Fallout: The double (or triple) dip

Fallout is generally defined as any situation where a recruiter has been retained to search for a specific opening and the client company decides to also hire other candidates submitted during the search for other positions within the company.The subject comes up frequently and we wonder why so few recruiters address it in their contracts. It doesn’t come up much in contingency relationships since it should be understood by both parties that a fee is due for every candidate referred, regardless of the position. This is the transactional nature of contingency search.But fallout becomes a bit foggier when the relationship is retained. We’ve looked at dozens of retained contracts and agreements and not one contained a clause covering fallout.Some search pros feel they should be compensated for these fallout hires; others think that they shouldn’t be paid for what is basically a by-product of the original search. Many relationships have been tarnished over this matter.One retained searcher told us a while ago of an assignment with a large multi-brand brewery for a Manufacturing Director for a specific brand. Naturally, their primary focus for the search was the brewery industry in particular and the beverage industry in general. They turned up several very qualified candidates and the client hired what they considered to be the best candidate.Two of the other finalists, however, struck their fancy – one for a similar position with another non-alcoholic brand and the other for a Senior Process Management spot in a non-related business altogether. Both were hired and the searcher expected to be paid additional fees for them. The HR Director told them that they would only pay the fee for the opening they contracted for and felt that the others should be freebies. Since the searcher didn’t want to lose his best account, he reluctantly agreed.One HR VP told us that he feels the same way. “After all,” he said, “we are paying for the process, not the product. If the process turns up additional hires, why should we switch gears into what is basically a contingency mode and pay additional fees? These people were turned up on our nickel, we paid the recruiter’s travel expenses to interview them and the candidate’s travel expenses to visit.”A recruiter told us that clients who won’t pay for additional hires are shortchanging themselves since recruiters control the rank and order of referrals and can skew the results with stalking horses, etc.There are fairly good arguments for both positions, depending upon which side of the desk you sit.Generally, fallout hires don’t command the same fee percentage as the original hire. The usual drop-down percentage is 20 – 25%.The overwhelming consensus among recruiters is: We submit them, you hire them, you owe us.A clause that should probably be added to your retained (or partially retained) agreements is:

(Search firm) charges a selection fee when a client hires one or more additional individuals presented during the search assignment. (Search firm) will provide its normal selection services for these additional hires. The fee for an additional selection will be 25% of the candidate’s first year projected cash compensation. We will extend our normal guarantee to those people who receive our positive recommendation.

Better safe than sorry.

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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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