Almost daily I receive calls and emails from owners, managers, and recruiters who are interested in learning how to build exclusive, engagement fee, and/ or retained relationships with their clients.
Often, they are confused about these options and not aware they can provide more than one option without being in conflict with their overall business objectives.
To help bring clarity, consider the following:
Recruiters basically have four options, or variations thereof, from which to choose when considering how to meet the needs of their clients.
Each of the options has certain advantages as well as disadvantages.
The key is to fully understand each option and then to discuss the appropriate options with your client. The objective is to jointly agree on the option that will produce the best results within an acceptable timeframe.
As the provider of services, you can choose one or more of the following options on which to focus. That is a business decision. However, it is possible, under the right business model, to provide any or all of these services to meet the needs of your individual clients. They do not have to be mutually exclusive.
Therefore, let’s define the nature and scope of the four basic options:
1. NON-EXCLUSIVE CONTINGENCY
In this relationship, the client only receives a measured response from each recruiter. Because there is no mutual commitment, each Recruiter has to work the job order on a “time/resource available” basis. Each order must be balanced against all the other orders currently available to the recruiter. This type of relationship generally does not lend itself to a strong drill down approach to penetrating the talent pool. Also, because the relationship is non-exclusive, the candidates surfaced can be and will be presented to more than one client. In this relationship both the client and the recruiter must take a quantitative approach, insuring that the numbers work in their favor.
From the client’s perspective, this may be an acceptable approach if the open position(s) is of low priority to the organization and the timing for hiring is not important. The client is basically taking a “commodity approach” to meeting their needs and will no doubt exert downward pressure on fees.
2. EXCLUSIVE CONTINGENCY
This relationship is based on a signed exclusive agreement between the Recruiter and the client. This agreement defines the exclusive nature of the relationship and ties both parties to a specific time frame. The recruiter must deliver results within a defined period of time. Penetration of the talent pool by the recruiter is much greater.
However, the client does not own the product of the search, i.e. the candidates. The recruiter is free to present these candidates to other clients.
As far as internal candidates, walk-ins, referrals, or any other candidates are concerned, they undergo the same process with the recruiter as sourced candidates.
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In this manner, the client is properly positioned to compare “apples to apples.” Since all candidates are processed in the same manner, an unbiased decision can be reached without compromising the results through an alteration of the process. From the client’s perspective, this relationship is effective if they place a higher priority on the position, and if timing is important for filling the position.
Regarding the time frame reflected in this type of agreement, it generally ranges from 30 to 90 days. Perhaps the best comparison for this type of agreement is the standard real estate contract, which gives the listing agent an exclusive period of time in which to sell the property. During that period of exclusivity, they are legally entitled to their commission regardless of who sells the property and regardless of the source of the buyer.
3. ENGAGEMENT FEE
This relationship combines retainer with contingency. The client signs an exclusive agreement with the recruiter and pays a predetermined portion of the estimated or agreed upon fee up front, and once paid, it is nonrefundable. Generally the initial engagement fee ranges from 25% to 33% of the anticipated fee.
The remainder of the fee is paid by the client upon the successful completion of the search and the hiring of a suitable candidate. Although the relationship is exclusive, the payment of the majority of the fee is still contingent on the recruiter’s performance.
The engagement fee relationship is designed to capture the recruiter’s attention and thereby secure for the client a greater level of commitment and resource allocation. This is most appropriate when the client places a great priority on the position and where timing in filling the position is critical.
4. STANDARD RETAINER
In this relationship, the client pays the recruiter’s fee in three installments or retainers.
The search begins when the client signs the exclusive retainer agreement and pays the initial retainer. The payment of the two remaining retainers is generally tied to specific time lines or performance outcomes. The client must be convinced that the recruiter can source and recruit qualified candidates and properly orchestrate an effective process for delivering the candidates while helping to insure that the hiring decision is not compromised by extraneous variables.
This relationship is characterized by a strong, mutual commitment between the client and the recruiter. The client has greater control of the process and owns the product of the recruiter’s efforts (i.e., the candidates). The recruiter is not at liberty to present the candidates to other companies until their client either fills the position or releases the candidates by stating “no interest.”
In order to justify this level of relationship, the client must place the highest priority on the position, while requiring no margin for error in their timing or evaluation processes.
It is not necessarily that one of these options is better than another. Rather, it is a question of which approach will best serve the client’s interest. This should be determined between the client and the recruiter. That is why it is critical to fully understand and consider all options.
The real art of positioning yourself as an effective recruiter is to clearly identify with your client the appropriate priority that must be placed on each opening. Ultimately, it comes down to a question of priority, which, once established, should determine the option that is required in order for you to achieve the best results for your client.