Companies Use Search Firms
you've considered engaging the services of a Recruiting Firm but have
about the mechanics of how they actually work, the following
will provide insight into the basics of recruiting options and will
some of the most commonly asked questions and suggests general
to ask when considering specific recruiting options or firms.
is essential to the health and welfare of all companies.
recruiters observe strict confidentiality.
can tap into a network of contacts.
bring objective feedback to management.
are cost effective.
How to Select an Executive Recruiting Firm
How long have you been a recruiter? What is your training? What was
prior work experience?
Experience against "Non Solicitation" Roadblocks
critical issue must be assessed carefully on a case-by-case basis. If
view your direct competitors as highly likely sources to fill the
do not work with a recruiter who cannot touch those executives.
A reasonable non solicitation policy in the recruiting industry is that a search firm will not initiate solicitation of a candidate it has placed in a company for which it has actively recruited for in the previous 12 months. This guideline should be flexible and be aware that there are considerable variations from this norm. Some recruiters specify other terms which may mean they have fewer companies that are blocked from you, but it will also mean your own future protection against solicitation is that much shorter. Some search firms observe no non solicitation restrictions, and some clients do not require them. Superior recruiting firms place high value on the client relationship and will observe unspoken "moral" parameters naturally, but readily offer protective clauses in their service agreements that address this sensitive issue.
Non solicitation sometimes has a second dimension. If a recruiter is working on an assignment, he or she will typically take possession of the search firm's files on suitable candidates for the position. If a second recruiter at the same firm is retained by your company for a similar position, your recruiter may not have access to these files until the first recruiter returns them to the firm's database. This policy is designed to avoid outright competition for executives within a search firm. For large firms that work on many assignments at once, and for highly specialized firms, this can mean that many of the best candidates are not available to you. Choose a firm whose recruiters work as a team for affirmative outcome for each and every client. Ask about the number of searches that will be going on simultaneously in your area. Your recruiter will always try to gather the best slate of candidates for you, but if the files of the five best VP's of Business Development in telecommunications are sitting on a fellow recruiter's desk down the hall, you are never going to see them.
Pay attention to what is not said. Are there companies that should be important hunting grounds for your assignment at whose mention the recruiter appears uncomfortable or changes the subject? Many recruiters hope that clients do not ask directly about companies that are off limits to them -- a kind of "don't ask, don't tell" policy. Your best strategy is to ask about every company you would like the recruiter to consider.
Will Do the Work
Recruiting firms also differ in the extent to which they use back room research staffs. Some firms, particularly the largest ones, employ almost as many researchers as recruiting consultants. Researchers do much of the front end work on an assignment, scouring through databases to uncover candidates, and often making the initial contact to gauge a candidate's interest. This can be an effective way to speed up an assignment, allowing your recruiter to focus on evaluating candidates. The danger is that the busy recruiter ends up relying too much on the short list of candidates presented by a researcher. The best searches usually involve a good blend of digging for resumes and inspired networking (by recruiters). Make sure the firm you work with is not overly dependent on just one approach
Firm's track record
One Fortune 500 company's head of HR reported a different perspective to Executive Recruiter News. They pick search firms based on these seven factors:
The search firm must have completed searches at comparable salary
in the last three years for one of their divisions or a "highly
reference in other Fortune 500 companies.
final client perspective is offered by John P. Finnerty of National
Bank: "The real test of any search firm is not only how well they know
their own business but how well they know ours." In addition to this
step process, we have found a few issues that crop up repeatedly. The
section discusses these frequently asked questions.
Is it important for the search firm to have a local office?
In most cases, no, if it is an executive level search. It is far more important that you find a recruiter who will bring you the best candidates than one who happens to be based nearby. This is particularly true when the assignment in question will involve looking for executives nationwide (or worldwide). Many effective searches are completed by recruiters operating out of different cities than their clients. Frequent telephone contact and occasional meetings can work well. If, however, the search is being conducted for lower to mid level personnel for a particular geographic area, a recruiting firm in the target area is best suited to know street level recruiting in its market. To ensure client service the recruiting firm doing local recruiting should insist on meeting candidates in person. Client companies are best advised to avoid recruiters that act only as transfer points for resumes.
The largest recruiting firms do maintain offices in major cities or collaborate with partnering firms from cities nationwide. This can be an advantage if they can bring local knowledge to bear in finding good candidates. These candidates can then be interviewed in person by the local office before going to the expense of flying them to see the lead recruiter and client.
If an assignment demands a local candidate be hired, then it does make the most sense to use a hometown recruiter. Local presence can also be thought of as a tie-breaker between otherwise comparable search firms.
How important are professional affiliations?
Executive search firms may be members of various professional organizations. If they specialize in particular industries or functions, firms will often participate in the relevant association. Although simple membership may be no guarantee of expertise -- since entry requirements and standards vary -- it can be a useful clue when choosing among recruiters. For a client, however, membership is perhaps less important than whether a firm adheres to the professional standards set down in the association's Code of Ethics. This code is intended to assure clients of a confidential relationship with their recruiter, as with a banker, lawyer or accountant.
Some individual recruiters are members of the International Association of Corporate and Professional Recruitment (IACPR). This association maintains entry requirements, and members must pledge to honor the group's ethical code.
How Does a Firm Perform a Search?
Once an executive search firm has been selected, the multi-step process of professional executive recruiting begins. Each step is managed by the search firm in partnership with the client team; successful results require diligence during each phase of the process. The key stages of executive search are:
evaluation of the employment need
search begins with the evaluation of the client need. The search firm
closely with the client to arrive at a thorough understanding of the
its culture and organization, and the specifications of the position to
be filled. Job specifications include title, department definition,
structure, and details of compensation.
When the job description is finalized, the research phase of the search commences. The search firm engages in industry research and networking; existing sources are contacted, leads are vigorously pursued. If the client wishes, an internal search of the client company can be performed to identify company employees suitable for possible promotion.
Based on research well underway, the search firm contacts prospective candidates by telephone and begins screening interested and promising candidates. Personal interviews ensue in parallel with thorough reference checking activities.
The most effective recruiters regularly report their progress and, at some agreed upon point, present candidate selections to the client. Recruiters sometimes recommend the best candidate(s), though the client and recruiter often arrive at an initial selection of the most promising candidates. Client interviews are arranged with the best two or three prospects. The search firm prepares the client to meet the candidates and may or may not attend the interviews.
When candidate and client have agreed to acceptable terms and after the successful candidate has agreed to accept the position the dynamic aspect of the search effort is complete. Most contingency firms search firms "guarantee" their lower to mid level candidates for 30 days and executive candidates for 60-90 days. Retainer firms may guarantee executive candidates up to 180 days or more. Most often, the firm will replace such an executive should he or she leave the client company regardless of reason. Often these replacement searches are conducted at no charge or for a reduced fee. Though a sensitive topic, clients need to have a clear understanding of the search firm's replacement policy, and all fees associated with such searches. The search firm should maintain communication after the new hire comes on board to help smooth the transition and assure client satisfaction.
Does Executive Search Work?
Executive recruiters are problem solvers. Client companies constantly face dilemmas whereby the solution calls for candidates with specific skill sets. Search professionals are brought in specifically to fill that void. Even though search professionals account for less than 15% of all new job hires in any given year, they're identifying those whose actions will have vast repercussions on an organization.
Making the right hire pays huge dividends for the hiring company. The right choice dramatically increase a company's value; and that value rises exponentially further up the management chain. So from the clients' perspective, engaging or retaining an expert to identify these candidates makes perfect sense. The fees associated with any particular search become almost incidental considering the ultimate payback.
About 75% of all searches are successfully completed. For those that aren't, the reasons are usually straightforward:
the hiring company causes the process to be too lengthy thereby giving
the impression of indecisiveness, insincerity or indifference to
dignity resulting in the loss of ideal candidates.
Most search professionals try to achieve 100% client satisfaction. It's fairly clear to gauge this in the contingency world since recruiters' fees are directly tied to hiring the candidate they've identified. Retained recruiters, meanwhile, face a different situation. Although they get paid regardless of the search's outcome, retained search pros tend to go to even greater lengths to maintain good client relationships.
A point that should be covered is the non solicitation policy, under which the recruiter agrees to refrain from recruiting from the client for a specified period or under specified guidelines. Some clients want this spelled out very carefully, others don't give it much or any significance. Our point is that the issue should be addressed to avoid pitfalls.
the recruiter's responsibility to help the client define the terms of
search engagement. A good recruiter usually works around the
obstacles that can lead to failure. The best recruiters take the
approach with the client. Such objectivity means search pros may turn
business rather than start a hopeless engagement -- which in the end is
a much better prospect for the client.
Contingency, Retainer or "Con-tainer"
When selecting an executive recruiter for an assignment, you can choose to work with a firm that operates on a contingency fee basis, a retainer fee basis or on a basis known as "con-tainer" which is a hybrid that combines the better features of both. The immediate differences between the three working arrangements is simply that contingency firms get paid only, if, and when they fill a position, retainers require that the recruiting firm be paid regardless of the outcome of the particular search, and containers pay the firm a percentage of the fee to commence the search with the balance being paid contingent upon the successful outcome of the search. This distinction is not always clear cut: some retainer firms occasionally take contingency assignments, and contingency firms sometimes obtain retainers from clients. However, most recruiting firms generally fall into one camp or the other.
It may seem fundamentally more attractive to pay only for success (contingency), rather than for the process (retainer) but culturally, and in terms of working methods, the two types are quite different.
Contingency Agreements Contingency firms tend to operate like brokerages, working quickly and possibly uncovering lots of resumes. To the client company this arrangement seems to be useful because, unless the contingency firm introduces a viable candidate for the position there are no costs. However, because the uncertain nature of contingency arrangements do not guarantee the recruiting professional compensation for real time and effort expended, the tendency sometimes exists for contingency recruiters (most often one man offices) to submit resumes for candidates that have not been screened, pre-qualified or even interviewed prior to their resume being submitted for consideration. Companies should steer clear of “recruiters” that tend only to be “drive-by-shooters” with resumes. This practice is engaged by less credible firms in order to “beat the clock”, that is, to be the first to get resumes of candidates transmitted to the client company's desk. The intention is to be the first to submit a candidate’s resume, qualified or not, screened or not, just to eliminate competition from trustworthy firms that have qualified candidates prior to their submission. This "shoot first, talk later" practice clouds the waters for legitimate recruiting for viable candidates and hiring companies, is highly unethical, and opens the door to troublesome situations.
that need assistance with recruiting and opt for contingency
are counseled to engage only one or two firms that understand their
Otherwise, since with contingency arrangements there is little
from the hiring company, there, too, may be little incentive for the
to perform with commitment, unless the hiring company engages only one
or two recruiters exclusively. The "you get what they pay for"
may apply here. Hiring companies that do not make the commitment
necessary for reliable recruitment and contact a multitude of
recruiters – thinking that it will culminate in more candidates -
experience a watered down approach and, therefore, a less effective
Since only one firm can ultimately place the candidate the balance of
contacts along the way wind up having been very time consuming,
and costly for the hiring party. The contingency arrangement's
rate can be positively influenced if the number of contingency firms is
limited giving the firms involved more of a sense of partnership,
and possibility of positive conclusion. Bilateral
yields best results in any relationship.
Agreements Retained recruiters
employer clients only and conduct assignments on a dedicated basis,
guaranteeing dedicated focus on the assignment but assess fees
of outcome (much like law firms and attorneys). The retained
between recruiting firm and employer increases the probability of
candidates agreeing to explore the opportunity which increases the
of an affirmative outcome. A typical assignment takes
30 to 120 days. Retained recruiters are most often used to fill higher
level positions with salaries of $125,000 and above, or positions where
talent is scarce and demand is high, such as various IT, executive, and
sales and marketing positions.
Agreements A "Con-tainer" is a
of Contingency and Retainer arrangements and combines the most positive
components of both for the highest degree of benefit for the employer.
The Con-tainer agreement may offered by either contingency or retained
firms and provides all of the quantifiable benefits of a retained
It's structure offers dedicated search, systematic recruiting and
of affirmative outcome to an assignment (identical to retained search).
An engagement fee is due to commence the search but the Con-tainer
does not grant the remainder of the fee until the search culminates in
success, whereas a retained arrangement commits fee payment regardless
Beyond these differences, Contingency, Retainer and Con-tainer firms also tend to specialize in different industry and functional areas, depending on salary levels.
When to Consider Contingency Firms
When the job is lower level and typically paying an annual salary of
When to Focus on Retainer Firms
the position is mid level or management, typically paying a salary of
When to Consider a Con-tainer Agreement
For positions of any level and when working with a recruiting firms
which a successful recruitment track record has been established.
Fees and How Recruiting Firms Charge for Search Assignments
Recruiting firms charge for services in two distinct ways:
Contingency firms searches are paid a percentage of the guaranteed annual compensation of the position and only when the client's position is filled by a candidate identified by the contingency recruiter.
Retainer or Con-tainer firms, in contrast, are paid for a search which typically has more exacting standards. They are retained to work on a specific assignment or they may be put on a retainer to work on assignments on a continuing basis. Companies often engage this option with recruiting firms that have an intimate understanding of the company's industry or a track record of success placing within their company. They are particularly useful when companies are bombarded by multiple sales recruiter sales solicitations. It is vastly more convenient to refer those solicitors to a retained, or con-tained recruiting firm partner for candidate screening and possible engagement. Doing so places a limit on unproductive communication with multiple firms while still enabling multiple sources to be funneled to one focal point ; the retained or con-tained firm. In any case the retained firm submits invoices for services regardless of the overall rate of successfully closing searches and the con-tained firm submits an invoice for a fixed percentage to commence the search, with the balance being paid only upon successful completion of the assignment.
most common approach to fees is to charge a percentage of the new
first year compensation. For many years the benchmark has been 20-30%
searches performed within the United States. Fees of 35% or more are
charged when the search has to be international. Sometimes recruiting
will offer discounts from these percentages in return for a guaranteed
volume of assignments. Firms may offer retroactive discounts when
billings hit certain pre-defined targets.
Occasionally recruiters will work on some other basis, such as hourly rates for time spent, or even (with some venture capital backed start-ups) for equity instead of cash. But the percentage model remains the standard approach in the profession.
Timing of Payments
or Con-tainer firms have varying policies concerning when they submit
One common method is to bill one third at the outset, one third a month
later and the final third a month after that. Or, the first invoice may
be sent after the first month's work. Or the firm may use fifths, with
a fee due every month until the full amount is paid or the search is
Almost all firms bill for the expenses they incur while working on an assignment. Typically including telephone and fax charges, travel, and meals while interviewing candidates, expenses can range from 5% up to 20% of fees, and even more for some complex international searches. Clients should pay close attention to expenses. In general, clear policies should be agreed upon up front. From time to time, we hear instances of recruiters using expenses as a profit center by marking them up, or double billing one meal or trip to two clients. Such abuses are thankfully rare, since most firms realize that their biggest asset is their professional reputation. A few firms bill their clients separately for work performed by their research departments: this can vary greatly from assignment to assignment. We recommend that clients monitor expenses carefully, but also bear in mind that being too aggressive could inhibit recruiters from making sufficiently thorough efforts on the assignment.
What If an Assignment Is Canceled?
It depends on when the assignment is canceled and the reason for cancellation. It is not unusual for clients to find an internal executive for a position after engaging a recruiter. In this case, the client should normally pay retainer or con-tainer fees on a prorated basis. (A contingency firm would not be paid anything.)
Sometimes clients change the job description substantially during an assignment so that the recruiter has, in effect, to begin a new search. It is common practice in these circumstances for client and recruiter to negotiate a partial payment on the previous work and begin a new fee agreement.
When the search fails to produce a candidate that the client is prepared to hire, or when the executives offered the position turn it down, contingency firms walk away without compensation. In theory, retainer firms will be paid in full, since their agreement is independent of the outcome of the assignment and con-tainer firms would be paid the agreed upon percentage to commence the search. In practice, there should be some discussion of why the search failed. If a recruiting effort fails It is not uncommon for the search firm to receive partial payment only, or to give the client a credit against future work.
Not every newly hired recruit succeeds in his or her new position. When the recruit is terminated or resigns for performance related reasons within a specified period of being hired, most search firms will agree to submit additional candidates for a specified period to find a replacement for zero or modest fees.
Clearly there are a number of ambiguous and potentially awkward situations that can and do occur regarding fee arrangements. While these problems cannot be predicted in advance, they can be mitigated if the client selects recruiters on the basis of building a close working partnership, not simply to carry out a hiring transaction.
Before the Search Begins
Successful executive search is a team effort: client and search firm complement each other's knowledge and strengths. It is advantageous for a client to do some "homework" both independently and together with the search firm before the search process formally begins.
1.) Define who is responsible in your company. Assemble a client team to work in partnership with the search firm. Designate a "team leader."
2.) Clarify the responsibilities of the search consultant, including what the role of the research department will be. Who is the "head search consultant" on your project? Will researchers interview candidates?
3.) Develop clear job specifications and qualifications with your client team and with the search firm team. Agree on a job description and compensation range.
4.) Agree on a general schedule and timetable for progress reports. Discuss and document an expected time line.
5.) Ascertain off limits and blockages; specify the search firm's obligations and limitations.
6.) Outline an expectation of involvement in negotiations including presence at interviews. If the search is transnational, what exactly is the role of the search firm's other offices?
Review the details of the search firm's method of charging for services
There are many books and training guides on interviewing and evaluating executives for managerial positions. In this section we present some introductory advice, suggest a general structure for interviews, and reveal general interview questions.
Advice on Interviewing
interviewers use the candidate's resume to structure the interview.
can have the disadvantage of giving effective control to the applicant.
The GMW Group suggests building an interview around three modules:
2.) self appraisal ("What is it about you that..."), and
3.) situations ("How would you handle..."). GMW points out that many interviewers talk too much and telegraph answers to questions they pose. Here is another way to organize questions to help you evaluate the skills of a candidate:
"How have you reacted when a client or customer has been angry with you
or a member of your team?"
While it is important to use the interview to form an assessment of the skills, thought processes and attitudes of each candidate, there are also minefields to be avoided. For instance, asking what citizenship a candidate holds is discriminatory on the basis of national origin. Similarly, asking how often the candidate has been absent from work due to illness discriminates on the basis of health or disability. Avoiding this kind of pitfall makes thorough preparation for every interview vital. You should have a game plan mapped out before sitting down with the candidate, no matter how seasoned an interviewer you are.
Suggested Structure for First Interviews
Sell the opportunity
Answer questions and close
How To Be A Good Client
The successful partnering between client and search firm is a two sided arrangement that requires substantial measures of trust, chemistry and professional respect. The client's approach to this association influences the speed and outcome of the search process. The single most important factor is for the client to understand the process and their part in it. Clients should follow a clear path towards this end.
1.) Select the right firm for your needs; get a good fit. Communication between search firm and client must be open and cooperative, the relationship should feel friendly and comfortable. Reflect on the atmosphere during initial meetings with search firms.
2.) Do your homework before meeting with the search firm. Define long and short term expectations for the job. Think through key organizational issues: reporting and working relationships, number of people new hire will manage, who he or she will work with most closely.
3.) Assemble your client team. The client team is a cross functional task force that should represent all major constituencies. A search committee of five to seven people is ideal; one senior member should be the designated leader. The client team must agree on the objectives of the position and be willing and able to commit time and energy to make the search effort a high priority. Make sure the client team members are compatible in their thinking. Get feedback from the search firm to identify differences of opinion among the selection committee.
4. Develop the search plan with the search firm. Client team and search firm must understand the key issues of the job. Provide all the necessary information. Be explicit about the chemistry and corporate culture of the company. Use the expertise of the search firm to get input on the market, organization, and compensation. Ruminate on possible issues that could be stumbling blocks such as style differences, reporting relationships, unrealistic expectations. Do not hide information, be thorough and honest. Disclose both good and bad, positive and negative aspects of the job and have no surprises waiting. Key elements to define for the job description are:
5. Establish high standards in evaluating candidates, but be sensitive to feedback. Understand the trade-off between the candidate qualities you require and those you desire. Don't be impatient with the process. Keep things moving from the client side: give timely feedback, schedule regular reviews with the search team, conduct candidate interviews promptly, maintain security and confidentiality.
Handle candidates skillfully. Don't "window shop," but don't compromise either; keep an open mind. Don't confuse a candidate's former position and company with his or her qualifications. After the search is complete, give the search firm feedback on progress of the new recruit IMMEDIATELY.
Remember, the alliance between client and executive recruiter requires teamwork. Clients need to provide access to top management and make decisions without delay. A spirit of partnership will go a long way toward enabling the search firm and client to reach their mutual goal.
Legal Issues in Search
"Avoid litigation at all costs" is the key watch phrase in discussing the legal issues involving search. Search is an intensely personal and trusting business; it's often difficult to define specific legalities surrounding client/candidate/recruiter relationships without offending one or all involved.
There are a few key areas to cover:
-Clients should clearly understand who is working on the recruiter's behalf are they employees or independent contractors? Recruiters have more control over the former, yet are equally liable for the actions of both.
-Recruiting firms act as agents of the client and, therefore, are subject to most federal, state and even local mandates (i.e. the Civil Rights Act, Equal Employment Opportunities Act).
-Don't say or assume what should be written. Search firms may forge ahead with a search based on the client's verbal OKs. Clients may assume certain candidates are not off limits to the recruiter's candidate specs alluded to in the name of "diversity", which may in fact be discriminatory. Don't rely on "he said, she said" when starting the search.
-Clearly specify with the recruiters all terms in the search engagement contract, including: overall search strategy; members of the search team; off limits situations; target companies; replacement policies; timelines. Sometimes it's more efficient to separate out these items as appendices to the basic agreement.
- Most lawsuits between clients and recruiters involve breaches of contracts that may have, in fact, never been clearly defined in the first place. Although some points may be obvious, it's always better to spell them out in writing.
Should clients feel compelled to take action, arbitration is clearly more desirable than litigation for all concerned. It's not only less expensive, but can also salvage the long-term relationship. Finally, both sides should consult their respective legal counsels with specific questions. There may be no clear answers to some of these situations. But raising the issue before it becomes troublesome goes a long way in staving off potential problems.
Common Pitfalls during the Executive Recruiting Process
This section lists ten commonly heard complaints about the process of executive search from clients. Search firms cannot guarantee a successful placement, but they do expect to be successful at least 75% of the time. You can reach (or beat) that average if you choose your recruiter carefully and invest time and effort in the search process. The following problems are all avoidable with a little advance planning:
No internal consensus before beginning the search.
No manager with final responsibility for the search process.
Settling for a "satisfactory" candidate.
Excessive focus on candidates' flaws - All candidates have flaws.
Evaluating candidates based on industry prejudice.
Second-guessing the candidate.
Recruiter did not understand the position/the client.
Recruiter presented too many unsuitable candidates/too few good
Recruiter was too slow or is overloaded with other assignments.
Recruiter overcharged us.
Using Smaller Firms
Is it safe to work with smaller recruiting firms? Do they provide the same level of service as the multi-office, multi-national giants? Are there any advantages to working with a solo recruiter?
The recruiting profession remains extremely fragmented. A handful of big retainer firms are well known but have only about one quarter of the market: a similar condition prevails in the contingency field. These big firms don't dominate the market the way that the Big Six firms do in accounting, for example. Even some of the firms on the Executive Recruiter News 40 Largest list have fewer than 10 search consultants. Small is the norm.
Advantages of Small Firms
Small firms proliferate in executive recruiting because they can be very effective operations. Many search professionals acknowledge that the quality of an individual recruiter is more important to the client than the brand name of any firm. Evidence for this comes from the fact that when recruiters leave a firm, they often take most of their clients with them. Given this, firm size is of far less significance to clients than finding an individual recruiter with energy, perseverance, industry wisdom and sensitivity.
Many small firms are run by recruiters and Human Resource professionals who formerly worked at large companies or search firms. Having benefited from the training offered by a large firm many of these recruiters have concluded that they can be more successful working for themselves. So it's quite common to find small search firms with highly entrepreneurial professionals. There may be fewer systems and back office support, but on the plus side, you may get more committed assistance. After all, your business represents a much larger slice of the firm's total billings.
One advantage that small firms may claim is that they have fewer client roadblocks than their large competitors. This can be critical for certain searches where the field of likely candidates is limited to your major competitors. While small firms on average have fewer clients, they may be industry specialists, in which case their blockage problems may be just as great as those of large firms. As ever, it pays to ask.
Large firms like to point out that their well known names give them an advantage in catching the attention of busy executives. While this may be true on the margin, it shouldn't be a prime reason to choose one firm over another. Small firms often have strong name recognition in the targeted areas they serve.
We recommend that clients consider both small and large firms. Both types of firm have advantages: national and international coverage, brand name, research departments, specialists and blockage issues. The smart client should pay close attention to the individual recruiters. You will find talented, highly qualified people at recruiting firms of all sizes.
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