Practitioners as well as their prospects and clients often misunderstand one of the most fundamental principles of our business. This misunderstanding creates a multitude of problems ranging from heavily discounted fees to nonproductive working relationships, all of which can seriously compromise the likelihood for achieving a positive outcome.
This fundamental principle can be stated in two simple to understand sentences.
1. The size of the agreed upon fee must reflect the value a client places on the open position (see TFL 10/03 Justifying Your Fee A Value Proposition).
2. The payment terms (contingency, engagement fee, retainer) and the agreed upon working relationship reflect the client’s commitment to the recruiter (see TFL 06/04 Justifying An Engagement Fee).
It is imperative to understand the duality of this principle and not to confuse its two components, which frequently happens during fee negotiations.
Anytime a client is allowed to compare the size of your fee with their perception of the process you will follow in filling the position, you will probably lose.
Value (fee justification) is determined by the contribution of the position to the overall welfare of organization, not by the process utilized to acquire the individual to fill that position.
That is why not all open positions have an organizational value that justifies the payment of a fee. As an example, if, after quoting your fee to a prospect, they say “your fee is too high” or something of a similar ilk, you might consider responding in the following manner:
“It could be. How do you measure that in comparison to the internal indicator of the position’s value to your organization?”
“It would be too high if the value you place on the work product for the position doesn’t justify this level of investment. In your organization, how is that measured?”
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The purpose for these questions is to help the prospect/client focus on the value of the position. After all, if it is a low value position, paying a fee may not be in the employer’s best interest. On the other hand, if it is a highly valued position, the actual size of the fee should not be a problem. Nevertheless, if you allow the employer to use anything other than valid internal indicators on which to make this judgment, you are doing them a disservice.
The second component of the principle, payment terms and working relationship, reflects the employer’s commitment to you. They may agree to pay your fee yet not agree to work within the structure of a productive process. This could result from poor timing (other resources are already in play), a lack of understanding regarding the benefits of mutual commitment, or, as it is in most instances, a lack of confidence in the recruiter’s ability to successfully fill the position in a timely fashion. The operative words here are “lack of confidence.”
Without confidence, there is no commitment and without commitment, there is no relationship.
In situations where you have not previously worked with a client, you must build their confidence in your capability to produce a successful outcome. First of all, in order to do this, you must possess the wherewithal to accomplish the task and secondly, you must be ready and able to clearly articulate the specific steps of the process you will follow in order to create the necessary results (see TFL 10/02 “It’s in the How and not the What”).
If you fail to build an acceptable level of confidence in your client, you will not gain the commitment necessary to properly execute an effective process on their behalf. Without this commitment, your results, if any, will most likely benchmark you as industry average at best. You will have become a commodity in the eyes of the client.
Therefore, if you are interested in building privileged relationships with your clients while earning full fees; make certain that you understand the difference between “value” and “commitment.” More importantly, make certain your prospects and clients achieve the same understanding.
As always, if you have questions or comments about this principle or how to apply it, just let me know. Your contacts are always welcomed.