Often when I’m conducting an executive search the business owner will ask about the executive search investment. It’s a common valid question. In discussion with the owner, I will ask several questions in turn, to get a sense of how much the search process will impact the operations of the business as assumptions on cost often overlook the business’ investment impact. It’s not a short list of questions, yet the discussion about the answers helps business owners to better appreciate the potential investment more realistically.
Investment in the Executive Search
I help the owner identify the projected executive search investment first by projecting annual compensation, benefits, outside testing, assessments, record checking, and potential relocation expenses for the chosen candidate, and, importantly, the time and investment necessary to develop the company’s strategic growth plan. I’ve also had suggested, by owners, the investment in the onboarding process for executive coaching services.
Central to this investment is the duration of the search process – how long will the position be vacant? Think of the number of months involved and the assumption you make in the executive’s base salary as a starting figure.
The compensation and benefits will vary the most and can include a base salary, bonus, stock options, and equity, and other benefits such as a retirement plan.
Severance
What? We just hired the executive! I know; however, you should think about the potential for a severance and include these calculations into your total investment impact. Consider here a severance fee (salary, benefits, use of office), any legal fees, possible outplacement counseling fee, administrative costs in separation, the wasted time of people in separation, and potential costs in lawsuits caused by the person (EEOC, harassment, wrongful termination, constructive discharge, etc.).
Mistakes / Failures, Missed And Wasted Business Opportunities
Will the executive drive a key customer away, lose sales, miss quota, miss production goals, impair customer loyalty, launch unsuccessful products? How long is the position vacant – 3 months, 8 months? What are the impacts on revenue – on expenses?
Disruption
How can your business calculate the costs of lower morale, driving away other employees, employee complaints, lower productivity, and/or impaired teamwork?
Other Areas to Review
When you are estimating the executive search investment include those missed opportunity costs and the additional time spent dealing with an executive’s less than stellar results from performance improvement plans, especially as these relate to implementation of the business’ strategic growth plan. After all, this executive will be responsible in leading the business to achieve the key metrics in the growth plan.
Calculate the Executive Search Investment
I know that these numbers will vary by company, however, I believe it’s important that business owners in private and family-owned businesses understand the potential investment as they consider retaining my company for an executive search.
If you are interested in assistance in estimating the investments, I highly recommend a visit to Topgrading’s Calculator. You will find more information in the executive search investment process.