Fees 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% fee for assignments with multiple recruiting sources. 15% fee for sole source, some assignments will require a small retainer depending on circumstances. 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.
Our Methods A project has two components, candidate identification and then candidate selection. Below is our process for a sole source assignment. The process for a multiple source assignment can’t be as refined, as I explained earlier. For most searches, along with the resume, we provide a candidate ranking. We’ve partnered with a national testing company to create a ranking system that allows us to send a numerical ranking to you, along with an explanation, with the resume. This should help you prioritize candidates and understand them better. For details on this system, please email me jeffzinser@rightrecruiting.com . Since this web site is open to candidates and employers, too many open details on the ranking system is an invitation to “game the system”. Some of the system is proprietary.
To identify candidates, your specs are a starting point. We can help with that. We know the market. I remember a client who once wrote such very restrictive job specifications that the only people who could fit already worked at the company, literally. It was analogous to a spec from the only company in the world that made super-gizmo widgets requiring experience in a company that makes super-gizmo widgets. We want you to have realistic specs that will allow you to hire a high-quality person who can do your job.
Once we understand the specs and culture, we begin contacting potential candidates. Our database is huge. It’s unique in our industry for two reasons. One, we keep files on every person and every company that crosses our desk. The breadth of information is enormous. Over the years, we’ve literally accumulated the names of entire departments in some companies and know almost every potential employer in the region. I also pay a retainer to a “sourcing” company whose sole job is to gather names and fill out organizational charts of local employers. In other words, we keep files on everybody. A lot of people will hear about your job. This is good because a larger selection helps you. But, I think the second unique characteristic of our database is more important. Our files are deep, not just broad. In other words, we keep track of every conversation and put it in a file. Having a lot of names is a great tool but we also use the database to help you in the selection process. That’s of great value to you. It helps you avoid mistakes. Here is how. You want to hire a person who will stay in your company for a long time. Both the skills and cultural/career goals must align.Skills should show up in the interview/references but cultural and career goals are transient. They can naturally change over time. Of more danger, however, are candidates who tailor them to each interview and situation. Without a deeper history of the candidate than a resume/interview, you have no way of evaluating what the candidate really wants and whether they really fit. How often have you interviewed someone who acted very pleasantly and courteously in an interview only to find out that they became Attila the Hun once employed? There are people with two personalities; one for the interview and one for life. This is where deep files can come in very handy. We gather information about candidates over time. It’s not a snapshot. It’s a movie. Here are a couple of examples.
1)You are doing organizational succession planning. You want someone for a Product Manager job who will rapidly be promoted to a more senior supervisory role. You need someone ambitious who will sacrifice quality of life while you train them in the intricacies of your industry and company, preparing them for a big promotion. You have an aggressive environment. A candidate appears who looks good on paper and who says the right things in the interview. He says he’s aggressive and ambitious and is prepared to work 70 hour weeks. Super! But here is what you may not know about him.
Our records show that we have spoken to him 3 times in the last 5 years about jobs. He blew off the first opportunity 5 years ago because “it might interfere with his side business as a wedding DJ.” He said no to the second opportunity because it was 30 minutes from home and his current commute was 20 minutes. He didn’t want to add 20 minutes to his workday with a longer commute. The third opportunity, 4 months earlier and before he was laid-off, he dismissed because there was no flex-time for him to use for his son’s soccer games.
These are all valid reasons BUT you are seeking someone with clearer priorities for a unique job. The last thing you need is to make a huge investment in someone who, 6 months later, may decide that he wants a more comfortable life and needs to re-focus on personal issues and limit his work week to 45 hours and, by the way, when are we getting flex time here? That is a real-life example. We shared that info with our client along with the resume and they were able to probe a little bit deeper into his motivations. Once they challenged his level of commitment to the job, it became pretty clear that his words were just rhetoric designed to get him back in the work force after a layoff.
2) Another true story. Imagine a company with a very matrixed organization that requires the ability to work with many different types of people. Courtesy is a very important tool for them. They interview a very friendly fellow who says and does all the right things; strong handshake, eye contact, thank you notes, etc. He even tells them that he works well on teams. Here is what they didn’t know. We spoke to him twice in the past year. The first was after he sent us a resume responding to an ad. When he was called for a discussion, his wife answered the phone and screamed at the recruiter, “Don’t bother us. My husband has a job.” She then hung up before the recruiter could explain. He never responded to emails asking him to call back.
Six months later, we tried him again for a different job. We had a good conversation and set him up for an interview. He cancelled the interview with one hours notice because, “he just got a raise.”
We never placed this fellow in a job. This all came to our attention when the company that eventually hired him called us to fill the job after they fired him. He was fired because he turned into a fellow who was an ultra-aggressive Type A personality who could only function in a team if he was the leader. When they told us about the experience, we looked him up in our database. Clearly, he was not the right person for them.
None of this information should, by itself, eliminate a candidate. When properly used along with our rating system, it illuminates potential conflicts. I call them “disconnects”. The interview and the outside behavior don’t match. Sometimes, our perceptions are wrong.
Sometimes, the person has matured and changed over time. But sometimes we are concerns are validated. This information should serve as an early warning system to a company and point out areas to explore in a follow-up interview. Also, sometimes the information we provide is positive and reinforces already strong opinions about a candidate. In those situations, your decision becomes easier.
All of this is what a recruiting firm SHOULD do for you. Sadly, most do not. They don’t because either they can’t or because they won’t. They can’t because their internal structure is not set up correctly. They won’t because the only trigger to their compensation is to be the first person to provide a resume that crosses your desk. After that, it’s all smoke and mirrors. We believe that character counts in a candidate and character is revealed over time, not in a 2 hour interview. At the end of the day, with us, you will get a resume, a ranking and a written evaluation of the positives and negatives of each candidate. You need to explore both the positives and negatives in the context of your culture and within the confines of the interview. Working with us will allow you to make a better informed decision and save money as well.
Lastly, for companies who have multiple needs, we make special arrangements on fees. For some info, please see the Other Services section of the web site.
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