Editor’s Corner

The first annual Fordyce Forum, held in New Orleans this past June, far surpassed any expectations I may have had. We were after those power recruiters for whom there were very few options at other conferences. By putting together a group of presenters, most of whom are $1million producers themselves, we succeeded in attracting about 200 of this country’s premier professionals and a couple from South Africa and Australia as well.

ERE Media, Inc., our parent company, already holds three conferences every year for the HR community, and they are consistently ranked as the best in the business. Their experience along with their truly amazing staff provided a flawless conference. We will definitely have another one next year, so stay tuned for the dates and venue before you commit to any other meetings.

Exhibitors were amazed at the caliber of attendees and have already reserved space for the next one – and 97% of the attendees rated the conference as excellent or good.

Here are a few comments from attendees:

“For a first conference, it was exceptionally well promoted, well organized, well run; fantastic presenters, great topics. Very worth my time/$.”

“Great job, Paul. I’ll bring back my senior recruiters again.”

“I liked that it wasn’t a replica of NAPS. It catered to more senior recruiters. The speakers were very useful.”

“Love the fact that most speakers have industry current involvements, some actually still working a desk. Everyone was very friendly and willing to share ideas and concepts. That was a pleasant surprise.”

“Extremely validating to understand that all recruiters have similar frustrations such as wild-goose-chase searches, unethical clients, unruly candidates, counter offers, etc. Also validating to understand where I stack up against my colleagues, and what it takes to bill $1MM.”

“Excellent. Please do it again!”

“Keep it blunt, candid, and outspoken just as this one was. I will attend again. Very good stuff. When is the next forum?”

“I loved the access to such successful recruiters. The motivation and enthusiasm for our industry was phenomenal!”

WHEN TO DUMP A CANDIDATE?

The past two months, we covered when to terminate a relationship with a client/employer. But what about dumping a candidate? When do you do it? Why?

What is a candidate? For many in our business, the term “candidate” is an ambiguous one. Just because someone answers an ad or a posting or just walks into your office or calls or emails, are they a candidate – or just an applicant? Is there a difference between someone who approaches you rather than being recruited by you? If you get a résumé from a guy working at Jiffy Lube wanting to be considered for a senior engineering position, is he really a candidate? Of course not!

Most recruiters consider applicants to be candidates only if they meet the minimal requirements for a job assignment and have been seriously considered by or successfully set up for an interview with a client. Some practitioners in our business get apoplectic over a couple of words: “agency” and “applicant” – words that many consider demeaning. So instead of calling things what they really are, we use terms such as “executive recruiting,” “executive search,” “executive shoulder tappers,” and the like. Applicants become “candidates,” “nominees,” “panelists,” “finalists,” etc.

Not to belabor the semantics of our nomenclature-obsessed practitioners, but there are times when you have to cut the cord with an uncooperative “candidate.”

What may surprise many of our readers is the fact that over 50% of practitioners still (very successfully) use the MPC (most placeable candidate) approach. In this scenario, should we refer to the MPC as “bait”? Probably not in our best interest, no matter how true it might be.

Dave Staats, premier producer and Pinnacle Society member, said: “Beyond being a candidate for a search, I only ‘work with’ about one candidate out of 100. Real MPCs are so rare I just don’t have much time to do my business that way. That said, whether for a search or not, I was taught to establish a ‘social contract’ with my candidates. As my Pinnacle Society colleagues have said, ‘Be excellent to each other’ and actually . . . just mutual honesty and trust. Also, Richie Harris said, ‘We must have total trust, complete honesty, and a common goal.’

“Once this is established, if it is violated, I drop the candidate like a hot rock because if they’ll do it to me, they’ll do it to the client. I know that sounds like a ‘Whatever, Mr. Perfect’ response, but it’s one of the few I do actually live by. Life’s too short!”

Another reader wrote, “Everybody says that talking about candidate control is somehow politically incorrect. Maybe so! You can’t really ‘control’ another person, but you can motivate, persuade, stimulate, inspire, and encourage them to do that which you want them to do and, hopefully, it is in their best interest as well as yours. The word is control, no matter how you try to obfuscate it. If you hear that someone is ‘sleeping’ with some-one else, do you really expect everyone to think they are off snoozing together? Of course not! Once I begin to lose ‘control’ over a candidate, I try to fine-tune the relationship. If that fails, I don’t need the aggravation and I will drop them from consideration. I do, however, make it crystal clear to both the candidate and the client that if, at some later point, they decide to climb into bed with each other, I get a fee for making it happen, even if under duress.”

Another reader warned, “I have had more deals go awry because of spouses than any other reason. That’s why I always interview the spouse of any finalist. If I sense any vacillation on their part, I move on. I had one candidate tell me to never speak to his spouse because he wanted to surprise her with the new job she had been nagging him to find. He took my client’s offer, reported for his new job in a distant city, and I thought everything was OK until I got a visit several weeks later from an FBI agent. Seems he never told his wife he was leaving, and she reported him as a missing person.”

Addressing both the client and candidate sides, one long-tenured reader said: “Seems like I have fired about half of the big player companies in my niche (and it is not that large). I am doing business with fewer and fewer companies, but I am having the best year I can remember. However, even with some of my better clients, I am feeling a strong push by HR departments to keep control of the turf they gained in the past few years. I have either fired or turned down chances to work on many job openings mainly because of the companies demanding low fees of 20% or less, long payment terms, unreasonable guarantees, or such ridiculous HR demands that I ignore the great contacts I have spent years building and go through them (HR) with all communications. It is as if they are trying to punish me for being effective in my job. At least if I choose not to do business with them, I can still keep my contacts.

“I have been reading The Seven Habits of Highly Effective People, and it seems to me there are a lot of companies out there that are trying to squeeze the productivity out of everything without replacing or maintaining the things that make them productive in the first place – the employees, vendors (recruiters included), customers, etc. I try really hard to not work for those kinds of companies, if at all possible.

“It seems like this has been happening more and more as larger companies have purchased smaller companies, and when they get larger they seem to, sooner or later, get around to thinking they can turn recruiting into a commodity vs. an art. Nowadays many hiring companies want to be our competition, and they try it, but only a few can cut it. What they can do, however, is make it much tougher for us good recruiters to do what we do well. When I run into one of these companies, I run the other way fast. Life is too short, and I have too many kids left to put through college to let these companies control what I can earn.

“Regarding candidates, if they are already all over the Internet, and already working with other recruiters, I rarely even bother with them. I always like to put the odds in my favor as much as possible, and working a candidate who is all over the net is a sucker bet.”

If your “candidate” is already on the market when he contacts you, you can expect a lower level of cooperation, especially if he has already contacted several other employers or recruiters. But never forget, if you are responsible for bringing a recruited “candidate” into the job-changing mindset, she will probably also become a very active jobseeker on her own – which is definitely not in your best interest. She will be weighing your client’s situation against others she has found on her own or through others. It’s known as The Better Deal Theory, as pointed out by Terry Petra (TFL – 3/07), and maintains that “before a person closes any kind of a deal – including marriage – he always worries about the fact that there may be a better deal down the road. It’s an uncontrollable instinct: at the last moment, the thought has to at least occur to a person that he might be missing out on a better deal somewhere else.”

Some of the reasons for dumping a “candidate” are:

– Lies about their background, education, salary, etc.
– Unwillingness to schedule interviews
– Reluctance to provide timely feedback
– Failure to return phone calls from you or your client
– Drastic changes in requirements for a new job
– Uncooperative
– Spousal reluctance
– Inability to make decisions
– Attitudinal problems
– Prima donna syndrome

As Dave Staats says, “Life’s too short.” Many of these reasons mirror those about when to “fire” a client.

One final word of warning: If you decide to dump a candidate, make sure you continue to follow up on all referrals you have made with them and let them know that if they accept a job through one of your referrals, a fee is due. Many candidates develop a “crawdad” attitude because the client has intimated (with a wink and a nudge) that they’d sure like to hire them but the fee is just too high – and they think that doing something to get themselves “dumped” by the referring recruiter just might get everyone off the hook.

Remember, we are the choreographers in this business, and when one of the dancers decides to do their own thing, they must be replaced or re-educated.

Tony Beshara, a legendary multimillion-dollar biller who does more placing than searching, has a very useful program for keeping his candidates in step with the process he directs. Like the gentleman he is, he has offered to share a Candidate Prep technique with our readers (see This & That for more information).

VOLUME DISCOUNTS. Can you imagine telling your best consultants that the more they bill, the lower their commission/bonus rate? As far as we know, only the government tax collectors think this is the way to operate.

Now that business is strong and employers are beginning to feel the talent shortage pinch again, there’s an ongoing propensity for fee-haggling. When times were tough, they said they couldn’t afford us. Now that times are better, they’re dangling multiple assignments in our faces as the incentive to recruit on the cheap.

In a perfect example of a “what’s wrong with this picture” scenario, an employer approached their best recruiting source (35 hires so far this year) and said, in effect, “Since you know exactly what we look for and you’ve done such a sterling job for us during the past several years, we’ve decided to pay you less per placement.”

Another firm that used a long list of recruiters decided to scale back the number used to only those who had collected X dollars in fees over the past year. At the same time they decided to cut back their fee cap from 25% to 20%. In a sense, they were saying, “Congratulations, you made our approved list of recruiting sources, so you can work harder to make less.” Shortsightedness in all its glory!

But how do you handle the request for volume discounts when you suspect that this “fleet discount” proposal is merely a ploy, as it often is?

Publications that carry advertising learned long ago that when a potential advertiser tells you that they plan to advertise in every issue if you’ll give them a discounted rate, they usually plan on only one insertion. To service those with honorable intentions, they came up with the “earned discount.” The same is true in the recruiting business.

Of course, discounts make sense in some cases . . . even for recruiting. There should probably be a monetary trade-off for a 10-placement deal. You’ll save money by not having to re-incur marketing/business development costs for each of the openings; you won’t have to learn the cultures and idiosyncrasies of 10 different firms since all placements will be with the same firm; and your sourcing efforts will be more efficient, especially when all the openings are for similar types of people. There are other factors as well.

If you have a true exclusive (is there really such a thing?), it may be worth a discount, but stuff happens. What if the openings are frozen after the first two placements? What if some are filled by employee referrals, thus reducing your true multiple-placement opportunity? What if (you fill in the blanks)?

Here’s one example of how these types of deals can be formulated. Suppose you’ve been asked to find 10 digital design engineers, all at the $60,000 level. At your normal 30% fee, these fills would give you $180,000. You’ve been asked to do the job for 25% fees, which will bring in $150,000, or $15,000 each.

Explain to the employer that you have no objection to a $30,000 discount as long as the deal is done as expected. But also explain that the lion’s share of your time and cost expenditures will be up-front and propose the following formula:

Placement 1 @ 30% $18,000
Placement 2 @ 30% $18,000
Placement 3 @ 30% $18,000

Placement 4 @ 25% $15,000
Placement 5 @ 25% $15,000
Placement 6 @ 25% $15,000
Placement 7 @ 25% $15,000

Placement 8 @ 20% $12,000
Placement 9 @ 20% $12,000
Placement10 @ 20% $12,000

TOTAL FEES $150,000

If the employer is not yanking your chain, they should have no problem with this formula. The bottom line is exactly what they wanted; the payout, however, protects you against any unforeseen termination of the search effort while still covering your heavier up-front costs. You’re moving the “what ifs” into the employer’s court. If they tell you no, they’re telling you that (a) there won’t be 10 placements and (b) they want the advantage of the cheaper placements at the front end.

Another formulation bases fee percentages on hire-in salaries rather than on which number the placement happens to be, but it’s complicated, unwieldy, and more applicable to multiple deals at varying salary levels than openings at the same level. The only advantage to this type of calculation is that it discourages the temptation on the part of employers to hire the cheaper ones first and defer the more expensive hires until the discount threshold is reached.

A third way is to give a discount coupon applicable to future fees, but as one practitioner told us, “We’re in the talent business, and coupons smack of pizza peddlers, not professionals.”

Whatever deal you structure, make sure that volume becomes reality before offering volume discounts for what could turn out to be only one or two placements.

Here are a couple of volume discount proposals used by readers:

– 1st and 2nd annual hires – billed at regular fee.
– 3rd and 4th annual hires – billed at 5% reduction from regular fee.
– 5th and 6th annual hires – billed at 10% reduction from regular fee.
– 7th and 8th annual hires – billed at 15% reduction from regular fee.
– 9th and 10th annual hires – billed at 20% reduction from regular fee.
– 11 or more annual hires – billed at 25% reduction from regular fee.

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And here are a couple more:

– There is a volume discount available for multiple placements during a twelve (12) month period. Should your company hire a second person from us during a twelve (12) month period following the first placement, we will compute the service fee as 30% of the total compensation to be earned by the candidate whom you employ during such candidate’s first twelve (12) months of employment. We will rebate your company 3.3% of the fee charged on the first placement. For all subsequent placements during the twelve (12) months following the first placement, service fees will be computed as 25% of the total compensation to be earned by the candidate whom you employ during such candidate’s first twelve (12) months of employment.

– We will rebate to your company 5% of the fee on the previous two placements. The invoice for the third placement will reflect this discount.

Although fees have devolved from the benchmark 30% over the past few years and many recruiting firms have now acquiesced to this lower standard by decreasing their fees to a maximum of 25%, I feel that now is the time to get them back to where they ought to be – 30%. If 25% is presented as the standard, employers will want a discount from that percentage. It’s human nature. If you already know they’ll be asking for a discount, the starting point for that concession should be 30%, not 25%. In fact, we have long advocated changing the conversation on discounting. I don’t know why most think the next available discount from 30% should be 25%. How about 28% or 27%?

Many have decided that, since they already have more business on their plate than they can handle, they won’t discount at all . . . and they’re getting full fee. Let’s face it – our business is all about alleviating pain. We probably won’t be asked to accept a search unless the employer has already tried everything else. If your toilet is overflowing, you won’t be asking the first plumber who shows up for a better price.

One of our readers recently cashed a $212,000 check from a company that had already been unsuccessful through the Heidrick & Struggles search process. Paying two fees in that amount indicates real pain.

But how do you approach the employer limbo contest where their only interest is in “How low can you go?” Here are some possible approaches:

HOW SEVERAL PRACTITIONERS REPLY TO “WE NEED A LOWER FEE!”

1. “I understand that you would like to solve this problem as inexpensively as possible. No one likes to overpay. But our fees are based on an analysis of our expenses along with a reasonable profit. I seriously doubt that I can talk my boss into accepting this assignment with no profit, so I must ask you which of the elements of a complete search would you not want us to perform?”

2. “While there may be some area in which we can achieve a compromise, it almost always results in a less than satisfactory outcome. Just as you would want the best available team to perform a family member’s open-heart surgery, I’m sure you’d be hard-pressed to tell us which of our crucial functions you can do without.”

3. “Our fees are based on the proposition that your search will be performed by a seasoned and successful veteran rather than a rookie, that the full resources of our research department will be brought to bear on your problem, and that our net will be cast to cover the entire universe of potential candidates. One or more of these components must, by necessity, be scaled back or ignored if the fee is reduced as you ask. This, I’m afraid, will compromise the final result in a way we can’t condone, so if your demand for fee reduction is firm, we’ll have to bow out and recommend that you seek that low bidder you’re looking for.”

This #3 scenario indicates that you care, but not enough to lower your standards. That’s a powerful negotiation tool.

Two more approaches to “Why won’t you lower your fee” are:

4. “It’s been a very long time since someone has even asked us to negotiate a fee. That issue was laid to rest some years ago, when the hirers of the country negotiated and agreed with the personnel consulting profession that the established standard fee for our services should justifiably be 30% (or whatever you wish to make it). Survey after reliable survey indicates that 30% is a fair amount and that employers who ask for, and get, lower fees end up with substandard results.”

5. “I’m not at liberty to even discuss fee reduction on a contingency search, but if you want us to handle it for 25%, we’ll be happy to do so under an exclusive retained agreement with expense reimbursement factored in. If you wish, I’ll start preparing the retainer agreement right now.”

From an old pro who swears this works more often than not:

6. “I suppose I don’t object to your asking me for a dramatic discount in the fees we normally charge, but if you’ll bear with me for a moment, I’d like to think out loud about your proposal.

The company for which I work has a sterling reputation for ethics and for success, both with employers and with candidates. We have never compromised on the quality of the services we provide. I’m proud of that, and that’s why I feel I’m privileged to be with the best.

I’ve spent many years learning my profession. I’m very good at what I do, and the greater percentage of my business comes from repeat clients who obviously feel the same way about my work as I do.

Our fee schedule is based on the same factors as almost everyone else’s. They are similar because everyone in our profession knows that our charges are fair, competitive, and reflective of the actual costs of doing business. Those who have cut their fees in the past just aren’t around today.

I didn’t spend years honing my expertise, gather-ing vital contacts, and building my reputation to agree to work for Bargain Barn prices just because someone was insulting enough to ask. As a matter of fact, I’m positive that I couldn’t effectively work with a company whose sole criterion was price rather than value and quality of service. Shall we proceed?”

The use of script #6 takes practice, confidence, and a bit of chutzpah, but for those who are able to master it, it often works to turn lowball wheeler-dealers into full-fee clients. The following is based on pure logic.

7. “I’m sure we wouldn’t be discussing this if your need wasn’t a critical one. Is that correct? (If yes, continue. If no, end the conversation.) My success is based on my track record. All I have to offer is my expertise and my time. If all my clients willingly pay me 30% – and they all justifiably do – on which assignments would you logically expect me to spend my time? One for which I’ll be paid 30% or yours, where my time will be spent for considerably less? For the amount you offer, I’ll be happy to do a file search, but if you truly seek an impact player who can make a difference to your business unit, the fee is 30%. I’m sure you’ll find dozens of others in the Yellow Pages.”

I still occasionally receive subscription checks addressed to me at the old TFL address in St. Louis, probably because that address is already programmed into an automated check-writing program. While I forward them to the New York headquarters office, this sometimes delays the renewal or the subscription start date. While you’re reading this, take a moment and change the address from P.O. Box 31011, St. Louis, MO 63131 to ERE Media, Inc., 580 Broadway, Ste 304, New York, NY 10012.

I am still totally responsible for the content every month. For me, that’s the fun part. Even better, all the back-office functions are now the responsibility of ERE’s outstanding staff in New York. So if you have a subscription problem or question regarding renewals, address changes, switching from mail to email, subscription delivery problems, etc., you can call (212) 671-1181 or email help@ere.net. For conversations about the business in general or questions in particular, you can still call me at (314) 965-3883 or (preferably) email your comments or questions to me at: TheFordyceLetter@aol.com.

I still want to hear from you.

Last month, we addressed several ways that practitioners are accelerating fee payment from slow-pay clients. Long-tenured and very successful practitioner Neil McNulty (McNulty Management Group, Virginia Beach, Virginia) weighed in on his methodology with the following:

Trouble getting paid? Use the following procedure and you will rarely face that problem again.

Day of placement, invoice the hiring authority (the direct report senior to your candidate) with your invoice as a Word attachment and terms “net due receipt of invoice.” Call the hiring authority to confirm receipt of the invoice and conclusion of the placement. It’s OK to leave this on a voice mail and email. This can sometimes result in payment prior to start date. Some employers may think that your candidate will not be allowed to report for work until after you are paid.

On the start date, email and vmail the hiring authority and tell him, “(Candidate) is excited about reporting aboard today and beginning his career with (name of company). Can you let me know when you sent our check for payment for his placement? It is already (x) days past due. Thanks!” Of course, no check was sent.

On start date plus 10 days: “(Hiring authority), we still have not received payment for (candidate). I am beginning to feel very uncomfortable here, that perhaps (placed candidate) is not performing up to your expectations. Please call me and let me know what the problem is. Thanks.” Of course, 95% of the time the placed candidate is doing fine and the employer is simply delaying payment, but your message will begin to make HIM uncomfortable because the last thing he wants is for you to contact his employee and plant seeds of doubt in the placed candidate’s head about his performance.

On start date plus 20 days, leave the following voice-mail message: “(Hiring authority), since we have not received payment for the placement of (placed candidate’s name), I can only conclude that he is not performing up to your expectations and that he is not working out. I have a duty to inform him of that. Please call me right away. Thanks.”

Ninety-five percent of the time, you will receive an immediate callback. If not, then it means you are correct in that the employer is unhappy with your placed candidate. In that instance, you should inform your hiring authority that he needs to either terminate the placed candidate immediately, or pay you. Do not fall for the “we need to give him more time to get his feet on the ground” excuse. Such placements never succeed, and you will not get paid anyway.

If you receive an immediate callback, which is the vast-majority result, you need to tell the hiring authority, “(Name), from my experience in these things, the only time companies are slow to pay for a placement is when they are unhappy with the placed candidate. Since you have said that is not the case here, I need to receive payment within three business days. If I do not receive the check in three business days, I have a duty to contact the candidate and inform him that IT IS MY OPINION that you are unhappy in some way with his performance because you have not paid the fee for his hiring.” Note: Be sure to state “it is my opinion” because you cannot say “he is unhappy” if you cannot prove it is true.

You will receive your check within three days if the company is happy with the hire.

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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