Executive-search firms have all but taken over the process of hiring presidents in higher education. Fifty years ago, almost every institution conducted its own leadership search on its own. Now, our research shows, at least 92 percent of colleges and universities hire a search firm when looking for a new president. Regardless of the arguments for or against hiring an executive recruiter, it is the norm.
But their ubiquity doesn’t mean people know what to look for in a search firm. We’ve studied trends and practices in presidential searches (and exits), for nearly a decade. Based on our research, we have five recommendations for search-committee members, trustees, purchasing agents, and university lawyers on how to make sure you’re making the best choice for your campus.
Be explicit with what you expect a search firm to do. Perhaps the single most important — yet often overlooked — element of a presidential search is the development of the request for proposals (RFP) to hire a search firm. More often than not, a university will issue a simple request for letters of interest or choose from a list of preapproved vendors. Most RFPs we’ve reviewed are essentially boilerplate.
As most professors have learned, the best way to ensure that students are submitting original work is to make assignments unique. In seeking a search firm, your request for proposals should be unique as well.
- Take the time to identify your institution’s real needs for this particular search.
- Develop a scope of work with a set of tasks specific to those needs.
- Determine the timeline — with milestones — for completing the search and identify specific tasks the search firm must complete.
- Last, but not least, be sure to establish discrete and measurable criteria by which to evaluate the various proposals.
Do not rely on the search firm’s standard contract. Nearly two-thirds of the contracts we’ve seen between institutions and search firms are written by the latter — often on the firm’s own letterhead. Not surprisingly, the contracts tend to be very one-sided, with virtually all the protections in favor of the firm.
This is not a modest procurement of services. Given the current compensation of presidents, as well as the potential costs of terminating a chief executive midterm, think of this as a multimillion-dollar “purchase” of a new president. Your institution should develop the contract with all the standard terms and conditions of any large procurement, including indemnification by the firm of the university, rights of termination, warranties of performance, and more.
It is especially important to know who in the search firm will do the work, and whether they have worked in higher-education administration. Don’t be surprised if some don’t. In a 2021 research study, we found that the principals of most search firms specializing in higher education don’t have much experience as campus administrators. Only four of the 21 search firms we looked at were led by a former university president. Of course the consultants who work on the individual searches may have a higher-ed background. Just make sure someone does.
Don’t pay the consultant’s full bill upfront. Standard practice is for the search firm to be paid its entire fee — typically in three installments — long before the search is completed. One installment is paid when the agreement is signed and the final two 30 days apart. But if you were remodeling a kitchen, would you pay the contractor the full amount before the building inspector gives a green sticker to the project?
Not only should there be a significant “holdback” until the new president’s contract is signed, but we would advise that payments be based on deliverables/milestones rather than the arbitrary passage of time. Here’s how that might work:
- Consider the initial payment as a retainer, upon execution of the contract.
- Subsequent payments could be based on the completion of tasks. For instance, a second payment could be made for the completion of listening sessions and acceptance of the position description. A third payment could be contingent upon the selection of the final slate of candidates.
- The final payment should be sent only when the chosen candidate has passed a full background check and signed a contract.
Conduct your own background checks. We’ve found that one of the weakest parts of institutional contracts with search firms concerns the background checks they do of candidates. We often see vague contract language such as “review of social media” or “check public records.” Some search firms even pay another company to do the legwork. It is not unusual for a search firm to state that it “does not warrant” (can’t guarantee the accuracy of) the information provided about a candidate.
Given both the financial and reputational risk associated with hiring a president who has a skeleton in the closet, we see two ways to mitigate the shortcomings of relying on a search firm for this vital information.
- First, have a public search that requires all finalists not just to be named, but to visit campus to meet with faculty, staff, students, alumni, and other stakeholders. This allows for crowdsourcing of due diligence. As we’ve said before, the faculty grapevine is probably the most thorough way to vet a candidate.
- An alternative, albeit one that is somewhat less effective, is for the institution itself to hire an independent firm (such as a law firm or a private investigator) to conduct the background checks. That won’t be cheap and candidates may balk, but virtually every other senior executive in the worlds of business and government goes through some form of formal, in-depth background check. Why not college and university presidents, too?
Either way, an executive background check can prevent a disaster that could be costly, both monetarily and reputationally.
Think carefully before accepting a contingency-based fee agreement. Some search firms calculate their fee as a percentage — typically about a third — of the new president’s salary and bonuses in their first year. In effect, a search firm could make more money by promoting the candidate with the highest compensation requirements. Instead of that contingency-fee model, we highly recommend a fixed-fee agreement. (We have, however, seen some fixed-fee agreements that allow the fee to change based on the salary of the new president.)
We’ve also found that many search firms charge an additional administrative fee, varying from 10 to 15 percent of their search fee, to cover “non-reimbursable costs.” Depending on the cost of the search, this could be as much as $45,000. This is akin to the dealer’s prep fee that people are forced to pay when buying a new car; most consumer groups consider that fee to be pure profit. Try to minimize such costs in the contract with the search firm.
All but one of the 150 search-firm contracts we’ve reviewed over the past decade had a provision that reimbursed the consultant for travel, per diem, and communications costs. We strongly suggest that institutions place a not-to-exceed limit on such expenses. Also, make certain these payments are in line with campus policies on reimbursing transportation, lodging, and per diem costs.
Once the contract is in place, we offer two final recommendations as you look for new leadership.
- Resist all the extras. If the search firm offers coaching or transition services for your new president, consider why. It’s not out of altruism and it won’t be cheap. As an alternative, governing boards might consider providing a new president with an executive coach, one who is independent of the search firm. This isn’t uncommon in the corporate world.
- Don’t forget that the search firm is a contractor and should be working exclusively for the institution, not for the candidates. That is true whether it is a buyer’s or seller’s market. But we’ve seen many instances where the line gets blurred, especially regarding contract negotiations. We strongly believe that search firms should not be involved in the contract negotiations between the institution and the candidate, or assisting in compensation studies. This is another area in which the smarter solution is to hire a lawyer with expertise in executive contracts for higher education and other nonprofits.
It is important to note: We recognize that many of the people who serve on presidential-search committees are unfamiliar with the executive-hiring process and may feel that they just don’t know the ropes. So it’s tempting, when search firms promise to do almost everything, to let them. However, a search need not be difficult, and search firms can be of assistance when you give them the right guidance. You are the people who know your college or university, and you are the ones who will have to “live with” the person chosen as your next president and the decisions she or he will make. Wouldn’t you rather be a part of the search now, rather than complain about its outcome later?
It is doubtful that we will go back to a time when using an executive search firm for a presidential search was a rarity. However, colleges and universities don’t need to be at the mercy of these consultants. Follow our recommendations and search firms will either adapt or disappear, but your institution will be better served.
