Natural attrition within the highly fluid executive search market slowed in 2020, influenced by the pandemic. An abrupt increase in retirements then followed late last year, just as competition for talent erupted. And now, past norms that put the onus on candidates to sell themselves to prospective employers have been inverted.
Introspection about what makes work and an organization important have contributed significantly to job changes and a hyper-competitive market for talent. Early on, as the events of 2020 unfolded, boards, shareholders and other stakeholders showed a tremendous willingness to grant executives some leeway, but others were dismissed as the safety net was pulled away.
For some, career trajectories stalled during the pandemic, motivating a change in course when it was clear that succession planning was lagging expectations. Additionally, the location flexibility of remote work has enabled many key professionals to extend their timelines so they can transition more slowly.
Overall, employees have more options and are less restricted by geographic boundaries. Organizations are also still contending with how to incentivize highly compensated top talent to stay with the organization long term. Recruiting new talent away from competitors is another common challenge, but creative solutions are emerging to help both retain and attract executive talent.
Approaching personal priorities with an open mind
Having a clear understanding of current market conditions is a differentiator for successful attraction and retention strategies and efforts. Securing key talent often comes at a premium, and conditions in 2022 may require employers to round up on salary and long-term incentive plans. Pay that's 10% to 15% more than expected will be absorbed by inflation, at least in part, while bonus adjustments will account for individual underperformance within a few years. When persuading a prospect to join, lesser known organizations may need to be prepared to pay more than others.
While market realities might surprise employers, it's important to refrain from overreacting. Focusing instead on understanding what's important to employees individually supports a better hiring process.
When a candidate asks for something that's notably different from what the organization offers, that moment can be a constructive opportunity to discuss personal priorities and the basis for the request. Insights may then drive more-successful negotiations. Besides salary, employers most often use insurance products (63%), vacation or paid time off (PTO) (50%), bonuses (35%), long-term incentives (13%), or nonqualified deferred compensation (3%) as attraction and hiring tactics for key talent.1
Taking a flexible approach to total rewards
Having rewritten and relaxed some of the rules for the way employees work since 2020, many organizations are realizing the value of flexibility more fully. Reactive decisions that were forced by the pandemic, in retrospect, may point to new and better approaches to business policies and practices, like remote and hybrid work arrangements.
Flexibility and choice are now a common denominator of employee preferences, as many individuals are prioritizing where they work and when. For organizations, this presents an opportunity to upgrade total rewards by granting reasonable requests for individualization. Extra vacation time, bonus guarantees and removing waiting periods for medical benefits or 401(k) vesting are just a few considerations that may appeal to key employees. To prevent departures, some companies pay bonuses even if all financial terms aren't fully met.
Sometimes culture is the most pivotal factor in the decision to join or stay with an organization. Overall, work-life balance and a connection to the organization's mission now wield more influence. They've been increasing in importance for several years, but the pandemic and the upheaval that's followed have refocused many people on non-material priorities — the ability to manage the value of their experiences. What this change means for the organization is that their story and sense of purpose in society have more persuasive power to attract and retain key talent, alongside compensation and incentives.
Properly calibrating long-term incentives
There's growing concern about insufficient investment in a long-term incentive package. Without a competitive strategy, the organization risks losing key talent after annual bonuses are paid out if it doesn't have the proper incentives to retain them.
Executive benefits can often be better designed to attract and retain key talent. Some organizations now incentivize talent during the earlier stages of careers or modify compensation design so employees receive payouts throughout their tenure. As an example, there could be a payout at the end of three or four years, with a larger payout at retirement. The goal is to provide employees with meaningful incentives while they're still employed.
Leveraging executive search capabilities beyond the C-suite
The expanded use of executive search now includes critical downstream talent. For some search firms, demand is reaching maximum capacity, which is often the threshold for working with clients more selectively. Trust on both sides of the relationship is essential for a successful experience, and thinking of the search firm as a partner instead of a vendor can boost the organization's confidence in a third-party alliance. Transparency with the search firm around the challenges and opportunities of the position being filled helps ensure there are no surprises for the search executive and the candidates.
Conducting an efficient search and holding off on hiring the first candidate
The luxury of long search windows when filling a position just doesn't exist anymore. In this environment, the relationship between the pace of the effort and the quality of the results becomes more critical. Hasty hiring decisions lower the odds of a successful hire, so it's still important to adhere to a thorough process with multiple candidates, albeit on an expedited timeline.
When hiring for most C-suite roles, search consultants typically work with the chief executive officer (CEO) or the chief human resources officer (CHRO), but they tend to partner with the board when replacing a CEO. Many boards need to be reoriented to hiring dynamics that now require a shorter window.
Because aligning schedules for interviews and update meetings throughout a search can be a key factor in delays, establishing a search committee that includes a subset of board members may improve process efficiency. Simple efforts like pre-calendaring all search committee meetings and interviews also helps to keep progress on pace.