September 11, 2019
Losing Money When You Delay An Executive Search
by Mary Newgard
Is there such a thing as coincidence? I think so because after writing my June blog “Some Things Age Well. A Recruiting Project Is Not One of Them.” I had conversations with agency leaders that involved the heavy cost of delaying a search.
I think we all understand there’s a financial loss when insurance agencies leave critical leadership positions vacant. In general, the industry does a poor job of capturing compensation data which makes it hard to find exact numbers in this instance. The revelation I’ve come to over the past month is that the financial examples have been in front of us the whole time. It’s all in the eye of the beholder; that person being your prospective candidate.
How Insurance Agencies Lose Money When You Delay Executive Recruiting
The Hire Just Got More Expensive
Not that people are houses but follow me on this analogy. I own a home because it’s an investment that appreciates. Every year my home value increases. The same is true for executive compensation.
- Benefits & 401k
- Stock options
- Employment contracts
Your executive hire costs 10% more today than it did 18-24 months ago. According to SHRM’s article on 2019 salary projections, “But signs indicate a bigger jump in wages and salaries for 2019 will outpace employers’ earlier expectations.” The article may cite 3% increases overall but that’s compounded by another 3% increase from 2018 and the same 3% from 2017. In this escalation we find truth in the 10% cost; even if the math didn’t work out that way, we know very few executives take a new job for a 3% increase 😊.
Candidates Have All The Bargaining Chips
Money is everything in this process. It’s hard for the ears to hear but candidates don’t even have to say it. Once they ask, at the very beginning of the interview process, “How long has this position be open?” and you say, “1-2 years”, you’ve lost all leverage. Now you need them a lot more than they need you. It’s a candidate driven job market. The delay will bite you in the offer stage when the candidate rejects your offer and can find another position in 3-6 months. The alternative if the deal falls apart for the agency is another 12-18 month search.
Vacancies Create Suspicions
The best and most stable agencies are growing, right? How can you grow if you’re leaderless? More so, agencies with leaders are selling, and without them are particularly susceptible to an acquisition. Delaying executive hiring creates a negative effect in the hiring process. Word gets out that the vacancy has existed for a long time and fewer people will express interest. At best an executive search has 3-5 qualified submissions. You may only have 1-2 people total and that’s a costly position to be in.