best offense is a great defense. To defend their leadership talent from being poached, some Fortune 500 retained search buyers dole out searches to as many of the leading global retained search firms as possible. It is not that they really want to do business with them. Rather, they have set a strategy to tie up large retained search firms with off-limits agreements. They give search business to companies that represent the greatest threat.

The Real Reason Is Poaching Prevention

In other words, yes, Fortune 500 companies engage the largest retained search firms to conduct executive searches . . . sure. But, they don’t do it because they think the search firms are the best at what they do. The real reason they are retaining as many of the large search firms as possible is to prevent those search firms from poaching their senior leaders. The retained firms are fully prepared to go after the talent of any company that refuses to do business with them. That threat is understood.

It Starts to Feel a Lot Like Extortion

Consequently, Fortune 500 companies give major search firms hundreds of thousands in search firm fees to keep their mitts off their executives. Naturally, client companies resent having to take this defensive measure. They wouldn’t do it if the threat weren’t palpable. So for some search firm buyers, it starts to feel a lot like extortion. Extortion is literally “the practice of obtaining something, especially money, through force or threats.” But the search firms aren’t threatening anyone, right? It’s just business.

What is a Search Buyer to Do? Think Small

A less costly, more effective way to ensure your search firm can recruit from as many target companies as possible is to use boutique retained search firms instead of global retained firms. We’re one such boutique firm. Small search firms have shorter off-limits lists, meaning they get to recruit from more of your favorite targets.

Boutique Retained Search Firms Are Preferred

In recent years, a growing number of corporations have turned to boutique search firms because they are virtually free from off-limits constraints. In addition, many of these smaller firms offer a better search experience. As one such boutique, clearly we have a dog in this hunt. But you don’t have to take our word for it. The growing popularity of boutique search firms is well-reported.

“With virtually little to no off-limits issues, specialized boutiques are beginning to catch up to their larger rivals at warp speed. Today, it is not uncommon to see dozens of completed C-level assignments dotting the websites of search firms that had previously been largely invisible. Quick turnaround times and an attention to service, combined with creative pricing structures, have put thousands of small or specialist recruiting providers in the viewfinder of clients today.”

— Hunt Scanlon Media

Search Buyers Are Opting For Boutique Search Firms

Hunt Scanlon Media, which covers the retained executive search industry, has noticed a change in search buyer preferences. In recent years, a growing number of search buyers is opting for lesser-known boutique search firms instead of the leading multinational retained firms. It turns out that “playing it safe” with better-known large retained search firms is not so safe after all.

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