It’s a tough time to hire — but it’s never been a better time to be a recruiter.
With record levels of investment and M&A activity in the tech industry, fast-growing tech companies can’t hire executives fast enough. That means recruiting firms are juggling more searches than ever, and companies have to wait in line to even start a search.
“It’s really unlike anything I’ve seen in the last 20 years,” said Mike Foley, regional managing partner of Heidrick & Struggles’ Technology and Services practice in the Americas. “It’s definitely booming.”
Another placement firm, Daversa Partners, performed over 750 searches last year, partner Frank Cumella estimated. The firm hired 90 staff members of its own over the same period to pick up the slack, but “it wasn’t enough to support the demand and market,” said Cumella, who recruits executives for enterprise software and consumer internet companies.
Not even the switch to remote work in the past two years, which allowed recruiting firms to pack in more meetings in less time, has helped with the backlog of searches. Much of recruiting can now be done without long car or plane trips to meet clients and candidates.
That’s a big change from before the pandemic. Foley is based in Boston, but before 2020 he spent almost 70% of his time on the road. Kelly Kinnard, Khosla Ventures’ head of Talent, said that when she was a recruiter a decade ago, she would drive to meet every candidate: “Look them in the eye, assess their gravitas, get a sense of who they are.”
Some of the nuance is lost over Zoom, Kinnard said, “but busy executives are busy, and recruiters are now able to get away with doing eight Zoom calls a day instead of driving to Mountain View, and then Cupertino, and then Sunnyvale.”
Foley said that while recruiting remotely, it’s been harder to accurately gauge a candidate’s level of interest in a new role. More executives are willing to hop on a call than meet for an in-person lunch, after all.
Travel and in-person meetings are starting to come back: Both Foley and Cumella are back at the office and holding in-person meetings, they said.
Money pouring in
All these searches mean big bucks for recruiters. Executive searches typically cost $100,000 or more — the going rate is 28% to 33% of the executive’s first-year pay, according to Kinnard.
And these fees are going up. One VC talent partner reported seeing searches go from the $80,000-to-$100,000 range up to $150,000. Kinnard referenced a go-to-market search firm that she said had doubled its retained search fee and now won’t do a search for less than $225,000.
“The fees have just gotten unbelievable. They’re higher than I’ve ever seen,” Kinnard said. “Every time I think they can’t go up, they go up.”
That particular firm limits its recruiters to five searches at a time, which was the norm when Kinnard worked as a recruiter. Cumella said it’s hard to focus on more than five or six searches at a time, so Daversa has been hiring aggressively to avoid overwhelming its recruiters.
Some others are juggling more work. Kinnard said she knows one recruiter — a specialist in recruiting VPs of HR — who now takes on 16 searches at a time.
“There’s just no way you can do a good job [juggling that many searches],” Kinnard said. “But they have so much business and they all feel like, ‘Now’s the time I can make a ton of money.’”
Reputable recruiting partners can easily make over $1 million or $1.5 million per year right now without doing any proactive business development, Kinnard said. Two other VC talent heads, including Holly Rose Faith of Greylock Partners, agreed that top recruiters are likely making more than $1 million per year.
(Foley demurred when asked about this range, while Cumella said that Daversa’s search partners hadn’t seen a windfall because the firm has been staffing up rather than having partners take on more searches.)
The waiting game
When Kinnard worked as a recruiter, she wouldn’t have let an hour go by before answering a client inquiry.
Now that she’s on the client side, her emails to search firms sometimes go unanswered for days. When she does hear back, recruiters often say they don’t have time to start a new search for a few weeks or even a few months. When Kinnard is looking for a search partner to work with one of her portfolio companies, she now takes timing into account: Which firm even has time to take on another search right now?
Foley said that Heidrick recruiters are “more open than ever” with clients on when they can start a project. “The last thing both sides want to do is get into a situation where we can’t tackle what they’re asking us to do, and that spoils our reputation or ends up with a bad outcome,” Foley said.
Faith, of Greylock, agreed. For search clients, it’s better to wait to start a search than to hire a recruiter who doesn’t have time to do a good job.
As a result, recruiters are increasingly picky about which searches they’ll take on. It can be so competitive to get in with a recruiter, founders of top-tier VC-backed businesses are “kind of just feeling fortunate to have the opportunity to partner with a top executive search firm,” Cumella said.
Recruiters have the luxury of deciding whether they want to work with a particular company or team, or whether the company seems motivated to get the search done quickly.
“Often, they’re doing calls with companies, and they’re like, ‘This CEO seems too difficult to work with. I’m going to pass,’” Kinnard said. “The tables have really turned, in the sense that the recruiters are really in the position of power right now.”