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6 Reasons Why You Should Use an Executive Search Firm for Your Next CEO Hire

6 Reasons Why You Should Use an Executive Search Firm for Your Next CEO Hire

June 2024


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Hiring a new Chief Executive Officer is one of the most important decisions a company will ever make.  

The right CEO can take an organization from strength to strength. However, an unsuitable choice could potentially set the company back considerably. 

At a time when the average CEO tenure continues to shrink, the stakes have never been higher. That’s why more companies than ever are turning to executive search firms to help them find their next leader.  

The Benefits of Using an Executive Recruitment Professional to Hire Your Next CEO

According to an Association of Executive Search and Leadership Consultants (AESC) survey, 82% of business leaders expect their use of executive search firms to either increase (30%) or remain steady (52%) by 2025. If anything, this indicates a growing reliance on these specialized services. The question then arises: why are companies increasingly turning to executive search firms? The answer is simple—the benefits make it worth it. 

But what are the specific benefits of using an executive search firm to recruit your next CEO? According to an informal poll, access to a wider talent pool (32%), objective, merit-based hiring (22%), thorough candidate vetting (20%), and time-saving efficiency (25%) are cited as some of the advantages. However, these are just a few of the many reasons companies choose executive search firms for their CEO hires. Let’s explore some of the other benefits in more detail. 

1. Access to the best talent

Top candidates, especially sitting CEOs, are often not actively looking for a new role. In fact, more than eight out of 10 vacancies, not just CEO vacancies, are filled through networking rather than traditional job searches. The percentage for CEO hires made through networking would be even higher than that. This means that if you want to attract a CEO whose company actually wants to keep them, which is always a good sign, you need to network with them or find someone, like an executive search firm, to network on your behalf. 

Executive search firms have relationships with these high-performing executives and know how to discreetly reach out to gauge their interest. Not only do they have the network to access these candidates, but they also have the skill to position your vacancy in the right light.  

The best CEOs are well-compensated, and their companies work hard to retain them by providing development opportunities and benefits. Getting your hands on a CEO like that is no walk in the park—but an experienced executive recruiter can help. 

2. Rigorous, merit-based, and proven search processes 

Most executive search firms follow a disciplined, merit-based, and time-tested process to assess the role, define the candidate profile, conduct original research to identify prospects, interview and evaluate candidates, conduct reference checks, and support the hiring and onboarding process.  

This process is more reliable than hiring without their assistance for several reasons: 

  • Search firms follow strict guidelines. They avoid conflicts of interest and maintain their objectivity.  
  • Search firms assess candidates based on their skills, experience, and leadership abilities, rather than allowing personal affiliations or “gut feelings” to dictate their decisions. 
  • Many search firms prioritize diversity and actively work to mitigate unconscious bias in the hiring process. 

When companies partner with a top executive search firm, they benefit from a hiring process grounded in sound corporate governance principles, proven to deliver results, and focused on identifying the most qualified candidates based on merit.  

The best way to support sound corporate governance, after all, is to prioritize it from the very beginning—starting with your CEO’s hiring process. 

3. Reduced risk

The cost of hiring the wrong CEO can be incredibly high. All the way back in 2007, the average severance package for a fired CEO was $5.38 million. This amount has obviously increased since then, and some CEOs expect much more.  

Take Robert Nardelli, for example, who spent a year as CEO of Home Depot and walked away with a $210 million severance package. This trend is not new—for decades, CEOs have expected large golden parachutes. In 1996, Michael Ovitz received a $140 million severance package from Disney after his brief tenure as CEO. Beyond the severance package, the cost of recruiting a replacement can also be sky-high, often three to four times the person’s salary. 

So, why am I rambling on about the costs of firing and replacing a CEO? The answer lies in the value that executive search firms provide through their assessment processes. When you team up with an executive search firm, you improve your chances of finding a CEO you want to retain, rather than one you want to let go. This, in turn, saves you both time and money in the long run. 

4. Board and stakeholder management

Executive search consultants are skilled at working with the board to get everyone on the same page about the role and the search process. They’re also great at providing objective input and they can help manage other stakeholders, like investors, who might have strong opinions on who should be the next CEO. 

Executive search firms achieve this by:   

  • Engaging with key stakeholders (investors, employees, customers)  
  • Aligning board members’ priorities and expectations  
  • Facilitating discussions and building consensus  
  • Providing regular updates and progress reports  
  • Communicating effectively and addressing concerns 

5. Improved compensation negotiations

CEO pay is a complex, high-stakes issue. Executive search firms have lots of data on CEO compensation and expertise in structuring deals. This allows them to develop a competitive offer while ensuring terms are appropriate and defensible to investors and other stakeholders. 

Research supports the fact that negotiating CEO compensation requires a detailed understanding of market trends and stakeholder expectations. For example, studies prove that CEO compensation packages are influenced by the need to balance fairness and performance incentives while aligning with shareholder value. Studies also show that fair CEO pay can predict positive stakeholder management outcomes—and thus, getting your next CEO hire’s compensation package right isn’t just good for the incoming CEO, but for your entire company. 

6. Onboarding and integration support 

A new CEO’s first 100 days are the most important period in their entire tenure because the first impression they give your employees, investors, and board will likely be an impression that stays with them throughout their role and sets the tone for future interactions. 

Many executive search firms, like Stanton Chase, provide onboarding support to help the CEO quickly build relationships, set priorities, and align the organization around their agenda.  

What is the Best Executive Search Firm for Hiring CEOs?

When it comes to hiring a new CEO, companies simply can’t afford to get it wrong. The financial and reputational costs are just too high. 

So, when you’re wondering, “Which executive search firm should I use to find my next CEO?” consider the following before you decide: 

  • Does the firm specialize in your industry or line of business? Do they have consultants who have actually worked in your industry at the top level or in your specific function? 
  • Can the firm reach out to international candidates if needed? 
  • Does the firm have a standard executive assessment process they use to test candidates? What does that process look like? 
  • Are they trusted advisors? Do they have a reputation for providing valuable guidance and support throughout the search process? 
  • Does the firm believe in a principled and inclusive executive search process? Are they committed to presenting a diverse slate of highly qualified candidates and thinking outside the box to find the best fit for your organization? 
  • How deep is their consultancy work? Do they take the time to thoroughly understand your company’s goals, values, and culture? Or do they offer a more superficial, one-size-fits-all approach? 

At the end of the day, finding the right executive search firm to help you hire your next CEO is all about partnership. You want a firm that really understands your company and what you’re all about. And they shouldn’t just be focused on checking boxes—they should be genuinely invested in finding a leader who’s not only qualified on paper but also aligns with your company’s vision, mission, and values. 

When you find a firm like that—one that’s got your back and is truly committed to your success—it can make all the difference in finding a CEO who will take your company to new heights. So don’t be afraid to ask the tough questions and really vet potential firms. The right partner is out there, and putting in the work to find them will pay off in the long run. 

About the Author

Bernardita Mena is Stanton Chase’s Global Vice Chair of People Excellence and Managing Director for Stanton Chase Santiago. With a background in psychology and business, including a degree from Pontificia Universidad Católica de Chile and an MBA from EADA, she believes in using leadership to drive organizational success. Before joining the executive search industry, Bernardita was a corporate leader heading initiatives like engagement, talent development, and change management for a multinational company. Now elected to Stanton Chase’s Board of Directors, she is passionate about identifying top talent that aligns with company culture and strategy.  

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