Consultants Earnings On the Increase

The information you are about to read is a compilation of the results from almost 1,600 firms who responded to our survey representing over 4,000 revenue-producing consultants. This is a larger number of respondents than last year.

The recruiting profession, at least according to this polled group, attests to the fact that our business is definitely in recovery. Perhaps we didn’t hear from a true sample since we only polled readers of The Fordyce Letter but this snapshot has demonstrated amazing accuracy over the 20 years in which we have conducted this survey. TFL readers tend to be longer tenured and more successful than non-readers.

As always, we asked for results from only those people who have been in the business for a year or more. While there are occasional superstars who demonstrate exceptional performance during that critical first year, this is an easy entry, easy exit business and including neophytes skews the results in such a way as to distort the results.

We also deleted those few responses where the Cash In figures were outrageously high (well over $1 million and probably a pooling of revenues from a number of ‘team’ members) or too low (only worked part time during the polled year).

Only 3% of the respondents identified themselves as purely retained. The balance was contingency with about 15% indicating that they occasionally charged upfront commitment or engagement fees and about 4% of the contingency group said they sporadically worked a fully retained assignment.

Approximately 17.22% of the respondents were solo practitioners, a percentage that is reflective of the proportional distribution of our readership in general. Franchised offices comprised 32.13% of the survey respondents.

Before going on, a brief explanation of a couple of the terms you’ll see throughout this compilation.

AVERAGE An arithmetic mean derived by adding all the numbers together and dividing by the total number of entries added.

MEDIAN A number in a set that has the property of having half the other numbers greater than it and half less than it.

The difference between the Average and the Median can be significant for a number of reasons we won’t go in to here but we are providing both in some of the areas addressed.

Here is a thumbnail look at those things that seem to matter most to readers. More detailed information will follow for those whose eyes have not yet glazed over.

CATEGORY PERCENTAGE OF RESPONDENT FIRMS

SOLO PRACTITIONERS………………………………………………… 17.22%

NON-SOLO INDEPENDENT FIRMS………………………………. 45.50%

FRANCHISED FIRMS…………………………………………………….. 32.13%

OTHER MODALITIES……………………………………………………… 5.15%

AVERAGE/MEDIAN FEES COLLECTED for 2004

ALL SURVEYED………………………………….. $17,863.09 / $18,000.00

SOLO PRACTITIONERS……………………….. $18,143.46 / $16,900.00

NON-SOLO INDEPENDENT FIRMS……… $17,996.60 / $18,794.50

FRANCHISED OFFICES……………………….. $17,627.60 / $18,350.00

NOTE: The previous year’s average fee for 2003 was $13,990. Average fee information is interesting, especially since most of these fees were generated at a 25% fee rather than the 30% that was normally charged during the heydays of the late 90’s, but they don’t have much meaning, for example, to the reader whose clerical specialty had an average fee of $5,800, yet she billed over $400K. Nor do they mean much to the high level practitioner whose average fees are in the $40-75,000 range. The differences in Average/Median fees by specialty are shown later.

AVERAGE / MEDIAN CASH IN for 2004

ALL SURVEYED………………………………….. $226,552.97 / $198,265.00*

SOLO PRACTITIONERS……………………….. $225,704.12 / $200,000.00

NON-SOLO INDEPENDENT FIRMS……… $221,986.43 / $193,750.00

FRANCHISED OFFICES……………………….. $231,986.36 / $200,000.00

*Excludes revenue of owners of multiple consultant firms who work a desk. These statistics are shown elsewhere.

NOTE: The last survey showed that the Average Cash In for 2003 was $186,840, considerably less than 2004, even though the constituency surveyed was very similar. The uptrend in business seemed to begin in earnest around February of 2004 and continued throughout the year with another spike in business occurring immediately after the election.

AVERAGE / MEDIAN CONSULTANT SHARE OF FEES for 2004

ALL SURVEYED………………………………….. $100,043.49 / $81,789.50

NON-SOLO INDEPENDENT FIRMS……… $104,631.87 / $81,789.50

FRANCHISED OFFICES……………………….. $94,575.57 / $80,000.00

SOLO PRACTITIONERS……………………….. Keeps all less expenses

Although some firms pay a fixed salary plus a smaller percentage of the Cash In, the vast majority of firms still compensate their consulting staffs based on performance (commission vs. salary). Another variable is the commission percentage paid. Some firms pay no draws or salaries, but pay from 50-70% of Cash In as a tradeoff.

AVERAGE / MEDIAN PERCENTAGE PAID TO CONSULTANTS for 2004

ALL SURVEYED………………………………….. 41.38% / 40.00%

NON-SOLO INDEPENDENT FIRMS……… 43.52% / 45.00%

FRANCHISED OFFICES……………………….. 39.36% / 40.00%

SOLO PRACTITIONERS……………………….. Not applicable

Some firms pay as little as 30% and a few dozen of those in this survey indicated that they pay as much as 70%. Much depends upon the architecture of the firm, benefits offered, types of placements, draw/salary components, etc. Percentages very often “step up” based upon Cash In results. Thresholds will differ from firm to firm but it is almost universal that the more a consultant bills, the higher the payout will be as a percentage of the additional Cash In.

TENURE OF RESPONDENTS AVERAGE = 9.17 years

MEDIAN = 7 years

NOTE: A large number of “old-timers” took the most recent economic downturn as their cue to retire. Even so, the tenure of practitioners in this survey points to the fact that a large majority was able to stay afloat and survive despite the economic circumstances.

TENURE AVERAGE / MEDIAN CASH IN — CONSULTANT SHARE

1-2 years (17.4%) $146,121.93 / $130,000.00 —> $58,915.27 / $50,000.00

3-4 years (13.77%) $215,483.83 / $181,869.00 —> $90,559.12 / $79,036.00

5-6 years (16.88%) $263,115.82 / $253,020.00 —> $119,003.03 / $108,885.00

7-8 years (12.47%) $219,663.62 / $200,000.00 —> $112,405.25 / $87,440.00

9-10 years (10.64%) $240,974.53 / $210,000.00 —> $112,401.09 / $93,708.00

11+ years (29.09%) $257,643.44 / $233,745.00 —> $113,219.22 / 100,578.00

NOTE: There seems to be a steady progression through the first 6 years, then production appears to stabilize.

PERFORMANCE BY SPECIALTY NICHE

Accounting/Auditing/Treasury

% of entire survey……………………………………………. 6.2%

Average fee……………………………………………. $17,106.00

Median fee…………………………………………….. $17,300.00

Average commission paid……………………………….. 40.1%

Average practitioner tenure……………………….. 8.83 years

Median practitioner tenure…………………………….. 6 years

Average Cash In…………………………………… $203,447.25

Median Cash In……………………………………. $208,984.00

High fee collected…………………………………. $108,000.00

Advertising/PR/Graphic Arts/Publishing*

% of entire survey……………………………………………. 2.5%

Average fee……………………………………………. $22,283.75

Median fee…………………………………………….. $18,092.50

Average commission paid……………………………….. 45.3%

Average practitioner tenure…………………………. 8.5 years

Median practitioner tenure…………………………….. 6 years

Average Cash In…………………………………… $239,769.67

Median Cash In……………………………………. $218,225.00

High fee collected…………………………………… $60,000.00

Banking/Financial Institutions/Wall Street

% of entire survey………………………………………….. 10.1%

Average fee……………………………………………. $19,740.93

Median fee…………………………………………….. $18,250.00

Average commission paid……………………………….. 38.6%

Average practitioner tenure……………………….. 6.99 years

Median practitioner tenure…………………………….. 5 years

Average Cash In…………………………………… $188,086.15

Median Cash In……………………………………. $167,000.00

High fee collected…………………………………… $81,000.00

Clerical/Office Support

% of entire survey……………………………………………. 3.3%

Average fee……………………………………………… $7,875.00

Median fee………………………………………………. $8,050.00

Average commission paid……………………………… 22.31%

Average practitioner tenure……………………… 10.35 years

Median practitioner tenure…………………………… 10 years

Average Cash In…………………………………… $222,122.85

Median Cash In……………………………………. $204,730.00

High fee collected…………………………………… $35,001.00

Information Technology

% of entire survey………………………………………….. 9.04%

Average fee……………………………………………. $17,836.87

Median fee…………………………………………….. $18,000.00

Average commission paid…………………………….. 41.9.1%

Average practitioner tenure……………………….. 9.48 years

Median practitioner tenure…………………………….. 7 years

Average Cash In…………………………………… $230,668.24

Median Cash In……………………………………. $199,688.50

High fee collected…………………………………. $123,000.00

Engineering/Technical/Design/R&D

% of entire survey………………………………………….. 13.2%

Average fee……………………………………………. $17,317.18

Median fee…………………………………………….. $17,216.50

Average commission paid……………………………… 40.87%

Average practitioner tenure……………………….. 9.26 years

Median practitioner tenure………………………….. 6.5 years

Average Cash In…………………………………… $218,953.04

Median Cash In……………………………………. $192,826.00

High fee collected…………………………………… $56,000.00

General/Administration/HR/Management

% of entire survey……………………………………………. 4.3%

Average fee……………………………………………. $20,315.11

Median fee…………………………………………….. $15,000.00

Average commission paid……………………………….. 41.7%

Average practitioner tenure……………………… 10.47 years

Median practitioner tenure…………………………….. 7 years

Average Cash In…………………………………… $219,434.18

Median Cash In……………………………………. $219,685.00

High fee collected…………………………………. $106,920.00

Healthcare/Pharmaceutical/Medical Related

% of entire survey………………………………………….. 12.6%

Average fee……………………………………………. $19,709.73

Median fee…………………………………………….. $19,900.00

Average commission paid……………………………… 41.49%

Average practitioner tenure……………………….. 6.49 years

Median practitioner tenure…………………………….. 5 years

Average Cash In…………………………………… $217,264.65

Median Cash In……………………………………. $193,000.00

High fee collected……………………………………….. $70,000

High Tech*

% of entire survey……………………………………………. 3.1%

Average fee……………………………………………. $19,562.50

Median fee…………………………………………….. $18,625.00

Average commission paid……………………………….. 44.1%

Average practitioner tenure……………………… 10.17 years

Median practitioner tenure………………………….. 8.5 years

Average Cash In…………………………………… $219,011.17

Median Cash In……………………………………. $236,146.00

High fee collected…………………………………… $39,600.00

Hospitality/Foodservice/Leisure/Travel*

% of entire survey……………………………………………. 3.1%

Average fee……………………………………………. $17,093.75

Median fee…………………………………………….. $17,000.00

Average commission paid……………………………… 49.67%

Average practitioner tenure……………………….. 9.92 years

Median practitioner tenure………………………….. 6.5 years

Average Cash In…………………………………… $256,225.82

Median Cash In……………………………………. $225,000.00

High fee collected…………………………………. $150,000.00

Article Continues Below

Insurance

% of entire survey……………………………………………. 5.9%

Average fee……………………………………………. $16,727.78

Median fee…………………………………………….. $17,000.00

Average commission paid……………………………… 45.35%

Average practitioner tenure……………………… 13.17 years

Median practitioner tenure…………………………… 12 years

Average Cash In…………………………………… $201,659.13

Median Cash In……………………………………. $186,500.00

High fee collected…………………………………… $80,500.00

Legal*

% of entire survey……………………………………………. 1.0%

Average fee……………………………………………. $32,333.00

Average commission paid…………………………………. 45 %

Average practitioner tenure……………………………. 6 years

Average Cash In…………………………………… $188,269.00

Median Cash In……………………………………. $140,500.00

High fee collected…………………………………… $57,500.00

Manufacturing/QC/Production

% of entire survey……………………………………………. 9.6%

Average fee……………………………………………. $18,063.94

Median fee…………………………………………….. $18,375.00

Average commission paid……………………………….. 42.3%

Average practitioner tenure……………………….. 9.62 years

Median practitioner tenure…………………………….. 8 years

Average Cash In…………………………………… $236,052.76

Median Cash In……………………………………. $201,155.00

High fee collected…………………………………… $54,000.00

Real Estate/Construction*

% of entire survey……………………………………………. 3.0%

Average fee……………………………………………. $17,262.20

Median fee…………………………………………….. $18,839.00

Average commission paid………………………………. 44.2 %

Average practitioner tenure……………………… 12.38 years

Median practitioner tenure…………………………….. 7 years

Average Cash In…………………………………… $403,025.42

Median Cash In……………………………………. $347,500.00

High fee collected…………………………………… $80,000.00

Retail*

% of entire survey……………………………………………. 3.0%

Average fee……………………………………………… $6,500.00

Average commission paid…………………………………. 35 %

Average practitioner tenure……………………………. 4 years

Median practitioner tenure…………………………….. 1 years

Average Cash In…………………………………… $203,333.33

Median Cash In……………………………………. $150,000.00

High fee collected…………………………………… $20,000.00

Sales/Marketing

% of entire survey………………………………………….. 11.6%

Average fee……………………………………………. $16,585.67

Median fee…………………………………………….. $15,000.00

Average commission paid……………………………….. 40.1%

Average practitioner tenure……………………….. 9.92 years

Median practitioner tenure…………………………….. 7 years

Average Cash In…………………………………… $224,346.07

Median Cash In……………………………………. $177,973.00

High fee collected…………………………………… $80,000.00

* The information under these categories is questionable because of the low number of respondents

AVERAGE # CONSULTANTS PER FIRM 3.1

NOTE: There has been no change in the number of consultants per firm since last year’s survey. Remember, however, that we do not include consultants with less than one year of experience. Even so, we would have suspected this number of be higher since many firms responding to last year’s survey told us they planned to add staff. If they did so, perhaps the majority of them didn’t last long enough to be included in this year’s survey.

FEE PERCENTAGES

Median fee percentage billed and collected……………………………………. 25%

NOTE: Reiterating our comments from last year’s survey, “When over 65% of respondents report that 25% are what they are able to charge, it almost becomes the norm by default. While most still have a ‘sticker price’ of 30% on their fee schedules, fact is, the real fee is almost always 25% – or lower.”

Although we have lately seen some significant movement back towards a 30% fee, there is still reluctance on the part of some large employers unless they are desperate to alleviate their pain on certain critical openings.

Also, rather than dropping their 30% fees down to 25% (which is really a 17% discount not the 5% as many believe), many have lowered it to 27.5% or some other in between percentage outside of the ‘5’ discount normally requested.

Here are the survey results:

33% fees……………………………………………………………………………… 2.8%

30% fees……………………………………………………………………………. 31.3%

26-29% fees…………………………………………………………………………. 2.6%

25% fees……………………………………………………………………………. 48.2%

21-24% fees…………………………………………………………………………. 2.6%

20% fees……………………………………………………………………………. 11.7%

<20% fees………………………………………………………………………….. 0.12%

Other (flat fee, hourly, unbundled services, etc.)………………………. 0.7%

GUARANTEES OFFERED

M = Moneyback R = Replacement P = Prorated

30M…………………………………………………………….. 12.1%

30R……………………………………………………………… 28.3%

30P………………………………………………………………… 1.5%

45R……………………………………………………………… 0.03%

45P………………………………………………………………. 0.03%

60M………………………………………………………………. 6.9%

60P………………………………………………………………… 1.3%

60R……………………………………………………………… 25.5%

70M…………………………………………………………….. 0.07%

90M………………………………………………………………. 2.1%

90P………………………………………………………………… 1.8%

90R……………………………………………………………… 13.4%

None……………………………………………………………… 3.5%

CONSULTANT % SHARE OF CASH IN

Average commission rate………………………………. 41.38%

Median commission rate……………………………….. 40.00%

NOTE: These have declined since our last survey when the average consultant commission percentage was 42.07%. They range from a low of 10% (where a hefty salary is paid and the 10% is deemed an adequate added incentive) up to 75% (where no draw or salary is paid).

Very few firms have a ‘static’ percentage payout. Most have increasing percentages based upon varying threshold production figures.

MONTHLY DRAW

The average draw is $2,289.75. The median is $2,000 the same as last year.

SOME OBSERVATIONS

Perhaps only happy and productive people respond to surveys like this. But we’ve been conducting this survey for 20 years and the results always seem to mirror the industry in general. It is, of course, only a snapshot of the industry at one specific point in time by people who are willing to share their results. It is instructive, however, as a benchmark against which to compare your particular practice. It also gives us the pulse of the industry.

We continue to see the tendency for birds of a feather flocking together. If a firm’s consultants have mediocre results, all of them generally follow that pattern. If a firm’s consultant billings are above average, all the consultants usually beat the average. Maybe it’s peer pressure; maybe it’s higher comfort levels. Maybe it’s better management; maybe it’s better training. Wish we knew so we could bottle it.

Further correlations of the data are still being massaged and the results will be reported in future issues.

We appreciate those who took the time to respond.

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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