Mumbai Top corporate employees are increasingly withdrawing from job offers at the last minute, upsetting management plans and forcing headhunters to restart searches or consider backup options. According to executive search companies, common reasons cited include counter-offers by current employers, multiple job offers and options to work abroad.
CXO dropouts began to rise in the last two quarters of 2021, and as the hiring frenzy continues, search firms don’t see the trend going down. In fact, those recruiting candidates at the level just below CXO have also observed a similar pattern.
“The dropout rate is reaching unprecedented levels and does not bode well for Indian leaders. Most of the search firms are grappling with this issue, which also includes keeping the backups back,” said Navneet Singh, chairman and regional managing director, Korn Ferry, India.
Headhunters say they are now asking clients to finalize job offers quickly and shorten the notice period. “We are also pushing customers to negotiate and close early and shorten the engagement period instead of longer notice periods, as this is now an employee market,” Singh said. The notice period for C-suite executives can range between three and four months, while in some cases, such as in R&D units of pharma firms, it can be up to six months.
Sometimes, companies introduce the chosen candidate to their teams and discuss plans with them even before formally joining, only to be disappointed later. Nikhil Sikri, co-founder and CEO of Xolo, said the two candidates he had shortlisted for the role of chief technology officer have pulled out of joining the co-living platform.
“One was introduced to the team; We waited three months for him, and a few days before joining, he dropped out. Another dropped out within weeks of accepting the offer. It pushes the plans back.
When CXO candidates withdraw, search firms are affected as well. Typically, headhunters earn about a third of their fee when the search begins, the next third when candidates are shortlisted and offered, and the last third when a candidate joins. The fee can go up to 30% of the CXO’s cost-to-company, and therefore, the search firm stands to lose the final tranche, unless they come up with a more suitable candidate soon.
“Backdowns are not a common occurrence at the CXO level, but it has increased during great resignations. They affect the hiring timelines of clients, increasing the need to stay close to candidates and maintain backup plans, Pankaj Arora, Managing Director, Russell Reynolds Associates said.
“There is at least 25% increase in dropout for candidates who are on the salary of 70 lakh and above. This reflects the junior-level hiring backout, and in most cases, it is the employer who is managing the employee retention, said Shiv Agarwal, managing director, ABC Consultants.
In the last three-four quarters as hiring after two years of Covid-19, companies have seen a record drop in IT, startup, fintech and retail sectors. At junior levels, candidates are sometimes tempted by rivals with salary increments of 30-50% and, in some cases, more than 70% for a few years of work experience in Analytics, IT, Machine Learning and AI.