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An Insider's View

An Insider's View | Human Resource Executive Online After putting together Wall Street's first in-house executive search operation at Merrill Lynch, Jean Allen offers a first-hand account of the journey from inception to its recent dissolution following the firm's takeover by Bank of America.

Tuesday, June 2, 2009
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I was an entrepreneur within a Fortune 100 company. My mission was to build an executive-search firm inside Merrill Lynch and operate it like an independent business. It was a great run, starting in the bull market of 2003 and ending in the credit crisis of 2009 -- when Bank of America acquired Merrill Lynch.

The Vision

The story begins when I was a partner at one of the major search firms, doing work for Merrill Lynch. The head of human resources at Merrill threw out the idea that the organization should create a capability to do its own searches instead of always using outside headhunters. The idea caught on quickly, especially when the management team started calculating hypothetical fee savings. I happened to be in the right place at the right time and was asked to come in and launch the new venture.

The Doubts

It was a big decision to leave behind an outside search practice that had taken years to develop. But the offer had that "once in a lifetime" feeling. My courage increased when two of my most-trusted colleagues agreed to join me. I will always remember the day we packed up our offices on Park Avenue. All our search buddies made a point to drop by and tell us we had lost our minds.

They predicted our downfall would come in three ways:

 

* We would lose credibility with senior leaders, who always turn to outside recruiters on high-impact assignments.

* We would lose market perspective, which is the essence of a good headhunter.

* We would not get candid information from candidates, who would not talk as openly with company employees.

And if that wasn't bad enough, we would not have the right search experience. Merrill Lynch was comprised of a series of highly specialized businesses, all of which had relationships with highly specialized recruiters. They needed those specialists to get the right talent. Why would they turn to us when our search expertise was in the corporate functional areas of communications, human resources, finance and law?

Lessons Learned

Their doubts did not materialize. The senior team (with a few exceptions) still trusted us with the big stuff, candidates kept talking and we made a point to stay just as close to the market. A good database, which may sound like a detail, is critical on the market front.

Ours ultimately held information on more than 10,000 people, many of whom we went back to for insight or recommendations on other assignments.

On the issue of specialization, we expanded beyond our core competencies but only to areas in which we felt we could still deliver strong results. We also added specialists to our team when the business requested it.

With Merrill hiring several thousand people each year, the goal was not to do all the work. The goal was to work where there was a demand for our services -- and to recruit key leaders who would make significant and lasting contributions to the organization.

Like all start-ups, we had our issues. There were things we couldn't do for political reasons and things we ended up having to do for political reasons, which sometimes took us away from our core strategy. It took time to get traction. And, because we did not charge back for our services, clients sometimes used us on fishing expeditions.

I am happy to talk directly to anyone who would like a deeper level of information on our experiences and/or our model. In every company, the approach will be somewhat different -- depending on hiring priorities, hiring volumes and a host of other considerations. Fortunately, the internal model is easy to tailor to specific circumstances.

For the big picture, however, I offer five fundamental points to those thinking of setting up an internal search function:

1. Start small.

Grow in step with demand, not ahead of it. Building excess capacity reduces the potential for cost savings and is bad for the energy level.

2. Get people with search-firm experience.

A cautionary note: Headhunters tend to be independent by nature, accustomed to working as individual contributors in unstructured environments. The adjustment to corporate life can be problematic.

3. Establish rules of the road.

There are a range of issues to decide upfront, including how you will handle user fees, capacity limits, outside research and database management.

4. Be commercial.

I am a big believer in generating monthly production reports that are reviewed by the search team and others who take an interest. Our report showed the difference, month to month, between the fixed costs of the group and the amount we saved in search fees. It was agony when fixed costs were higher than savings and exhilarating as the savings grew throughout the year. We also included a range of analytics, such as placements by business, by level, by diversity and so on.

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5. Build organizational support.

Use every available channel to communicate how the team contributes to business and organizational success. Mobilize clients and placements to spread the word.

 

 

  How it Ended

On Sept. 15, 2008, Bank of America announced it would acquire Merrill Lynch. Our team, by that point, had placed 100+ executives and saved more than $15 million in search fees. The market, of course, was collapsing around us and Wall Street was in free fall. Recruiting activity, especially at the senior level, was basically frozen. We knew what was coming.

And it came. The team was disbanded in March of this year. We understood the decision and had no regrets.

What We Will Keep

Doing executive search from inside an organization is an up-close and personal experience. There is no hiding. All good headhunters hold themselves to high standards -- but the motivation goes up a notch when you know you are going to see your client in the elevator.

Likewise, the concept of open communications takes on new meaning. We realized how much our internal clients valued all information. They didn't just want to know about specific candidates, they wanted to know how their businesses were perceived, what their competitors were doing and anything else we might learn from conversations in the talent market. We got into the habit of passing along everything we could gather.

The candidates you recruit into the organization are going to be in the elevator too. So the standard of accuracy on how you represent a job opportunity also increases. It doesn't work to tell someone you think the role or the culture is right for them if you really don't believe it.

On the same note, it is wonderful to watch someone you have placed who is clearly thriving. Their success, in some part, becomes your success.

In short, being in it together makes the search dynamic much more of a partnership than a transaction.

Before becoming an executive recruiter, Jean Allen held communications roles at The Walt Disney Co., Kimberly-Clark Corp. and the public relations firm Hill & Knowlton. She was a partner with search firm Heidrick & Struggles before joining Merrill Lynch. Jean is now a founder and partner at Exchange Place Partners. The firm specializes in key corporate functions -- finance, law, risk/compliance, human resources and communications -- across industries. It also has deep industry knowledge in financial services and professional services.

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