Why Even Well-Paid And Loyal Executives Will Say 'Yes' When The Headhunter Calls

When a search firm calls and asks an executive, even a loyal and well-paid one, if they're willing to look at a new job, the majority are probably going to say yes, according to a new NBER study.

The executives most likely to say yes to a search are the ones who aren't sure about the prospects where they're working, the ones who have broad experience in different business areas, and most of all, the ones who have the broadest experience in their current company.

The vast majority of targets are senior and executive vice presidents from large, well-performing companies.

In order to take a look at the problem, authors Peter Cappelli and Monika Hamori use an extensive dataset on approaches from a prominent executive search firm, and use a variant of the "multi-arm bandit" problem to analyze it.

Classically, that refers to a gambler facing a row of slot machines, not knowing the potential payoff from each, and trying to figure out which levers to pull.

An executive, when he gets a call from a search firm, will usually hear almost nothing about the potential job, just that they might be a good fit. The choice is complicated because there's uncertainty about how big the opportunities are at their current job, and even bigger uncertainty about the payoff from the unknown new job.

Still, almost all executive hiring among large employers goes through retained search firms, and such an approach likely means that the job is a good fit and pays pretty well.

Recruiters also aren't approaching people who are publicly looking to move. Desperation or marketing actually turns consultants off, the authors found. They want people they might have to convince to move.

The risks are pretty big. If it becomes known that an executive is searching, and if they move and it doesn't work out, they've just thrown away years or decades of work.

But for the majority of managers, the prospect of the jackpot and the lure of the unknown is worth it.

So in order to keep top execs, make the rewards of loyalty and longevity very clear, and make sure people know that they'll have opportunities to move up.

When somebody is being moved between lots of different functions and is widely experienced, they're also the most likely to depart because they have by far the widest range of options, so searching is the most useful.