I write this specifically for you and I am one of you. That’s assuming that you are a business owner, Managing Director or HR professional engaged in an African market with turnover of anywhere from $500k to $500M.
I am not a recruitment industry professional and I don’t have any plans to become one. I have, at various times, generated more than $6m in sales in African Start ups, rapidly scaled exiting business and spent time as an MD and business owner in East Africa. In short I am not an inside man but rather one of you.
We all have our strengths and weaknesses as Leaders and Managers and we have all presided over some glorious successes and hopefully fewer mistakes along the way. Whether we all openly admit to the latter is a separate point, but here and now I will come clean on one of my biggest mistakes in the hope that it may help you avoid it.
Wherever your business is in its development cycle, from start up through to early stage, from profitable to mature and from mature even to overweight, you will likely face a common issue. We all have cash flow concerns in early stage businesses, there are common board and investor management issues across the phases and sales and BD are obviously key drivers in markets with high overheads.
However, I suspect the one issue that is most persistently pressing to those who operate in African markets is how to source key people? How to find those diamonds in the rough? How can we secure a pipeline of those multiplier individuals who generate more than 10 times cost, whether it is in Sales, Operations, Strategy or Leadership positions.
Well this was my mistake. I wasted more than $600,000 by not having the right people at the right time and, regardless of the scale of my sins, I suspect many more of you are falling into the same trap without truly understanding the real costs. To be honest, I suspect my costs might be small compared to others out there, but I thought I would break the real costs of hiring mistakes down;
- I suspect that at some stage we have all undergone a failed recruitment process but how often do we calculate the real costs? How often have you invested that much in a Search?
- Regardless of who left whom, when an Executive or Senior Manager leaves within 3 months, you will have spent a few months salary, housing and allowances, relocation fees and likely some costly airfares. Even for a $150k role that can add up to $50k each time and I can remember at least 3 hires that were clearly not right from the start.
- Total Cost = $50k x 3 failed hires = $150k
- In many cases the initial costs and high base salary requirements have dissuaded me from making an offer to someone who was clearly better suited to deliver what I needed.
- Combine this with the added pressures of Board approval, budgetary constraints and short term cash and P&L targets and there is an inherent bias towards getting the cheapest person and then sighing with relief as you shut down the recruitment process.
- Clearly this isn’t that healthy under any longer term cost benefit and either leads to failed recruitment (as above) or sometimes worse than that, it leads you down a path of propping up and paying for an executive who is not performing as needed.
- My mistake here was to give an individual longer than I should have to reach performance levels, all the while suffering an all too slowly diminishing burn rate over an extended period.
- This specific scenario might only apply to early stage businesses but the point is general. Performance at 80% has real underlying costs to your business above the 20% of employee cost wasted. Cost of sales lost, strategic position lost or missed opportunities are almost always greater.
- Total cost = 6 months extended burn x $30k average burn rate = $180k on ONE hire.
- Whether you are a 5-man band or a multinational subsidiary, Executive level recruitment almost always soaks up management time. Whether it soaks a third of your time over 3 months or a sixth of your time over 6 months, it still takes a month of your time to execute a Search and deliver an Executive hire at the right level.
- Where the urge to run the process internally is almost unavoidable given the high costs of external Search Firms, especially in early stage businesses focusing on cash flows, the real costs are often ignored, even in the short term cost benefit analysis.
- What is a month of your time worth? The raw cost, given likely expat salaries and allowances, is high enough in itself, but the absolute killer, and most commonly ignored, is the opportunity cost.
- Given that you are likely the exact type of person who we are looking for, that diamond in the rough, I would expect your opportunity cost to be 10 times the raw cost or more. For the purposes of this cost analysis I will hope that mine was.
- Total Cost = (1 Month x $26k Raw Cost of Me) + (10 Months x $26k Opportunity Cost) = $286k on ONE Hire
Picture – By MediaPhoto.Org (mediaphoto.org Own work) [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)
To be honest I could go on, given many other ways I have mistakenly prioritised the avoidance of short-term actual costs, at the cost of far greater overall detriment to the business and sizeable opportunity costs but I think the point is clear. Recruitment success delivers far more than the value of the Executive Contract and correspondingly, recruitment failures have a disproportionately greater long term costs.
How can these failures be avoided you say? Well firstly, I can offer no fool proof plans, but I can tell you at least where I think I went wrong. I never used Retained Search.
I felt that providing exclusivity and committing to fees upfront was unwarranted especially where my experience of contingent ‘head-hunters’ had largely been to receive a barrage of CVs where I was still left to complete the process and where they still wanted 20% of Y1 Executive Package.
With the benefit of hindsight, I had developed an ingrained perception that was re-enforced with each foray into Contingent Recruitment – every time I tried to use ‘head-hunters’ they confirmed that they were simply exorbitant purveyors of ageing CVs, so why would I commit to any one of them individually?
In failing to commit, I had inadvertently committed to failing, each and every time we recruited. My lack of commitment was mirrored by the vast array of Contingent Search Firms and this coloured my perception of the industry in a self-fulfilling spiral.
(As an aside, given the number of times I engaged Contingent Firms and never hired from them, and given the lack of density in Executive Search for African markets, one could argue that their lack of commitment and focus to me, was a reaction to their clients using them in this way.)
My eureka moment was finally meeting an Executive Search firm that specialises only in Africa. The fact that they existed, the fact that they weren’t simply purveyors of CVs and the fact that they genuinely knew their stuff on some remote markets I have been involved with fundamentally changed my viewpoint.
Frankly, I was taken aback to be able to have a detailed discussion on the specific recruitment challenges in South Sudan on an equal footing with a UK based Search Firm rather than having to first explain where the country was. Indeed they even knew the quirky airport luggage handling system.
Looking back on the last 10 years I started calculating how much I could have saved had I known about this Search Firm sooner, albeit in hindsight, and from there came this confessional.
Ultimately, no recruitment process or firm is perfect, but the key point that I have missed until now is that there is another layer of Executive Search, executed by people who actually undertake a specialist Search for individuals who meet the bespoke criteria specific to your business, your market and your operating environment in Africa.
Essentially, I had assumed that, because I once had a car break down on me, that my refusal to ever buy a car again was rational. Furthermore, that my frustration with the costs and hassles of only ever renting cars was a valid reason to avoid buying cars, because they were expensive and I refused to commit.
The key is obviously in differentiating those who perform a genuine proactive and targeted Search at this level and those who demand 20% fees for access to their fast ageing database of generic CVs. Looking back, if I had access to the former, as a business partner actively undertaking a bespoke Search Process for me, and, if I had taken into account the long and short terms costs, the actual and underlying effects and compared this to the fixed fees, should I have committed? Yes. Would I have committed? Yes.
There is a further critical point that I should add. As a business owner, MD or HR professional operating in Africa, do you do all of your own legal work? Do you undertake your accountancy functions yourself? Do you have employees guarding your gates or do you outsource all three of these functions to professionals who specialise in those areas?
I know I am starting to sound like I am preaching here, but this was key to changing my perception and I hope it will be valuable to you too. My concerns about exclusivity and commitment would not have applied to our lawyers, accountants or security providers, so why to Executive Search? Yes there are cowboy recruitment agents out there and there are, of course, risks of being fleeced by a firm claiming to be a specialist and specific ‘Search Firm’ who are in reality the same old CV merchants, but, as I hope I have shown, even if I had only found the right Search Partners on my sixth attempt, where I might have wasted 5 sets of fees, I would still have more than half of my $600k sitting on my balance sheet.
Fundamentally, the costs of getting recruitment wrong, even once on a $150k hire, is far greater than the cost of getting it right with a specific and specialist Executive Search Firm. My advice, now that I know these Africa focussed specialists exist, is to take the leap of faith and avoid my $600,000 trap.
About the Author
John Agnew is a British Expat who has spent more than 10 years building and scaling businesses across the UK, MENA and East Africa. He has launched new ventures in Cameroon, Tanzania, Kenya and most recently spent 5 years in South Sudan launching a Pharmaceuticals Distribution business and his own Fleet Sales and Leasing Operation. Following evacuation from South Sudan in 2016 he is now looking for new projects and roles in Africa. Please contact Sarah Fitzgerald, MD at Executives in Africa if you would be interested in speaking to John about an opportunity to expand your business.