Evolution

The Merriam-Webster dictionary defines evolution as “a process of change in a particular direction.” I could not find a word for “a process of change in NO particular direction.”

In an effort to be more responsive to the needs of those entities that pay our industry’s bills/fees, there has been not only a blurring of the lines between “search and placement” and “staffing” but also a conglomeratization of the various methodologies, processes, and practices. As one practitioner told us, “Anything for a buck!”

Last month, Placements & the Law columnist Jeff Allen again revealed a half dozen different fee options for those in the direct (permanent) placement business. That’s a start, but we’re seeing a wide range of transformation in the quest for revenue.

What used to be considered the major players in the temp industry are moving into direct placement – and many of the permanent placers are moving into the temp or interim space. There have always been hybrids in our business, but because of the inherent differences between the business models of each segment, the temp activity of the mainly perm placers has often been handled as a separate entity. Temp is considered a “business,” while perm has been viewed as a “practice.”

I recently spoke before a major international organization known primarily for permanent placement. They will be moving seriously into alternative business opportunities such as contracting, RPO (recruitment process outsourcing), interim executive placement, temp to perm, and other variations. Because of their size, commitment, and presence, they will be a force with which to be reckoned.

I queried several of our readers as follows:

1. Have you begun to offer service alternatives to clients and potential clients? If so, what have they been and how has this worked out for you?

2. If not, do you anticipate doing so in the future?

3. Have you noticed a change in the way business is done – and how? Please elaborate.

Jim Doherty of Systems Personnel, Inc., said, “We have offered contracting services to clients in addition to permanent placement for a number of years. It is all part of providing service to a client. With the business downturn in early 2001, many TPRs went onto the corporate side. Companies still think they can reduce cost and do it better themselves, but the corporate admin items do in most former TPRs and they are not as effective. The Internet has broadened geographic limits and improved the speed of the process. More email than phone interaction with candidates and companies. Email is efficient but not always the most effective. Recruiting is still a personal contact sport.”

Alan Elmont of Technical Staffing Specialists wrote: “Our corporate office in San Francisco began offering outsourcing services over two years ago. There is also a separate business entity that has provided contract labor services for many years. In LA we still provide direct hire contingency placement exclusively. At some point we will open an office for our contracting company in Los Angeles. Only in that email now is available for data exchanges, actual sales still happen the old-fashioned way, via dialogue.”

Jennifer M. Scott, a relative newcomer to our business and principal of HireEffect, started out by offering a range of alternatives. She said: “My business is new – founded just this past April. I offer a range of consulting services to my clients in addition to contingency search. I have found that there are employers, especially smaller companies, who do not wish to work with a traditional TPR, and I offer an alternative. I act as an extension of their HR department, and can offer service and pricing options based on their needs and wants. At this point, since I have only a few clients, I can offer my services on a project basis (e.g., I will staff an entire department, a new venture, multiple salespeople, etc., for a flat fee); I can offer consulting services at an hourly rate (e.g., train hiring managers on behavioral interviewing techniques, help create/define an employee value proposition, create/design an onboarding process, etc.); and I can offer contingency search. So far it is working out very well, although as an independent operator, I need to keep my client base rather small. Therefore, I am also working many splits with other independents, including splitting temp business if one of my clients needs a temp/temp to hire candidate, since I am not set up for temp payroll. While I have not ‘changed’ my model, I did start something that I consider to be rather unique. . . .”

Marilyn C. Durant, MS, SPHR, of Durant Resources Group, Inc., opined: “I have seen a change in the way the contingent business has been done. More than in the past, some clients are setting unrealistic hiring criteria. We are also seeing that we need to offer fee alternatives such as multiple search discounts, contract recruitment, hiring and/or retention bonuses, reduced percentage on fees, and, at times, submitting candidates with a signed contract and having to fight for payment or delayed payments. Making changes to the fees has assisted in closing some deals, but it has not made it any easier to find quality candidates in today’s tight job market.

We have not had to deal with this in the last 12 years, and it is more obvious in the nonretained mid-management and senior management market. There is a skills shortage, and rather than hire “talent” with potential, they would rather wait for a candidate with long-term stability in an unstable market. Quality candidates who have been victims of corporate changes are not being considered without a hard sell, and more often than not, they won’t even talk to them. Educating them is a slow process and candidates can be lost, not to mention the time needed to close the search.

We are also seeing more and more clients hiring in-house junior recruiters who have shortsighted vision and/or no authority. They are given the title and asked to go out and make it happen. They rarely have a hiring budget and live off the job boards. They are sometimes threatened by external resources as a reflection of their own lack of competence rather than seeing the value in third-party partnering. It is still better to have the relationship with the decision maker.

In a very tight and competitive job market, we were warned years ago that it was going to get tougher to find good talent. We must continue to learn from each other as we remain ethical and competitive in our profession while trying to satisfy our clients’ needs and achieve results.”

Jim Sullivan of Galaxy Management Group, Inc., shared his views (and the views of many other respondents) as follows: “We’re not offering any service alternatives at the moment. We’re real busy keeping up with the perm and contract positions we have. I have a small boutique, and clients are keeping us very busy with the ‘bread and butter’ positions. I can’t see adding anything else at the moment without adding staff. I am seeing a change in the way business is done. It feels more ‘procurement oriented’ than ever. I see long-term clients pay more attention to $ than ever before. I’m not saying they are looking to save, but I see them having many layers of service. Some they do themselves; some they farm out for a fee.”

Donna L. Friedman of Tower Consultants echoed the remarks of many when she wrote, “I believe Tower Consultants’ success over our 19 years has been that we have been razor sharp in our focus and have consciously avoided considering becoming all things to all people. We are a boutique retained-search firm specializing exclusively in the search for human resources professionals, and our HR clients have often told us that they appreciate our not selling them a host of other services. My best advice is to celebrate what you do best and if you’re really good at it – stick with it.”

Fran Timson, manager of ITPCS and Executive Search, shared a diverse view: “We have been offering our clients perm, contract, and contract to hire since 1999. We found that we have a better relationship with the client when we can respond to all of their needs and it provides a much better basis on which to ask for an exclusive. Within the last few years we have also provided outsourcing for a client’s software and hardware Helpdesk Center, and that has worked out very well. I think that any company doing perms or contract only in this market needs to reevaluate their model. It is very frustrating to have a great candidate (in a seller’s market) and not be able to place them in a position if they only want perm or contract.

We are seeing more clients who want to reduce their number of vendors. In order to be a true partner instead of just another vendor, I believe you need to use your sourcing and recruiting experience to a client’s best advantage. We are finding that clients want their vendor partners to know the inner workings of their company and be able to handle multiple types of jobs, i.e., contract or perm.”

Robb Norris, CPC, Practice Lead – IT, Inteqna, shares a Canadian viewpoint: “Please remember that I work in the Toronto market, and the Canadian IT market functions differently than the U.S. What I see as the differences between the two (and I have worked for a U.S.-based company in Toronto that functioned like a U.S. company in the Canadian market) is that most major Canadian IT recruiting firms do the full range of staffing/recruiting now. They almost all provide contract staffing, full-time placement, payrolling, contract-to-perm (temp is not really a term we use in this industry, as we generally are more corporation-to-corporation contract arrangements). We have not begun to offer service alternatives. Nothing seems to be driving us to do so. Although we have some competitors that do offer managed vendor services, we tend to shy away from those – especially if we are one of the secondary vendors. I have noticed a slow but steady move to making our services much more of a commodity rather than a valuable business solution. This has been caused by two major issues. 1. When the market was very soft, companies began really squeezing vendors like us on margin. It is not uncommon to find major contract buyers with set contract gross margins of 15% – hard to make a living at that rate. 2. Because of #1, there are several large competitors that have decided to go after the large client with low margins in order to capture market share and effectively shut out competitors in those large contract buyers. The fallout from this is that now, even though the market has tightened up for candidates, many companies are still trying to dictate lower fees/rates, despite the lack of supply. With the prevalence of job boards as well, access to a large number of candidates (not exactly the best candidates, either) gives companies the false impression that they can find top-notch people easily and on their own. A lot of recruiting firms (especially IT recruiting firms) have fallen into the trap of just surfing the job boards for the quickest and easiest candidate – also contributing to our own suicide by job board.”

Michael Shaffer, CSM and president of Management Recruiters & Sales Consultants of San Francisco Bay, said: “We will be starting a contract division in Jan ’08. We really have not had to change service alternatives with our clients or prospective clients. I have noticed a change in the independent side. We seem to be running across lower fees being offered, but it has not made a difference in our fee structure. There are agencies strictly gathering names and presenting them to clients as a low fee alternative. We are not offering that service as well. There are firms signing clients to agreements to act as a clearinghouse for many recruiters throughout the U.S. After a firm presents a candidate on a specific opening, they can then have direct contact with the client. The clearinghouse firm does the billing and offers a 90-day refund. They will attract only the weaker recruiters who choose not to market or do not have the skills to market. Our position is that we replace candidates only. No Refunds. We have not had the need yet to offer service alternatives and will probably not do so in the future other than contract staffing. In candidate-driven industries, we have noticed a number of huge counteroffers. We have had to improve our counteroffer skills and qualifying skills with these candidates. A positive change I have noticed is that clients are far more perceptive in modifying their hiring process for us; e.g., expediting their hiring process and decision making as well as shortening the number of interviews required for a hire. They are also more open to coaching (interview prep) and selling their opportunity.”

Miquel Purvis McMoore of KP Companies emailed: “We have begun to offer service alternatives to clients and potential clients. In addition to direct-hire options, we now offer temporary staffing, temp-to-hire, and contract services. We’ve also provided research and explored recruitment process outsourcing (RPO) with a large client. We’ve added a diversity search specialization, which is in high demand for all of our clients and has attracted more business. Diversity search done right is worth its weight in gold. More and more business is being done electronically. With the use of video technology, we found, it makes email more fun and personable. My executive recruiters get more responses from their email marketing than from traditional cold-calling tactics. Additionally, as with other functions of HR, more and more companies are realizing a value in RPO. These are just a couple of changes I’ve noticed in the way business is being done as it relates to recruiting.”

Thomas Fagan of Staff Accountants wrote: “I am a senior recruiter in the accounting/finance industry. I speak with candidates/clients in all industries. My firm has been in operation for almost 18 years and has established solid relationships with local CPA firms to Fortune 500 companies in both audit and tax. We do approximately 95% perm placements, very little contract/temp assignments. More than half of our business deals with public accounting firms (local to national). I have not noticed a higher demand (at least in the last two years) for alternative-type hires (contract, temp to perm, etc.). So I guess to address your question, we are not seeing the need to offer alternative services. I would attribute this to the current demand for the types of candidates we place (mostly CPA types in audit/tax). This market has become much more of a ‘candidate driven’ environment. I do not see this changing anytime soon (as the demand is growing).

I have noticed a change in the way business is being conducted on both the candidate and client side. Candidate profiles have become a major issue; we are finding that we need to ask more questions, redundantly re-ask the same questions, to make sure we are getting the same answer. Counteroffers are at an all-time high. It seems as though a large percentage of candidates are going through sometimes three to five interviews, while never having the intention of making a move (I know I do not have this kind of time to waste).

Also, I may be showing my old-school mentality here, but there seems to be way too much electronic communication going on. Whatever happened to the phone?!? This business, as well as society as a whole, is becoming extremely introverted . . . I will get off my soapbox now.

The only other topic I would make mention of is the use of electronic job boards. I find this tool to be less of a time saver and somewhat of a crap shoot. I find most of the candidates that are posted on these J-boards to be marginal at best, and the above-average performers with whom you network have been or will be contacted by a dozen + of your competition. I say direct recruiting passive candidates has been and still is the way to go.”

Bob Eskridge, CPC, CTS, PRC, CSP, President of Eskridge & Associates and a Board Certified Physician Recruiter, seems to be embracing the new paradigm. “We have been very busy this past year in expanding our offerings – some traditional, some not so traditional. We started out doing just contingency perm three years ago and within six months quickly moved into contract and temp staffing, called locum tenens in the physician world. We also expanded into government contracting as well. Most recently, we launched a full-service travel agency to assist primarily our locum tenens physicians with all the travel details. It has been a huge success so far. It is www.eskridgewwtravel.com. We have teamed with Recruiter Relocation to assist our physicians in their permanent moves. We are also looking into starting up a medical licensure company within a year to assist physicians with getting the appropriate licenses for states they want to work in. No moss growing here.”

One correspondent asked if we thought that the traditional placement models were in danger of extinction. My answer is no. Are they being challenged? Yes, for some areas.

Some practitioners want to build empires; some want to stay in their homes and quietly earn a great living without all the distractions of trying to manage their way into greater prominence. The majority of traditional recruiting firms aren’t sure what they want to do.

I continue to have conversations with many potential hirers who indicate that a good many wished there were more options to the process of filling their empty chairs, especially in the area of fee elasticity or in the service alternatives offered. Several, for instance, said that they had piles of résumés through their ads and job postings but didn’t have the time to wade through them to separate the good ones from the bad. This was a common complaint, especially among those who posted their ads on a job board. One hiring manager complained, “I’ve gotten hundreds of résumé submittals forwarded by our understaffed and clueless HR people, most of which are totally off the mark since they didn’t prescreen most of them. My department has suffered some terminations and I’m doing the work of four people. I just don’t have the time to spend valuable hours wading through unqualified prospects or overpriced prima donnas, only to find that they’re not what I really need.”

We, as an industry, have been conditioned to sell ourselves as “full-service” providers. When asked for a discount, we are programmed to say, “And which of the 30 steps in the (search/placement) process would you like us to dispense with?”

Yet what we’ve found is that many employers think they would like it if we offered unbundled services, cafeteria style. And hundreds of recruiters have heard their clarion call. Sometimes, standing firm on a full-fee service arrangement can be counterproductive, especially when that dollar amount may be attainable through another methodology.

In the past, we have mentioned many other methods used by recruiting firms to enhance (or protect) their revenue stream.

A large number of respondents asked for clarification of some of the alternative revenue sources. We won’t cover the details of RPO since that topic was covered in the October issue by columnist Margaret Graziano, but here are the general topic areas you may wish to explore:

Although every company’s needs are different, it appears that almost all employers are susceptible prospects for the right presentation to outsource all or a part of the hiring process.

While it is unlikely that most employers will be willing to relinquish total control over any aspect of their employment activities, there are a number of RPO deals out there, and in some cases, these have produced worse outcomes than the chaotic results they were meant to replace. One RPO provider’s employee forthrightly admitted that all they were doing was surfing the job boards and forwarding the results. He was frank about the fact that absolutely no creative recruiting was being done and that their success ratio was abysmal on almost all but the low-level clone type jobs.

Another problem for the traditional fee-per-placement practitioner to get into any form of “temp” services is their inability to obtain the necessary financing and back-office help. There are a number of firms offering these finance and back-office services, but it’s a business that normally requires more time and financial commitment than most traditionalists are willing to endure.

Here are just a few of the functions that have been successfully outsourced:

Sourcing of candidates – Some just generate names; others go further into the search process (screening, interviewing, qualifying, ranking, candidate report writing, and even occasionally checking references). Many search firms have offered their in-house research services on an a la carte basis, but there is a thriving business by freelancers who charge from $90 to $110 per hour. The most common method of payment is an hourly (plus expenses) charge, but there are a few that charge by the project. Almost 400 of these specialists are listed in The Executive Search Research Directory (www.rsronline.com) along with their backgrounds, operational methods, costs, and specialty areas (over 290 of them). Assignments may be position-specific or a more generalized assignment such as: “We always need ____, so keep our pipeline full.” Some will work only with companies, some only with searchers, and most will work with both.

Another source of revenue for recruiters with good investigative/sourcing skills is to perform research for other search firms. Several who had in-house researchers find it more cost-effective to hire an outsider to do it.

Wording on a typical proposal might begin with:

We invoice at an hourly rate of $____ for a minimum of 25 hours at the beginning of each project. We are reimbursed for actual telephone costs. Timely progress reviews are made by telephone, and a written report is submitted following each 25-hour segment.

Screening of candidates – This function has existed for decades but has never been thought of as outsourcing. Basically, the vendor performs initial and/or more in-depth screening of response from ads (print and Internet) and write-in applicants, referring only those who fit the specifications. This has become a much larger task for hirers with the job boards in the mix, disgorging hundreds of hopefuls at a time. Although there are companies selling “selection” software that supposedly does this task with some form of AI (artificial intelligence), fact is a true screening requires some form of time-consuming personal contact with those who hope to survive the “cut” process. Thinning the herd for important professional or senior-level openings also requires that the screeners possess the “soft skills” necessary to truly evaluate the candidate against the actual opening, not just some hypothetical templates provided by the software providers or the job description, which is usually nothing more than a wish list. After all, if screening is just based on the résumé, you have nothing to rely on except what the candidate has divulged. Third-party verification and evaluation is a most important ingredient at this stage of the prehiring procedure. As much as you hear about hiring becoming a robotic automated function devoid of most human contact, it will never happen.

Much of this work is being done either on an hourly basis or for a predetermined project fee based on replacing in-house costs/functionality. (In-house assessment skills are rarely as good or unbiased as those of an outside evaluator.) One tangential benefit noted by practitioners who engage in this sideline is the accumulation of usable résumés that don’t pass muster for the client but may be useful for future placement activities.

Responding to employment inquiries – One of the biggest complaints from job seekers is the fact that their résumé submissions go into an HR “black hole.” Companies that previously ignored unsuitable applicants are trying to polish their PR image through some form of communication and often outsource this task. Sometimes, this is a part of the previous function; sometimes it is a stand-alone function to write “Dear John” letters or other canned correspondence to job applicants. It may or may not include a call to applicants to further determine their suitability. This is normally handled on an hourly basis.

Checking references – This self-explanatory function has been selectively outsourced for years. The trend continues to grow. There are a number of reference horror stories, mainly about miscreants whose tawdry pasts caught up with them after they were put on someone’s payroll. An insurance policy to guard against legal action is highly recommended.

Coordinating college relations/recruiting – Whether a company visits one college or a hundred, this chore is an expensive grind that can (and has been) be more efficiently handled by an outside vendor.

Coordinating job fairs/career centers – Like college recruiting, job fair/career center interviewing is nothing more than an initial screening job probably done more efficiently and economically by an outsider. A spin-off to this is the downsizing company that produces its own career center for exiting employees. More than one recruiting practitioner has become the coordinator for events like these, issuing invitations to companies still hiring and professionally organizing and managing the event for the shrinking client. Getting paid for this function is quite wide-ranging. Some are paid a project fee for event management, and others have designed ways to get paid a fee for each person placed – some from the hiring company and sometimes from the terminating company (as an outplacement fee).

Relocating newly hired employees – Unless a company has its own relocation department (which few do), the details of moving people can best be done by an outside specialist in the area. Several exist independently, and a number of practitioners are offering this as a sweetener when moving out-of-towners.

Administering skill/aptitude tests – More often done by temp firms than permanent placers, this can be a profitable sideline.

Operating on- or off-site employment office – This is a more full-service approach for short-staffed clients with continuing needs.

Maintaining applicant database – Often, the scanning in and maintenance of applicant files from a varied number of job boards and similar sites can be done by an off-site vendor or by an on-site contract employee. The number of firms doing this is rapidly growing.

Becoming the employer of record – Many employers want to “test drive” new employees before committing to permanently hire them. Putting them on your payroll instead of theirs gives potential hirers the opportunity to audition them without the obligation of having them on their payroll. Auditions often lead to full-time gigs.

Other functions frequently outsourced are:

Updating affirmative action/diversity plans
Staffing short-duration projects
Employing temporary workers
Outplacing of employees
Training
Drug screening

Knowing the lingo for the outsourcing and staffing industry could almost be described as a “core function” in itself. You need to know and recognize the following list of common outsourcing/staffing terms and definitions:

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ADMINISTRATIVE EMPLOYER – The company that manages all payrolling, employee benefits, and other human resources functions.

CARE & CUSTODY EMPLOYER – The company that manages the day-to-day employee activities such as the hiring and firing, salary increases, promotions, and performance appraisals.

CO-EMPLOYER (Joint Employer) – The legal relationship between two or more employers in which each employer has actual or potential legal rights and duties with respect to the same employee or group of employees, as well as the specific legal consequences of that relationship.

CORE COMPETENCY – A business strategy wherein a company concentrates on what it does best – the functions and/or staffing that are considered central to business operations.

FACILITIES STAFFING (Functional Staffing) – The provision of temporary workers to handle a particular facility, department, or function for a customer.

OUTSOURCING – An alternative staffing option involving the transfer of a department or business function in an organization to an outside supplier.

PAYROLLING (Payroll Service) – The practice of placing an employee on the payroll of a temporary-help company.

PROFESSIONAL EMPLOYER ORGANIZATION (PEO) – An organization that contracts with a business to supply human resources and benefits consulting and becomes the administrative employer of the customer’s employees. The functions most often administered by a PEO include payroll administration, employee benefits, risk and insurance management, regulatory compliance and reports, and recordkeeping. The customer is billed for actual costs plus an administrative service fee. The customer retains responsibility for the product or service it provides, and for direct supervision of the employees. There are more than 700 PEOs in the United States. (This function was formerly termed “employee leasing.”)

While many practitioners engage in some of the aforementioned tasks as a way to level out profit peaks and valleys, it is important to recognize the main focus of your business and not become diverted into sideline activities at the expense of your core business. And before you take the plunge into peripheral activities, you have to know what your time is actually worth. Will the time and resources spent on these secondary activities come at the expense of making full-fee placements?

You are probably already performing many of these functions for your own purposes, so to take on clients for less than full-service tasks may be a profitable way to keep underutilized researchers or other less than productive staff members busy. Just be sure that these efforts are worth your while and don’t diminish either your bottom line or your ability to capture full-fee business when it comes your way.

There may be a tendency to become self-victimized during some periods or by some employers by succumbing to the requests for fee discounting, but many times this can be overcome by just steering the conversation toward a different way to get paid. Veteran practitioner Russ Riendeau wrote about a number of alternatives for good times and bad:

“Some of these fee options are not familiar to managers, so practice patience when explaining them and stress the benefits of creative arrangements.

Option 1. Standard rates are a maximum 30% fee. Period. You run the show your way. This is a great stand to take if you anticipate the manager or company to be difficult to work with. If your opinion turns out to be true, you’ll still make money despite the difficulties.

Option 2. First hire 30%. Second hire 25%. Third hire 20%. This is pretty basic and easy to remember, AND easy to see how much money you’re losing.

Option 3. First, second, and third hire, full fee. Fourth, fifth, and sixth hire, 25% fee. Seventh, eighth, and ninth hire, 20% fee. Not a bad way to structure it if the searches are easier to fill, and you won’t need to do extensive recruiting or reinvent the wheel.

Option 4. A flat fee reflecting a reduced fee based on projected first-year earnings. This is a popular approach because everybody knows what the charge will be from the start – no questions asked. The problem can be that this fee can stay at this amount for years and you’ll be skeptical of approaching the client to increase it. You may want to find a way to convert that flat fee into some kind of percentage amount. That way inflation will take care of keeping the fee in line with rising costs and salaries. Or build in a yearly cost-of-living increase to the flat fee. The bottom line is: don’t get locked in to a number for life.

Option 5. Engagement fee, 25% of estimated fee paid up front, nonrefundable, to ensure commitment on the client’s part that the search is for real and urgent. This tactic works well in a strong economy where candidates are scarce. It tells the client that you’re serious in wanting to work with them, but need their commitment to the project so your recruiting costs are covered, should they change their minds and not fill the opening. Point out to the client that all your costs are incurred at the beginning of the search, so to ensure against any losses, the engagement fee protects this. I will consider discounting the fee slightly if a company is willing to give me an engagement fee. The odds go up to fill the search when they have invested dollars with me already. (Engagement fee is also an excellent way to nurse your client into future retainer business. They will see that it doesn’t even hurt!)

Option 6. Base fee on cumulative salaries of hires. Example:

0 – $100,000 of salary dollars – 30% fee
$101,000 – $200,000 salary dollars – 25% fee
Start back at 30%

This is a great way to lock in a client to long-term savings and to building a relationship with you. A win-win all around. You can adjust the ranges of salary discounting to fit your industry pay scale, and maybe set it up to provide approximately three hires in the first group and three in the next.

Option 7. Sign a national agreement in return for a reduced fee. Note I didn’t say contract, but agreement. It’s less commitment for the client, yet it creates a synergy and understanding that will go a long way. Do indeed sign a contract if you can, guaranteeing that the client uses only you and pays your fee. But if you have not done a lot of business with them yet, it might be hard to get this signed. Be patient and keep performing above and beyond the call – a contract will come.

Option 8. Run an ad. They pay and you collect résumés and screen candidates. In return, you reduce your fee and keep additional leads and candidates generated from the ad. This is a good way to source some additional candidates, but it can be time-consuming and downright depressing getting numerous calls from those seeking a change without the qualifications or preparation. I don’t do these too often, unless business is in the dumps.

Option 9. Regular fee agreement – a 10% discount off that amount. Clean and simple.

Option 10. Reduce fee slightly if paid in 10 days. A 2% net 10 is textbook discounting in business. It’s worth a try.

Option 11. Avoid extended guarantees. If you need to comply, consider a 50% refund after 60 days, for example, rather than the full amount. Or prorate the refund over the length of the guarantee. Remember: You’re a recruiter, not an insurance company.

Option 12. Get a retainer. These are easier to contract than you may think. The only difference between a contingent fee search and a retained search is the method of payment, not the method of search. The full-time retainer firms attempt to paint a mystical picture of how they seek out and secure talent for client companies, but the approach is not much different. I do retained searches with companies I have worked with in the past or if I have a good understanding of their business. A retainer can be great, but if the company is unsure of its needs, you can be sucked dry of time and energy seeking out a candidate that doesn’t exist. Use caution when accepting a retainer search. If you primarily do contingent work, you have the option of walking away from a contingent search. It’s a little tougher when you have a retainer contract that needs to be fulfilled.

If the fee gets too low, walk away and find a better one. Low fees are a pain, and the managers expect miracles. Stand firm; they will come back to you when they’ve frustrated themselves with cheap fixes and poor-quality candidates.”

Jeff Allen’s Placements & the Law column also discussed fee options from a more legalistic view in last month’s issue.

Yet another great option to increase profitability is to join a network, association, or other affinity group with whom to cooperate regarding job orders and/or candidates. Much as we think the word synergism has been overused, it fits in the networking context. It is defined by Webster’s dictionary as “The combined action of two or more . . . agencies to achieve an effect greater than that of which it is individually capable.”

Cooperation with others is one of the easiest ways to extend your reach – through either associations or networks. Over the years, our surveys have shown that those who collaborate with others through formal or informal networks or associations earn more money than those who go it alone.

The franchises learned this lesson long ago, and it is one of their biggest selling points. Employers frequently tell us they prefer doing business with firms that have cooperative alliances with others. Sharing candidate data or assignments can be particularly important when economic uncertainties are present. But it can also be important during boom times or bad because it allows practitioners to extend their business boundaries beyond what they can reasonably handle themselves – and into areas with which they may be unfamiliar.

Although there is supposedly a semantic difference between networks and associations, that distinction is beginning to blur as associations often facilitate fee-splitting (a traditional bailiwick of networks) and networks (at least the larger ones) have taken on many of the traditional trappings of associations (education, conferences, lobbying, etc.).

Size of the membership of networks seems to have little to do with how much revenue a member can make from the affiliation. Those with small memberships are often narrowly specialized and regionally restricted, and their very focus can make them more efficient than a larger group without separate core groups.

On the other hand, larger groups can offer peripheral benefits not available through the more tightly organized ones. If, for instance, as an insurance specialist within a compatible network group, you receive an assignment that is far afield from the network’s purpose, you have nowhere to go with it, whereas as a member of a more generalized network, you have a better chance of farming it out to a member whose specialty happens to coincide with the client need.

Is a network membership going to automatically make you more money? Of course not! You pay for a telephone, but unless you use it, it will not make any money for you. The same holds true with networks. Cooperation (which is what networks are all about) is a two-way street. If you go into a network with a unilateral mindset, you will lose.

Some trainers have advised against networks or other cooperative arrangements. We disagree. Network members tend to react much quicker to client requests for speed, and a bigger talent pool is becoming increasingly important to hirers.

Later in this issue, Margaret Graziano, a practitioner we greatly respect, gives her opinions on the industry in a way you can understand from the viewpoint of an already successful career that is evolving in different ways. Take heed.

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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