Myths And Other Fuzzy Thoughts

One of the pleasures of editing a newsletter is the communication I have with our readers. Agree or disagree, I learn as much from these interactions as I hope you learn from The Fordyce Letter. Having been in this business since 1959, I’ve seen a lot of changes, made a lot of friends and had more than my share of fun. I know of very few other professions that are as addictive as recruiting, search and placement.

Over the years, I’ve compiled some belief statements made by people in our business. From my perspective, all of them are false. Of course, there are some areas of disagreement, but that’s the nature of practitioners in a business heavily populated with mavericks, free spirits and nonconformists.

Feel free to let us know your thoughts on any of the following.

1. Consultants who don’t make at least 50 calls a day are destined to fail.

At the beginning of a career or when switching to a new specialty, it’s almost mandatory to telephone canvass broadly to acquaint yourself with the landscape but, unless you’re in an endless “job order contest,” other functions (such as recruiting, screening, qualifying, etc.) become more important and more profitable. Having a fistful of job orders languishing on your desk without some action being taken on them is ludicrous. Better to make 10 pre-researched, quality calls than 100 broadsides.

Managers who believe that hundreds of “Hi, how are you … do you have any openings” calls will bring in the business are delusional, number obsessed automatons who quickly create consultant burnout.

2. Retained recruiters make much more money than contingency recruiters.

Our surveys indicate that, on average, recruiter income is about equal for both groups so long as equivalent experience levels are compared. Fact is, many retained recruiters started and honed their skills as contingency practitioners. Guaranteed compensation paid by retained search firms to their recruiters tends to be higher up-front than that paid by contingency firms who pay lower draws/salaries and higher commissions/bonuses.

In the long run, however, unless you’re one of the industry superstars, a tenured recruiter, whether contingency or retained, will earn about the same.

The misconception that retained recruiters are all rich and famous and that contingency recruiters are poor cousins is due primarily to the rapid arrival and departure of recruiters into the contingency business with over 90% of them leaving the business within the first year. There are scores of contingency recruiters who consistently earn close to (or more than) seven figure incomes. And, there are retained recruiters who have trouble making the rent and phone bills.

3. Temp firm billings far exceed permanent placer revenues.

This fable continues to flourish because of the raw numbers involved. Perhaps the word “billings” should be replaced with “profits.” “Experts” have put the total staffing industry revenues at anywhere between $60 billion and $140 billion. That’s quite a spread and it depends upon which categories of “help supply providers” are included.

The fly in the ointment is the fact that reported temp revenues consist of total money collected from customers. The net income of the temp business is considerably smaller (sometimes as low as 5%). A perm fee, although burdened with some operating expenses, averages a net profit of 25% and is often as high as 50+% for many solo practitioners.

While the temp business is larger in both gross revenues and total net income, the actual difference shrinks considerably when comparing apples to apples rather than apples to oranges.

4. Retained recruiters never advertise.

We’ve noticed more ads from retained recruiters lately. Many clients (especially governmental, quasi-governmental, scholastic institutions and non-profits) require that ads be run as a part of the deal. Others, according to our sources, surreptitiously run blind ads and Internet postings to attract a broader candidate pool. While advertising is rarely a source for the final hire, it is done more frequently than the purists would have you believe.

5. The Americans with Disabilities Act doesn’t impact on the recruiting community.

Don’t believe it. The ADA, EEO, OSHA, FCRA, I-9 and the other ingredients in the government alphabet soup bowl are as germane to recruiters as to your clients. You’re in the loop whether you want to be or not. You ignore these laws at your peril.

6. Computerized firms rarely have better production than non-computerized ones.

As most practitioners have computerized, the more the advantages of automation diminish but our most recent survey shows that computerized firms have decidedly higher production.

Where the rub comes in is in the definition and scope of the term “computerized.” If you think you are computerized just because you have a rudimentary “off-the-shelf” word processing, accounting or database program you are probably kidding yourself as to the benefits.

If, on the other hand, you have a sophisticated industry-specific program encompassing a full-range of features (such as search/match, notepad, mail, rolodex, word processing, scanning, planning, management/consultant activity reports, automatic dialing, fax, follow-up reminders, CD-ROM, candidate/client report generation, accounting {payables & receivables}, status tracking, etc.) you can expect your investment to increase your revenue generation by as much as 25% to 45% once you have it up and running.

The biggest problem during the first year of computerization is the tendency to tinker with the programs to the detriment of your regular business activities. Once you get over that phase and return to your usual revenue-producing activities using the computer as a slave rather than a master, you’ll notice a dramatic increase in time for placing.

Internet literacy is also a factor in determining whether you are playing in the major leagues or still playing in the peewee league. Some practitioners conduct almost all of their business via Email and the web. Others only check their Emails once a week, if then. Whether the Internet is a plus or minus in your practice depends on your keyboard skills, your specialty area, your tolerance for tedium and a whole host of other variables.

Many practitioners conduct 99% of their business through Email and many are quite successful at it. Others view the job boards as “human parts bins.”

The reality is that information technology is what it is. It won’t go away. Even though recruiting is still a contact sport, with the right computer proficiency, your contacts can be made quicker and more efficiently. But it changes and improves by the hour and will never be the magic potion that many believe.

Dr. Wendell Williams opined, “Web-based services were then, are now, and will always be, just another delivery method, not a panacea for all hiring problems.”

7. Big billers are just luckier than mediocre ones.

Remember the old saying, “The harder I work, the luckier I get?” Put another way, “Success is all a matter of luck ask any failure.” Everyone can get lucky in this business. I once placed 88 people in one month when two out-of-town companies wanted to hire the very people that two St. Louis firms happened to be laying off or relocating. I was lucky! Others have stumbled into big production as well but most were “flashes in the pan.” While that may be temporarily exhilarating, it is sustained production, year after year, which creates superstars . . . and that takes a lot more than luck.

As much as many in our business would like to believe in serendipity, ours is a formula business. Some minor tinkering with the formula to suit your own personality and work ethic is OK, but major deviations from the tried and true framework or attempting to take shortcuts in the process are always counterproductive.

“Luck is the corner where preparation meets opportunity.”

8. The best marketing tool is a well-written brochure.

Practitioners seem to be obsessed with expensive fancy brochures. Literally millions of dollars are spent every year in design and printing of brochures, most of which end up saying the same old stuff.

For every thousand brochures mailed to potential client companies, expect to hear back from 2 or 3 of them. Those are lousy odds.

Your best marketing tool is you on your telephone. Your least effective tool is your brochure, no matter how many colors, sizes, die cuts, pockets, gimmicks or resourceful prose it contains.

We have no objection to your having a top-notch brochure if it makes you feel better, but save your postage if you think that mailing them out will suddenly transform your business from Abe’s Computers to IBM. It ain’t goin’ to happen.

Your best bet as an alternative to brochures is a well designed web site and a comfortable telephone headset..

9. Our business is better off in states where we are regulated than in those where we are not.

“If only we could get some strong regulations in our state we could force the bad guys out of the business.” I don’t know how many times I’ve heard well-meaning practitioners tout this nonsense to their collective meetings.

It doesn’t work . . . ever. Every time it’s been tried it has caused practitioners more grief than joy. The marketplace is the best regulator. If a recruiter promises more than they can deliver, employers shun them and they go on to other pursuits. No bureaucracy, no matter how well intentioned can chase transgressors at the pace they choose to defraud. No amount of legislation can keep a miscreant from practicing their dishonesty.

Most of these bureaucracies are geared to protecting the job seeker who pays their own fee, but the net they cast to protect this miniscule group frequently snares all of us.

The preponderance of our activity is a business-to-business relationship. Businesspeople are big boys and girls who don’t need oppressive and dim-witted legalisms or public pen pushers to regulate their grown-up undertakings. Most states have recognized this and deregulated our business.

10. The “but for” collection method is the law of the land.

“But for my referral you wouldn’t have known about or hired that candidate.” Sounds so simple and it puts most fee disputes in perfect perspective. Unless, of course, the employers have a few ‘but fors’ of their own . . . and they usually do.

How far can you carry the ‘but for’ terminology? What if your referred candidate mentioned unreferred co-workers who are then contacted by the company and hired? What if the company says, “But for our vigilance after you dropped the ball, this person could have never been hired?”

There are thousands of ‘but for’ rebuttals which make the argument impotent and emasculate your ability to legally prevail with its use, not the least of which is that it is not recognized by courts of law. The ‘but for’ terminology, originally introduced by attorney A. Bernard Frechtman (http://www.frechtman.com/), is understandable non-lawyer shorthand for the more legally acceptable theories such as “efficient procuring cause,” “proximate cause” or “substantial cause” which are theories best promulgated by an attorney conversant in our business.

11. A consultant with a good personality is better than a well-trained dullard.

Likeability goes a long way towards creating success in this business but a skill-deficient charismatic consultant won’t hold a candle to a well-trained technician who follows the formula. Of course, a combination of charm and competence is the ideal but, given the choice, I’d rather have a consultant who dots their i’s and crosses their t’s than a back-slapping charmer who’s an inch deep and a mile wide.

12. The basic difference between contingency and retained search is the process by which the search is performed.

The only true difference is in the way each gets paid. In simple terms, the retained recruiter gets paid for the process; the contingency recruiter gets paid for the product.

Contingency recruiters go through the identical processes to reach the desired goal. They usually just do it faster since they don’t enjoy either the luxury of a guaranteed paycheck or the several-month, exclusive-granted time frame in which to complete their task.

The “behind-the-potted-palm” mythology which surrounded the executive search business for so long is history. Show and tell books and in-depth articles by business reporters have helped to shed the melodramatic image that many had tried to perpetrate. The line between contingency and retained has become increasingly blurry.

13. Client visits are a waste of time.

Most owners/managers approach consultant visits to clients the same way most parents view their daughter’s first date with a gothic guy who has foam dice hanging from their rear view mirror . . . with extreme apprehension.

Or they fear that the meeting (if it really takes place at all) will be a non-productive howdy session wasting precious hours when telephoning could have been done.

Survey after survey has indicated that employers are more likely to utilize consultants who have taken the time to visit than those who haven’t. And those consultants who visit clients and potentials almost always outbill those who don’t.

Not only does “pressing the flesh” establish a more lasting bond between recruiter and client but it gives the recruiter far greater insight into the client’s personality, culture and real needs . . . but the visits should be planned, done on a regular basis (one visit per week to a different firm will cement relations with over 50 firms per year), and confined to only those consultants who can make a positive impression.

And, it’s a smart manager who accompanies the consultant on the visit to assure the visited client that the firm cares about their business and to suppress the likelihood that the employer will move their business if the consultant leaves.

Jeff Skrentny, in the April & May 2002 issues of The Fordyce Letter superbly covered this topic in detail. (For an Emailed copy, contact TheFordyceLetter@aol.com and request “Client visits.”

14. Clients tend to bond more with recruiting firms than the consultants who work for them.

Not so. A consultant who builds rapport with a client company will, more often than not, take that business with them should they leave. It’s human nature to follow the person who has successfully serviced your needs than the firm for which they work whether it’s a lawyer, accountant, doctor, barber or recruiter.

That’s why it’s so important for astute management to interject themselves into the process as often as they can, becoming partners and accomplices with their consultants so as to maintain client continuity and identification with the firm. Accompanying consultants on visits, making periodic “quality control” telephone checks and otherwise maintaining communications with the client (through newsletters, meals, tickets to sporting events, clippings of interest, open houses/cocktail parties, etc.) are your best insurance policies against client defection.

15. Higher consultant commission rates produce more production and happier consultants.

Raising a commission or payout percentage to a mediocre consultant usually means they’ll do less, since fewer placements will produce the same revenue for them thus effectively reducing your revenue. Just because a competitor pays a higher percentage doesn’t mean that their consultants are more productive.

If a consultant tells you they need a bigger payout, tell them to work higher-level positions or place more people at their current level. Both will increase their income without eating into yours.

Paying more to inspire the unmotivated never works.

16. The weakest link in the placement process is the candidate.

More often than not, it’s the consultant who hasn’t taken the time to coach and prep the candidate. A consultant with a well-researched complete job order that is thoroughly discussed with the candidate has a much higher hit ratio than the consultant who crosses their fingers and hopes for the best.

Nevertheless, candidates (even well prepped ones) can be loose cannons, and the preparation phase to improve their ultimate success is skillfully covered in the Rap Session training program. (www.rap-session.com).

17. Companies should always place want ads before contacting a recruiter.

If companies assume that the best people are underpaid, unhappy or unemployed and they don’t mind populating their ranks with castoffs and wishful thinkers, a want ad or job board posting will do the trick. So will a romp through their files or an applicant database if they don’t mind considering out-of-date retreads.

Fact is, many jobs require nothing more than a warm body . . . and a lot of second-rate companies do just fine with ordinary people who can be attracted by an ad. But it takes exceptional people to produce extraordinary results . . . and these people are somebody else’s happy, productive employees with better things to do than waste time reading want ads or surfing the job boards. They can only be surfaced by a professional recruiter.

Show me an employer who asks you to cut your fee and I’ll show you an employer who blew most of its budget on non-productive advertising and, because of it, now needs to fill the opening on the cheap.

Other than producing second-rate results, placing a want ad or Internet posting is not a risk-free experience. Reams have been written about companies being sued over inappropriate ad wording and job seekers have learned that posting their resumes on the Internet can follow them to their graves, inappropriately showing up long after they wish their originally posted resume would just evaporate.

18. Clients won’t review coded resumes.

Although many say they won’t, three out of every four employers a recent survey said that they will, depending upon how it is presented. Many said they prefer coded resumes since they carry absolutely no fee liability until some interest has been generated.

19. CPCs make more money than non-CPCs.

Some do; some don’t. Since the Certified Personnel Consultant designation is granted by associations for which membership is less than 5% of the entire industry, it’s almost impossible to verify or dispute. But money is not the reason why people become CPCs.

Nor does the designation seem to make much difference to employers (who generally don’t know what it means). But it labels the CPC as a professional who believes in his/her profession. It denotes someone who has spent the time and money to set themself apart. It marks a person who has pride in the profession they have chosen . . . for the long pull. It’s a declaration that the person is probably more sensitive to the ethics of the business. People like this often make more money.

20. It’s OK to code minority applicants as such.

As logical as it sounds, in this politically correct world it’s still a no-no with the EEOC even though the Department of Labor has no problem with it. It’s typical oxymoronic government nonsense.

Some efforts by the more enlightened have been made to make it possible to code minorities as such but the bureaucratic weight of opinion is against it.

21. Recruiters should always inform fee-avoiders why they’re legally entitled to the fee before taking them to court.

It’s a deadly mistake to use all the arrows in your quiver when you sense that you are about to be stiffed out of a righteously earned fee. Yet, that’s exactly what most practitioners do. They explain chapter and verse about all the reasons they’re due the fee; then they put the same information in a long letter telling the adversary exactly how they intend to proceed.

By the time they turn it over to their attorney, their knickers are down around their knees without a chance of winning because they’ve allowed the employer the time to doctor the files and given the employer’s lawyer every chance to rebut and refute any claim you might have been able to make if they had kept their mouth shut and their word processor turned off.

If you have a conscientious claim to a fee and the employer refuses to pay, contact your attorney now. File suit now. A subpoena wakes them up in a hurry and lets them know you’re serious.

22. Offering discounted fees brings in more business.

I remember a major recruiting firm’s ads of many years ago that headlined to all, “If you’re paying more than 15%, you’re paying too much.” It almost sunk them and they quickly stopped the promo. Another major firm advertised a 5% fee before we castigated them in print and embarrassed them out of their lunacy

They were laboring under the common misconception that employers are strictly price buyers. Although they like a bargain as much as anyone, 82% of them told us, in a recent survey, that they pay 25% or higher fees with 7% of them saying that 30% or higher was OK for specific problem openings.

Too many in our business (and on the employer side) confuse price with value. And too many roll over when an employer first asks for a discount without holding out for the true worth of the service.

Setting your fees is strictly up to each practitioner. (See Fee Negotiation in TFL‘s 11/04 issue). Depending upon many variables, a tidy profit can be made by some at a 20% fee while overhead considerations may force another firm to charge 30% or more for the same level of service. We know of no firms who have been able, for long, to sustain their business with deep discounts without lowering their service level to unacceptable levels.

Keep looking and you’ll be amazed at how many full-fee-payers there are out there . . . and how many discounters have disappeared.

23. Accepting a discriminatory job order is OK so long as the company giving it to you is operating under an affirmative action plan.

There are no circumstances where it is legal to accept a discriminatory job order unless the request is covered as a bona fide occupational qualification. Even that distinction is becoming fuzzy and when I asked an EEO worker to name one, she said that a sperm donor opening could discriminate against women and a wet nurse opening could discriminate against men.

If a company specifically asks for only minorities, you’ll have to explain that you cannot discriminate by law, no matter how noble their request. That, of course, doesn’t mean that you can’t determine that only minorities pass your muster, but it’s a slippery slope best left to others. Your best bet is to direct your sourcing efforts towards talent pools or websites where your target candidates will most likely be found.

24. The first recruiter to submit a resume to a company is entitled to the fee if that person is ultimately hired.

We call people who broadcast a candidate’s resume to everyone in sight “drive-by shooters.” If, at whatever present or future time, that resume or referral is the only act that causes the employer to hire their candidate, they are due a fee. But what if, many months later, the candidate is re-submitted by another recruiter, perhaps to a different person or for a different opening, and is hired because of the subsequent action?

Companies are often afraid to pay either recruiter, fearing a lawsuit by the one not paid and there are cases where both recruiters got paid because of the employer carelessness. Too frequently, companies just let the recruiters fight it out amongst themselves or totally exclude that candidate from consideration.

Several years ago, the Professional Employment Research Council (now extinct) drafted the following:

“In case of more than one referral, the source whose referral caused the action leading to the eventual hire will take precedence. No fee will be paid unless the hire was the direct result of interest initiated and stimulated by the agency.”

This is preferable and more straightforward than “resume logging” and is slowly being accepted by employers in their quest for equitable standards of candidate source recognition.

Be advised, however, that this axe swings both ways so, if you accept the comforts offered by the policy, you also need to recognize the downside if you happen to be the drive-by shooter.

25. Errors & Omissions insurance is a waste of money.

So is automobile insurance unless you have an accident; or health insurance until you get sick. Somewhat akin to malpractice insurance, E & O can protect you against some of the perils experienced by recruiters living in an increasingly litigious marketplace.

While we recommend it, be sure to read the policies carefully. It doesn’t protect against blatant stupidity nor does it cover many of the things that can happen during the normal course of business. The big print giveth and the small print taketh away . . . and there’s a lot of small print. For more information on placement firm insurance, go to www.fordyceletter.com and order Report #15.

26. The greatest placement opportunities for the balance of the decade exist in the overseas market.

We hear so much about the global economy and the opportunities it offers us as an industry. Yet, with few exceptions, I know of no mainland firms who have made a large dent in this international “target of opportunity” without a physical presence within the targeted countries.

In my conversation with Gardner Heidrick, one of the elder statesmen of the search business, he said, “I wonder why Europe, Asia, South America. I learned at Booz, Allen & Hamilton that if we can keep busy two-thirds of the time, we will do all right. If we can keep busy three-thirds of the time, we’d make good money. So why try to go out of the country to be busy four-thirds of the time? Unless you’re bilingual you don’t know what’s going on in other countries.”

What makes you think you can do a better job than a firm who is already there? Why would you spend double or triple the time and money to pursue foreign business where so many have been stiffed with no legal recourse just to be able to say you’re an international recruiter? Why chase business in Brussels when your next deal is down the street on Broadway?

If you want to work with foreign firms, do it through a trustworthy foreign affiliate or wait until they ask you to staff their plant in the U.S. . . . then watch them closely because their mores can be far different than those to which you are accustomed.

27. Companies who grant “exclusives” to contingency recruiters are liable for a fee if they hire through another source.

And pigs fly! Unless you have a signed agreement to that effect, an exclusive means almost nothing. Even then they probably won’t hold up in court.

Employers normally “grant” exclusives in exchange for a discounted fee. It makes you feel so good to be favored with an exclusive and the employer knows that it puts you under the gun to produce.

If a department head suggests a cousin who gets hired, if the employment clerk finds the perfect candidate in the database or if the “right” person just happens to walk in the door, don’t expect to get paid . . . it won’t happen, whether you think you have an exclusive or not. If you want a real exclusive, have them sign a retainer agreement letting you get paid whether you produce or not.

Until then, dream on.

28. Some recruiting specialties are more productive than others.

Although year after year, the technical disciplines have been the meat and potatoes of our business, we have seen recruiters carve out and prosper in some very bizarre niches. As we pointed out in our specialties issue (1/04): (1) Some of the top producers work specialties which are narrow in scope and in declining areas of activity, (2) If you’re no good at search and placement, it doesn’t matter how hot your specialty may be, (3) Overcrowded specialties tend to create situations where lower fee structures are acceptable.

29. Getting fee agreements signed is counterproductive and not worth the trouble.

Can you imagine any legitimate reason why a company would refuse to sign? I’d be very wary of a company that asked me to spend my time, energy and skill on their behalf while withholding their signature on the agreement to pay me for successfully doing what they asked me to do. So why do so few practitioners get signed agreements?

Ours is traditionally an oral contract business. A verbal handshake and we’re off and running. I completed a 25-year career without ever getting an employer to sign an agreement. I can name the fee disputes I had on one hand . . . and I ultimately got paid for every one. Every time I mention this subject I get dozens of calls from readers who have shared my experiences.

But I get even more calls from readers who collected fees only because they had a signed agreement.

In Massachusetts, agreements that are not signed are not enforceable. Other states are moving in that direction.

Since it doesn’t take much more than a request to get a signature, why not err on the side of safety.

30. Government-generated statistics are the best way to determine those areas upon which to focus.

Only if you’re comfortable with stale data or prognostications from non-business people who use out-of-date numbers to predict the unpredictable for businesses they rarely understand.

Most government statistics are generated for use by other government employees . . . to justify spending more money, creating more programs and to rationalize their own existence. Furthermore, most of their numbers are skewed, distorted or otherwise “normed” to accomplish the results they hoped for in advance. While a few of the government agencies are honestly trying to be correct, little of the information reported is of any real value to our industry.

For more accurate figures, follow the industry-generated surveys appearing in The Fordyce Letter and other sources. Over the long pull, they’re far more accurate even if they are generated more for general-purpose PR value than to instruct competitors how to compete.

31. Clients will always hire the best person for the job.

If that were true, no one would ever be terminated and everyone would live happily ever after in the same job. In a perfect world, companies would have a precise position specification and endless time to find the ideal person.

But that’s not how it works, is it?

Those of us who diligently search for and refer water walkers only to find out that the company hired a person you rejected as unqualified know whereof we speak.

Although we shudder at the thought of being called mudslingers, fact is, companies with warts hire people with warts. Treating every assignment as though it comes from P&G, IBM or Microsoft can easily put you into the “J. C.” mode, trying to accommodate B and C type companies with A type candidates. Don’t be surprised when the company that asked for an M.S.E.E. with 10 years experiences hires a non-degreed technician two years out of a trade school.

32. Having a more liberal guarantee policy will produce more business than having a stingy or non-existent one.

Guarantees are basically marketing/negotiating tools. On the scale of employer priorities, they are far down the list.

Thousands of recruiting firms have no guarantees whatsoever and it does not significantly hinder their abilities to attract business.

Guarantees are like pre-nuptial agreements and can have as many variations as pre-nups. They can be useful to you to hasten payment but are generally heavily weighted towards those who make the decision to hire and totally control the employer-employee relationship after the hire. You are paid a fee to provide a suitably hirable candidate. You shouldn’t be encumbered with what happens thereafter. If, in the course of negotiating the assignment, you are coerced into giving a guarantee, make it an add-on concession. We recommend against offering it up-front in your fee schedules or preliminary offerings.

If you offer a money-back guarantee, make it a “tire tread” or “self-destruct” guarantee. If your Michelins require replacement, they’ll deduct the tread you’ve used and reimburse for the tread that’s left. You should do the same.

If you offer a 30-day guarantee, make sure the words say that the fee-back liability reduces by 1/30th with each day your candidate works. If it’s a 100-day guarantee, it will reduce the fee-back liability by 1% for every day worked. It’s that simple. Don’t offer what you’re unwilling (or unable) to pay back.

33. You have no liability if a company hires an undesirable candidate from you.

Companies that pay fees for talent take a dim view of the hire who turns out to be malodorous after your assurance that they were the best available candidate. If a company later finds that references weren’t checked when you said they were or that the candidate wasn’t all they claimed to be (and you should have known it) your defenses evaporate.

If a company terminates your candidate and is, in turn, sued for wrongful termination, you will, more likely than not, be named in the suit. If the company asks for a fee refund because the candidate fooled you (and them) as to their credentials and qualifications, it’s probably financially wise to accommodate them. Your liability lives on whether you offer a guarantee or not.

34. Other sources for candidates are always less expensive than recruiters.

And a Yugo is a better car than a Lincoln Town Car. Sure, some jobs in any organization can be filled less expensively than by using a recruiter. And, sometimes, a pearl will emerge from one of the low-cost alternatives. But run-of-the-mill jobs aren’t the usual target of our business and the providing of run-of-the-mill people is not what our industry is all about.

Is it less expensive to pay a recruiter a fee for a hired candidate than to spend an equal amount on non-productive advertising? Is access to a list of independently researched potential candidates or any of the plentiful job boards any assurance that one of them can be hired? You are much more likely to be asked to discount your fee if the hirer has already blown their budget on non-productive alternatives.

For a copy of “Why Recruiters are Worth What They Charge,” Email your request to: TheFordyceLetter@aol.com and ask for Recruiters Worth.

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35. If a client sends you a check for less than the full amount of the fee, it is OK to cash it as long as you mark it as “partial payment” before you deposit it.

As negotiable instruments, there are ample and specific laws, rules and regulations covering checks, and the words most frequently found are “accord and satisfaction.” If the check for less than the full amount is accompanied by a letter acknowledging that fact and is referred to somewhere on the check, you at least have a defense against an employer who states that the check was for full payment because the fee amount was disputed and that an accord and satisfaction occurred. According to Chapter 114 of the book Placement Management (www.searchresearchinstitute.com), the accord was your agreement to accept less than the full fee, and the satisfaction was your cashing of the check. Accord and satisfaction is the way courts bind parties to a settlement. They simply refuse to enforce their rights in the original agreement.

36. The best time to terminate a consultant is when you first think about it.

This is a rather harsh slogan best left to Simon Legree. It is, however, a manifestation of a thought process felt by most managers at some time in their careers.

In days of yore, it was felt that if a consultant hadn’t made a placement within the first three weeks, they should be canned. Times (and the marketplace) have changed.

But we all get “gut” feelings about people, often coupled with a vision of them making their final exit through your door. This is the time to examine that thought and determine its source. If the consultant refuses to submit to further training in weak areas or their troubling behavior doesn’t change, say good-bye.

37. There is no difference between billings of solo practitioners and those who work for other firms.

On average, our surveys have shown that solos produce 20-25% more than their counterparts working within a more traditional office setting.

The reasons for this are many. Solos often have far longer tenure than those against which they are compared. A solo is self-employed and believed to be more motivated because of that fact. A good many solos were superstar producers when they worked for others and that success trait continued after they went out on their own.

38. Blending other ingredients into your service mix rarely works.

As long as the areas are peripherally compatible there is no reason why you can’t step out of your mold into things like management consulting, reference checking, providing independent research, interim executive placement, contracting, temporary placement, outplacement, etc.

Our business, however, is very time-sensitive. Make sure you’re not spreading your wings in areas where you’ll spend more time to make less money to the detriment of your core business. See “Time vs. Outcome” cover story in TFL 1104 issue.

39. The best judge of candidate referrals is the Human Resource department.

Sure sounds logical but it generally isn’t so. Committee-created “wish lists” (otherwise known as job specifications) lose a lot in the translation between the hiring manager and the HR screener. Some things just can’t be put on paper nor are you likely to find those intangibles that generate offers in resumes. The best candidate is often screened out by HR because of some insignificant item or omission in a resume. Perfect hiring templates simply don’t exist in those areas most frequently served by our industry. This basic tenet still exists: A’s hire other A’s. B’s hire C’s. Interjecting HR into this process (except to weed out obvious misfits) just dilutes the process.

40. Most companies are reorganizing their operations and hiring temps rather than permanent employees.

News reports are full of the temp craze and the temp phenomenon continues to grow . . . but not at the level one would believe by reading anecdotal reports put out by reporters with the specific agenda to make us believe that it’s sweeping the nation.

Only a small percentage of the millions of companies in the country are into replacing permanent employees with temporary ones and, as we’ve noted before, the permanent business is alive and well . . . and it will stay that way.

41. A majority of recruiters belong to associations or networks.

Our estimate, based upon many surveys, is that, at most, 10% of the country’s practitioners belong to a local, state or national association, network or other affinity group.

This, when compared to other professions (lawyers, doctors, real estate pros, etc.) is a sad commentary. For an overly boastful business such as ours, the dues are usually chump change compared to the benefits, but we don’t expect much change in a business where almost everybody already “knows it all!”

42. Candidates are more truthful to recruiters than to potential employers.

If a candidate is inclined to lie or exaggerate, they’re probably more likely to overstate or prevaricate to a conduit (you) than to the organization where they’d like to work. Most candidates feel that recruiters are looking for information upon which to base a positive spin when communicating to their clients. They also believe that recruiters are less likely to check references in the depth to which employers will investigate them. They also feel that if a recruiter can get them face-to-face with an employer, they can cover any discrepancies at that time . . . with the people they think really count.

43. Recruiters who do their own research are more effective than those who use researchers.

Wrong. If your researcher(s) are competent and efficient they usually increase your revenues by far more than their cost. The major problem is that recruiters too often don’t place enough trust in those who are funneling the information to them. Or, they are using them improperly.

Too many mediocre performers spin their wheels on grunt work that can be better accomplished by one specifically designated to do it.

44. Openings that are advertised are your best source of new business.

While these may provide a “gentle” way to ease a new consultant into the business, want ads or Internet postings will probably produce negligible results.

Should they be monitored? Absolutely! Scrap books, pump files or databases of ads previously run by companies can be a big help in developing a profile of the types of people normally recruited by them, but as a source of immediate business acquisition they’re almost always time-wasters.

45. Relocation costs make no difference in hiring decisions.

Relocating an employee can cost up to $50,000 or more . . . an amount that dwarfs most placement fees. Add to this the increased costs of attracting and interviewing out-of-towners and it’s no wonder that 88% of hirers told us that relocation expenses figure into their hiring decisions and 79% said they would accept a less qualified candidate who was local.

One successful practitioner reported that by pointing out the vast differential in costs between relocating a freebie hire and paying a fee for a local candidate, he has not only doubled his business but has also compressed the time between taking the assignment and filling it by two-thirds. His recruiting costs are significantly less and his offer-to-acceptance ratio is twice what it was when working with out-of-towners. Something to think about, especially if your specialty is a type of candidate used by most firms, i.e., accountants, sales people, etc.

46. Consultant non-compete contracts don’t work.

If well constructed, signed for real consideration (preferably upon employment) and not overly restrictive, these contracts are enforceable in many jurisdictions. Whether they’re a good idea or not varies widely with the type of practice you have but, if everyone in the organization is made to sign one and any (and all) transgressions are litigated with equal vigor, they are likely to be upheld by most courts, especially as they pertain to trade secret protection.

47. Placement and outplacement can’t co-exist.

Nonsense! Who better to help people find jobs than the people who are in the job-finding business already?

For years, the purists on both sides of the issue have steadfastly looked down their noses at so-called “double-dipping” but if, as many proclaim, our mission is to become full-service HR problem solvers why shouldn’t we assist in the ingress and egress of employees?

Some moralists on both sides claim it is unprincipled to take money for easing a person out of a job, then collecting another fee for finding that person their new job. We disagree. The payment is for functions performed and they are separate and distinct.

In my active recruiting days, my best client had a division where layoffs were imminent. They asked me to bid on a group outplacement program. I did and the bid was accepted. Part of the agreement included our right to collect a fee for those we were able to place elsewhere and it posed no problem for the client.

You may not wish to run a blended business but many have done so . . . successfully.

48. It’s best not to tell an employer of a bad reference check.

If it comes from just one sorehead who will likely be contacted by the employer anyway, why not soften the blow by letting them know up front that they’ll be talking with a grouch? It’s easy to overcome if you really believe in your candidate.

If the candidate has some serious confirmable blemishes in their background, take them out of the running and find someone else without the stain.

While it’s not in our business’s best interests to spread the bad news about our candidates, neither is it in our best interests to deceive our clients about the imperfections and shortcomings of them either.

Better to gracefully back off from these situations.

49. The best way to judge the economy as it affects our business is the news media.

Remember that the general news media usually report bad news about business unless it’s a puff piece about a local firm. Also remember that troubled industries can often be a sterling source of business for our industry. Just because you read that the bottom is dropping out of this or that industry segment doesn’t mean you should necessarily avoid it. They may be your next best target of opportunity.

50. It’s easier and better to treat your consultants as independent contractors than as employees.

It can also cost you dearly since the IRS has determined that there is no legal way to ever treat consultants as independent contractors. They have a group of businesses on their target list and recruiting firms are high on that list. We have seen dozens of practitioners stripped of all their assets after being discovered with a roomful of 1099 recipients. We have also seen lawyers and accountants rendering erroneous advice on the subject as well as numerous deceptions designed to elude the letter of the IRS law.

One small bright spot emerged with the issuance of an IRS Letter ruling 9402001 which exempted a business which had improperly treated employees as independent contractors from paying back employment taxes. The ruling said that they could avoid the back taxes if (1) there were reasonable grounds for treating the workers as IC’s, (2) the IRS audited the employer in a prior year and did not object to the treatment of the workers, and (3) all tax filings required of those hiring contractors (1099s, etc.) were in fact properly filed.

In view of the fact that you can’t even enforce trade secrets agreements against ICs, put them on your payroll and sleep better. It’s not worth the potential grief.

51. Part-time recruiters can do more harm than good.

If you are recruiting people from (and for) a specific industry or discipline, part-timers can be invaluable, especially if your recruiting needs are many and varied within that industry or discipline. While part-timers may not be trained to do in-depth phone interviews they can certainly gather basic information about their targets’ backgrounds and determine if there is an interest in further conversations with a senior recruiter.

Many recruiters don’t subscribe to this methodology feeling that the “hand-off” denotes a lack of professionalism . . . and for very senior level openings they may be right. But think about human nature from the potential candidate’s point of view.

They’re home, reading the paper or surfing the Internet after a lousy day at work and they receive a call from someone who actually offers them the first step towards a more fulfilling career. If scripted properly, this teaser call from the part-timer puts their “dream factory” into play. By the time the senior recruiter contacts them they’ve probably thought of a dozen reasons to leave their current job and very few to stay put.

In the heyday of the aerospace hiring binge, when candidates were needed on a wholesale basis, I employed dental students as part-time recruiters. They were bright and needed money. Each evening, I’d give them a long list of possibles from the phonebooks of major aerospace companies and turned them loose with a script best described as ambiguous, but forceful. During the five hours of calling, they never produced fewer than five candidates a night and often many more . . . all degreed technical professionals with a strong desire to explore other opportunities.

Do part-timers pay off? From my point of view, the answer is a resounding yes.

52. Ours is primarily a minimum wage, straight commission business.

It used to be, but no more. It finally dawned on the parsimonious within our industry that you get what you pay for. Although each recruiter’s income is (or should be) primarily based upon production, hiring a person at a sub-existence draw or salary just hastens the day when they leave with “nothing on the board.”

While there are hundreds of different compensation plans out there, most recognize that there is a big difference between a comfortable living while getting started and worrying about force-feeding a placement to keep the house from being foreclosed or the car from being repossessed.

53. The best and quickest way to source candidates is by ruse calling.

Quickest – yes; best – no!

The prevailing thought is that rusing is a no-no even though it is still being taught by many groups. Depending upon how it is done, it can be illegal as well as a poor business practice.

In 1982, practitioner Bonner Smith wrote a booklet called “Why Not Ruse” (No longer available) wherein she set forth dozens of research alternatives to rusing. In a perfect world there would be no rusing but consider the following situation:

Several years ago, I was sitting in the office of a long-tenured recruiter when his phone rang. An employer was calling from a local hotel. He told the recruiter that, despite the fact that he had run a large ad, qualified people from the specific company from which he hoped to attract applicants just weren’t responding. Rather than blow the trip he asked if the recruiter could set up 4 or 5 interviews with the types he was seeking. The company agreed to stay overnight, agreed to an exclusive if the recruiter could set up hourly interviews between 8:00 a.m. and 1:00 p.m the next morning. If successful, there would be $60-75,000 in very quick fees since the company was willing to pay top dollar and “buy” the talent they needed. The recruiter agreed even though he didn’t have a single candidate in his files. The target company was not a client and the only way he could possibly dig up the number of candidates he had promised was to ruse call into the company.

Despite the fact that he had been his state association’s ethics chairman for two years, he spent the afternoon finding and the evening lining up the 5 people. Three were hired for aggregate fees of $52,000. When I asked him how he could justify his actions his hemming and hawing could be heard for miles.

Pragmatism won the day for him and the industry’s image suffered a large black eye.

54. Almost any attorney who is conversant in contract law can handle fee collection cases.

If you need a traffic ticket fixed you don’t go to a personal injury attorney. If you have a fee collection problem and don’t want to spend a fortune educating an attorney in the nuances and particulars of our business, we recommend that you find someone who has successfully been through the drill . . . and they are few and far between. A whole set of ingredients almost exclusive to our business come into play and one tiny misstep can queer the deal.

55. If a consultant places himself or herself on a job order, you lose the job order, the consultant and the potential fee.

We’ve all heard the scuttlebutt that most people enter our business so they can take the best job that crosses their desk. And it’s more prevalent than you may think. But can you collect a fee for these do-it-yourself efforts? Sometimes!

Lawyer Jeff Allen has written on the topic and, without getting too legalistic, he feels that as your employee, the consultant’s intent is legally your intent (and you didn’t intend to waive the fee) and the employer, by the very act of giving a fee-paid job order, has agreed to pay the fee if someone was hired, even if it is your consultant.

It can be tricky but it can (and should) be done when your consultant places themself.

56. Trade secret litigation against an ex-consultant who you treated as an independent contractor is almost always successful.

Wrong! An independent contractor has their own business no matter what kind of a deal you thought you made with them. Since they’re in the search/placement business, semantically, they’re a competitor and you are deemed to have given the information to them. As an employee, they can’t use it if they leave. As an independent contractor, there’s very little you can do about it.

57. Offering a replacement guarantee will protect you against having to refund money for a fall-off.

Depends upon the circumstances and the mood of the judge. Often judges convert replacement guarantees into monetary ones, and they’ll even extend the term of the guarantee. Employers can think of all kinds of reasons why no replacement is suitable. If they do, don’t think that the matter is moot. If there was a legitimate reason for the termination which causes the guarantee to be triggered (and they can manipulate the records to back them up) you’ll end up on the short end of the stick.

Better to offer no guarantee at all or one where the refund liability reduces with each passing day. See #32.

58. Consultant employment agreements should be individually tailored for each consultant.

Not if you want them enforced. While you can vary the agreements for certain groups of employees, within those groups they’d better be uniform as to restrictions, prohibitions or constraints or they’re likely to be thrown out of court

59. Our business is best described as “consulting.”

Last time I bought a car I bought it from a Personal Transportation Consultant. My insurance man is an Estate Planning Consultant. When my father was made a V.P. after three decades of selling steel, he still wanted his business card to read “Salesman.” He said he never wanted anyone to be confused about the real reason he was in their office.

You can call yourself anything you wish as long as you realize you’re there to sell. If some consulting goes along with the sale, so be it. If you’re more comfortable telling your friends you’re a consultant, O.K. But never think about yourself as a consultant for even a moment. Self-delusion leads to self-destruction in this business.

60. Companies usually refuse to work with recruiters who won’t sign their Personnel Service Agreements.

Some will and some won’t. PSAs are the great levelers designed by HR folks who think they can treat every recruiting vendor exactly the same. It sounds so fair . . . and if the PSAs reflected the realities of the marketplace, they’d be just fine.

Unfortunately, they view this exercise as a way to get everyone to cut their fees, extend their guarantees and promise never to raid them for life. Like sharks at a feeding frenzy, they get together at HR meetings and revel with each other over how bizarre these things can be. Then they foist them on you.

But recruiting firms aren’t the same. There are mediocre ones (who’ll sign anything put in front of them) and there are super searchers who routinely tear them up while continuing to do business with those same companies at full fee.

Face it. HR people have very little real control over anything their companies do. They are the ultimate corporate bureaucrats who are constantly striving to justify their existences. But they think they have control over our industry and it greatly pleases their fragile egos to exert some power over us by putting these nonsensical agreements in front of us, hoping we’ll sign them.

If a company asks you to sign them, refuse. Those who do are usually the weaker firms. Ask your better competitors not to sign them either. When a company’s best recruiting sources are no longer available to them it’s amazing how quickly they’ll ditch the PSA and allow us to do our job.

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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