Never Trust a Headhunter

Recruitment of a Star

In the case study presented by Groysberg et al. (2007), Stephen Conner has a number of difficulties to face in his hiring decision. The unexpected departure of his star semiconductor analyst -- at a particularly crucial juncture for Conner's firm, handling a semiconductor-related deal -- means that Conner needs to make a replacement decision fast. But how does a firm replace a star? Each of Conner's potential replacements -- the two men and one woman who are brought to him by headhunters, another who has put himself forward aggressively as the correct candidate, and finally the existing assistant who could be promoted if necessary -- has advantages and drawbacks. However, in considering what decision Conner should make, it is important to examine what problems he faces, what criteria his decision should be based on, how the interview process should work, how the selection process should work, and finally the issues raised by making an internal promotion rather than an outside hire. After consideration of all of these factors, it will be possible to offer an opinion, in conclusion, of who Stephen Conner should hire.

We should begin with the problems faced by Conner, however. The first problem is the looming semiconductor deal for the firm, which means time is of the essence. This factor is, one would hope, somewhat rare in the real world -- but it means that Conner is in a difficult position and has to hire someone immediately. If time were not a factor, it would certainly affect the selection process -- a slower hiring process, for example, might favor the internal promotion. However, the internal promotion is discounted by Conner and everyone else for other, more crucial reasons: for a start, these positions are ranked by II Magazine, which is clearly the only reason why there is such a thing as a "star" semiconductor analyst. The firm's reputation and standing, therefore, depend upon its ability to maintain a competitive presence in a given field, according to these slightly artificial rankings produced by the trade magazine. It is worth noting, however, that all of Conner's problems and considerations in making this hiring decision are fairly standard and familiar for those with a knowledge of human resources, except for this specific question of how a firm would replace a "star" employee in quite this way. We can imagine Conner's firm would cease to do business with PowerChip if they did not find a replacement for Peter whose reputation was adequately lofty -- so in some sense, the chief problem Conner faces is how to constitute a replacement for a star.

In this light, then, we can analyze each of these different candidates in terms of what about them seems to suggest star quality. The first, David, is the most obvious in terms of what we might imagine constitutes a star in this field: in the sample "Analyst Rankings in the Semiconductor Industry" table, he is ranked (in second place) in the II Magazine above the departing Peter (who is ranked in third) -- and more to the point, the rankings for the two individuals had held true for the previous year as well (Groysberg et al. 2007, 22). Conner must weigh David's seniority and star power against his potential short future lifespan -- he is an elder statesman in the industry, and this brings with it the sort of problems we might associate with any senior staff hiring. The other candidate put forward by the headhunter, Gerald Baum, seems to be a foil to David -- he has youth and aggressive drive, the sorts of things that Conner's firm would probably prefer in a bond trader rather than an industry analyst, but these are there to indicate that to some degree the star analyst position is a sales position. Aggression counts, and more to the point this is why Conner has rejected tout-court any attempt to recruit from the buy-side of Wall Street. The boutique firm candidate, Mrs. Meetha, is prized for her superior knowledge of the industry -- as with boutique firm choices in general, it requires a certain amount of insider knowledge to be impressed with the level of her knowledge. The self-nominated candidate, Seth, is a runner-up in the II magazine rankings: so in distinction to David (who outranked the departing Peter two years in a row) we have someone who is quite nearly ranked, but not quite (Seth sits at 5th place after David in 2nd and Peter in 3rd). Then finally the potential internal hire, Rina, presents the usual dilemmas associated with such a decision: the message sent to the company that loyalty and hard work are rewarded internally must be weighed against the fact that the II Magazine rankings have never heard of this humble assistant and the socialization process that has already occurred means that Rina may indeed never be able to rise to the level required of her, even if she is given the job now.

The chief weakness in the interview and selection process here is the necessity of using the intermediary headhunting firm. Conner has no choice but to do this, however it demonstrates a lot of the flaws within such a system as well. To an outside observer it seems like Gerald Baum is gaming the hiring system -- he is ranked at eleventh, but seems to spend more of his career bouncing from position to position rather than concentrating on a way to improve his own work. In other words, Gerald seems to have the same position with the headhunter Conner uses that Seth has with a different headhunter: he is actively job-seeking and doing so through a recruitment firm as an intermediary. The difficulty here means that Seth is not even presented as a candidate by the headhunter that Conner employs -- instead, he is brought to Conner by a rival headhunter. In other words, the headhunting firm pretends to be providing Conner with a service, but they are also in their own way engaged in sales. Gerald Baum is a product that they are selling, and which they have deliberately overvalued (from Conner's perspective). But the headhunting firm that Conner has hired has, in some sense, skewed his results: because Seth is signed with a rival headhunting firm, presumably, he does not make the shortlist presented to Conner by the headhunter despite outranking in the II Magazine ratings two of the three candidates on that shortlist.