Associations, Networks, Franchises, Alliances, Coalitions, Etc.

What role will they play in our future? Will they get bigger or smaller? More influential or less?

“I work the accounting specialty with a number of well-established clients. Frequently, they ask me for help on openings in manufacturing, sales, and other disciplines I do not handle. Since joining one of the major formal networks a few years ago, I have averaged making eight extra placements a year with candidates from my non-primary specialty provided from my network partners – almost $100,000 a year for sharing a hot job assignment with a full-fee-paying client – revenue opportunities I would have missed before joining a network.”

This response from a reader echoes the results of most practitioners who take advantage of the growing number of cooperative affiliations in our business. Not only are the traditional networks growing in number, but some of the associations have branched out to include these types of coalitions. And some networks are taking on the mantle of associations. Franchises, of course, have always trumpeted the fact that they provide the ultimate in collaborative efforts between franchisees who may be working in dissimilar specialty areas, but the lines between these disparate groups is very blurry these days.

The Internet, aside from birthing a number of new and different types of networks, has changed the face of recruiting. MySpace, Facebook, LinkedIn, and other organizations initially established as “social” networks have changed the landscape dramatically by linking like-minded people, which often culminates in affiliations between recruiters (and others) that probably wouldn’t have occurred otherwise.

Trainer and practitioner Bob Marshall once said: “As the Internet has grown, so have the networks and associations that are driving (and responding to) the demand for shared data-bases. The relative ease with which information can be stored and accessed has enabled both specialty and generalist providers such as NPA, RON, Top Echelon, IPA, and First Interview (as well as several state associations like GAPS) to serve a greater number of recruiters and, in turn, capture a higher percentage of overall industry billings.

“With the scarcity of candidates coupled with the incredibly fast-changing environment in which we work, recruiters will need networks and associations more than ever. Contacts, information, support, and speed are all by-products of a network affiliation. I see additional ‘networks’ being formed (both formal and in-formal) as more recruiters recognize the potential value of working together.”

Attorney Jeff Allen has called networking of all types “the underrated underground that makes recruiters more placements.”

Some time ago, Terry Petra said: “Historically, membership in state/national associations grows proportionately when the economy is strong. This is also true for affiliations with networks and franchises, as well as in-formal coalitions between individual firms and groups. This will continue in the future. However, there are other factors that are contributing to the growth of these groups.

“For individuals and firms within the staffing industry, success in the future will increasingly require access to and application of ‘world class resources.’ As the ‘big get bigger,’ local and regional staffing firms will be edged out of their markets if they cannot compete on the qualitative scale. Access to the combined resources of the right group will allow these firms to leverage their relationships while, in many instances, outperforming the larger players through process excellence and timely deliverables.

“Membership in state, regional, and national associations pro-vides staffing firms with opportunities for networking with peers, access to certification and educational programs, as well as operational and technological purchasing discounts. These benefits of membership will only increase as competition in the marketplace heats up. We are in the age of outsourcing and qualitative differentiation. Membership in organizations and affiliation with shared resource pools will increasingly allow staffing firms to successfully compete in the marketplace of the new millennium.”

Trainer, author, and industry speaker Steve Finkel has noted: “Associations and networks fare poorly in a recession, a fact conveniently overlooked or never known by those currently involved in such entities. Membership renewals dwindle precipitously, and abysmal attendance at multi-day association gabfests results in major financial losses.

“Networks also disappoint in a recession. To put together a successful placement on a net-work requires a serious client, a committed candidate, and a competent consultant on both candidate and client side. The absence of any one of these participants means ‘no sale’ – and the likelihood of all four being present in a slow market with many qualified and unemployed candidates on the market ‘for free’ is remote. Networks do well in candidate-short boom times such as we have today.”

Not only is formal network membership on the rise, but the number of informal relationships is also increasing . . . along with the usual attendant problems.

The urge to split a fee with another recruiter can be a strong one, especially when you have received a job order outside your normal realm. We are constantly receiving calls asking for the name of “someone who specializes in ____.”

But the press of time often tempts practitioners to forget that these relationships should be formalized to avoid the usual disputes that arise from such alliances.

Another reality was brought to the fore by frequent TFL contributor Frank Risalvato, who lamented in an ERE and NAPS article (A Cure for the Sounds of Silence) that too many recruiters, when asked for help or cooperation in filling one of his openings, never respond to the request one way or the other. He also expressed concern that the same silence too often occurs in dealing with a client company when a recruiter is unable to produce a suitable candidate on a timely basis. We agree with Mr. Risalvato that silence is unacceptable behavior in either situation, but the fact remains that most recruiters, especially when presented with a split opportunity with another recruiter, will only do a quick file search for candidates to refer. To expect a busy and successful recruiter to take time away from a full-fee search to spend time on a search where they will receive only 50% is unrealistic.

Most honest network providers know that their success depends largely on luck or serendipity. When a member posts an opening to other members, it is unlikely that any of them will do more than search their databases, and if, by coincidence, someone in their files happens to meet the specifications, a deal is done. Otherwise, there seems to be no reason for further communication, and most practitioners who submit an opening through the networks implicitly under-stand that unless their network colleagues have a match, the niceties of communicating their failure to find one is neither expected nor necessary.

We have published below a sample Cooperative Placement Agreement for those who wish to work with others. These are not cast in granite but cover most of the situations that should be addressed in these types of agreements. Believe us when we tell you that a large percentage of the complaints we receive revolve around problems that occur between people in informal split arrangements.

COOPERATIVE PLACEMENT AGREEMENT

THIS AGREEMENT is to facilitate placement networking between ______ and _______. In consideration of the mutual terms, covenants, and conditions herein, whenever a candidate is recruited by one of the associates for placement by the other, both associates hereby agree as follows:

1. Placement fees received by the placing associate from an employer shall be shared with the recruiting associate if a candidate who is recruit-ed by it is placed with said employer.

2. Any division other than one-half (1/2) to each associate shall not apply unless agreed in writing by both associates prior to disbursement of the placement fee.

3. The complete fee and guarantee agreement with any employer shall be fully disclosed to the recruiting associate prior to referral of said candidate.

4. Placement fees shall be disbursed within five (5) business days of receipt from the employer, but shall be retained by the referring associate until expiration of the guarantee period.

5. Guarantees shall be honored fully; the referring associate shall be responsible for any refund, and the recruiting associate shall be responsible for any replacement. Until said guarantee is honored or expires, no disbursement of the placement fee shall be made.

6. Candidate information received from the recruiting associate shall not be disclosed to any other recruiter without the consent of said associate, and shall be used only for the purpose of effecting the original placement.

7. Communication with the employer or candidate shall be only through the associate who originally contacted said employer or candidate.

8. No unsolicited résumés shall be submitted by either associate to any employer without the prior written agreement of the associates.

9. Any potential conflict (duplication of employer or candidate information, un-acceptable fee or guarantee provisions, etc.) shall be resolved prior to the referral of any candidate.

Article Continues Below

10. Any formal step involving a recruited candidate’s prospective employment (initial interview, second interview, offer, turndown, etc.) shall be related as soon as possible to the recruiting associate.

11. All shared candidates and job orders shall be originated by each associate through its own recruiting or business development and not from any other source wherein a financial obligation exists.

12. In the event that both associates to this agreement wish to enter into a three-way cooperative networking agreement, the terms of said agreement shall be separately negotiated in writing prior to the referral of a candidate.

13. The recruiting associate shall have the right to payment for three (3) years after the last communication regarding said candidate. If a candidate contacts the referring associate directly through an independent source more than one (1) year after the recruiting associate’s last communication, no payment shall be due. If a candidate responds to any solicitation or follow-up to determine availability, the candidate shall still be considered supplied, regardless of whether he or she has changed employers.

14. The referring associate shall not contact a candidate for networking or additional referrals without the consent of the recruiting associate. If referrals are subsequently generated from the candidate, they will be considered recruited candidates. The referring associate shall furnish all information on said candidates to the recruiting associate.

15. The referring associate shall not use a recruited candidate or their background information for any general business-development purposes. Said information shall be used only for the purpose of effecting a specific placement.

16. During negotiations between a candidate and an employer, the referring associate shall have the authority and responsibility for all communication. The recruit-ing associate shall cooperate fully, rendering whatever assistance may be requested. To the extent that this provision may be inconsistent with other terms of this Agreement, the associates shall comply with it to effectuate the mutual placement.

17. In the event that an error or omission in connection with the placement results in a claim, the associate responsible shall not seek indemnification or pursue a claim against the other associate unless said associate contributed to the error or omission.

18. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association, and judgment upon the award may be entered in any court having jurisdiction thereof.

19. In the event that it becomes necessary to enforce or interpret any term, coven-ant, or condition of this Agreement, or any part thereof, the prevailing associate shall be entitled to reasonable attorney’s fees, actual arbitration and litigation costs, and any other necessary and proper disbursement in connection with enforcing or defending its rights herein.

20. This Agreement shall remain in effect continuously until revoked by either associate by written notification to the other. In the event that it is revoked, the terms, coven-ants, and conditions of this Agreement shall remain in force for a period of three (3) years with regard to candidates recruited, referrals of said candidates, use of shared information, and contact with candidates or employers.

Although we recommend net-working as a tool, different practitioners may require different affiliations. Some networks have several affinity groups within their own structure. Some reach out to other “affinity” networks when there are not enough members within their own network. And although franchise group members are discouraged from reach-ing outside their own franchise membership, many do so anyway – usually camouflaging their identity by joining under a different firm name. Rather than list all of the networks and associations, we recommend going to Bill Radin’s very informative website at: http://www.billradin. com/recruiting_resources.htm#Recruiting%20Networks.

There have been a (very) few problems with the formal networks that police their membership and enforce their agreements. But miscreants occasionally slip through the enforcement filter. One of these dodges involved people with a sideline of a “secondary sell,” where they’ll ask applicants (often harvested from their network colleagues) for some amount of money (usually from $50 to $95) to broadcast their résumés to either a list of companies from their database or promise to post their résumés in an online computer database to be accessed by potential hirers. We’ve seen dozens of versions of this scheme over the years. If the average search/placement fee was $15,000 for a $50,000 placement, then it would take 300 “marks” putting up $50 each to equal the revenue from one fee. To get $50 out of 300 chumps, you would probably have to contact 3,000 or more of them. This is the main reason why we decry these efforts as penny-ante.

In a similar scam, we noticed that a member of a major network put out (in bold and blazing lettering) a NOTICE OF MEMBERSHIP TERMINATION to its members in good standing.

It seems that the transgressing (now ex) member was gathering up résumés from the network and sending them a postcard pitch for putting their résumé on the Internet ($40) or rewriting their résumé ($95), or offering some other cockamamie confidential version of the $40 service for $100.

Caught through a “decoy” network candidate and learning that there would be no split fees of any kind with the members who submitted the canvassed candidates in the first place, the network wisely ended the relationship as a violation of the “network spirit.”

All in all, though, network membership has been a big plus for those who have joined one or more of the well-established groups. The track record for informal networking relation-ships makes up the largest portion of the complaints we receive – especially among those where the relationship was formed only through a telephonic “handshake” – so beware and know that there are still those who would rip you off.

Frequent contributor and celebrated diversity recruiter Frank X. McCarthy chimes in below with his views on networking.

Paul Hawkinson is the editor of The Fordyce Letter, a publication for third-party recruiters that's part of ERE Media. He entered the personnel consulting industry in the late 1950's and began publishing for the industry in the 1970's. During his tenure as a practitioner, he personally billed over $5 million in both contingency and retainer assignments. He formed the Kimberly Organization and purchased The Fordyce Letter in 1980.

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