Professional Search Fees - Search Firms - Philadelphia - PA - NJ - DE
Let me begin with a statement that might surprise you. Most recruiters wildly overcharge their clients. I am serious. The fees that most companies pay are ridiculous. This is true for both contingency as well as retained search. Of course, that statement will not make me very popular with my brethren in my industry but that’s not my problem and they are not my clients.
It’s important to understand why fees are so high before we can design a fee structure that makes sense for all parties. Contingency fees are high for two reasons. The first was already addressed in our introduction. Most large contingency recruiting companies have a lot of overhead. Over 60% of the fee covers overhead, owner’s salary, some expenses like rent and phones and a slew of managerial overrides which add up themselves to 15% of the fee. By the time the poor recruiter gets his cut of a $10,000 fee he may see $3,000. In other words, one of the reasons fees are high is that the fee pays a lot of people who had nothing to do with the project.
But, the primary reason for high fees is the unpredictability of success. It’s the contingency arrangement that creates a high fee. Some employers believe that contingency fees are in their best interest. After all, they risk nothing and can have an unlimited number of recruiters working on the job at once. However, there is a price to pay for this. Here are two scenarios for an $80,000 job.
Assignment A 25% contingency fee ($20,000 fee) Five other recruiting firms with the assignment and the company is running ads as well
Assignment B 15% fee ($12,000 fee) Sole source recruiting arrangement
A good recruiter knows that Assignment A gives him only a 1 in 5 chance of earning a $20,000 fee. Assignment B gives him a 90% chance of earning a $12,000 fee. Do the math. Good recruiters look for predictability in their assignments. They also would also prefer to handle assignments professionally. That last is an important point. Contingency fees with multiple recruiters drive away the best recruiters and give you the worst results possible. Here is why.
Multiple vendors racing to fill the same job create a scenario that eliminates any thought of providing you a thoughtful selection of candidates. It rewards whoever gets the resume of the person that you hire on your desk first. In other words, you are incenting the type of behavior that you abhor – blind, bulk submission of resumes. You are creating a track-meet of submittals where everyone is jostling to cross the finish line first.
That is a silly way to manage one of your most important functions - attraction and recruitment of professional talent. It’s the easy way out. You would buy no other service that way. A manager or HR person falsely believes that they can sit back and enjoy the spectacle of a bunch of aggressive recruiters competing to earn their money. In reality, they have created a free-for-all that confuses candidates and, in the end, costs more money as well.
A little work up front solves this problem. Do your homework and interview and choose your recruitment vendor with the same care that you choose other vendors. When you are comfortable with a recruiter, talk about a program that incents the right type of behavior and gives the recruiter predictability and gives you a lower cost. Hopefully, you will think this is a good idea and will consider us. As a benchmark, here is our fee structure.
Contingency 25% contingency, multiple sources. 20% contingency, sole source. 15% retained, 1/3 paid at beginning of project as reatiner, the rest upon completion. On the sole source assignments, you will receive an evaluation on each candidate and an objective numerical grading of the candidate for your specific job. We explain this is greater detail below.
Please consider the importance of the quality of your staff. Spend as much time in evaluating the vendor who will represent you to potential employees as you would to any other service. Interview and select a vendor as you would a candidate and you may get a cheaper and better relationship.
RIGHT RECRUITING Water Tower Building, 6198 Butler Pike, Suite 120, Blue Bell, PA 19422 Tel: 215-641-9300 Fax: 215-641-9308 jeffzinser@rightrecruiting.com