Placement Fees Are Cheap When You Look At Them This Way

Employers seldom complain about the services of headhunters, it’s the headhunters’ fee that has become their pain point.

A few months ago I was a presenting at a seminar to about 35 business owners and HR professionals.  The topic of the presentation was “How to Recruit like a Headhunter” and during the presentation I made the statement “If you are not using headhunters as your primary recruitment weapon, then you are not hiring the best talent in-the-market”

One individual took offense to that particular statement and became very irate. He stood up, pointed his finger directly at me and said, “You don’t know what you’re talking about because we hired some pretty good people, and they are working out just fine. And we didn’t use headhunters.”

Without any hesitation, here’s how I responded:

Sir, you are absolutely correct. You really don’t need headhunters to hire the best talent on-the-market.  However, what would you say was the difference between the best talent in-the-market and the best talent on-the-market?

I watched his eyes roll as he struggled to find a good money and bulleseyeanswer. Without waiting for his response, I asked if anyone in the audience knew the difference. What I heard wer a number of resume related answers such as: the ones with the best resumes; or, the ones presently work for the big brand name organizations; or, the ones that were educated at the most prestigious universities.

My reply was that they were all very good answers, but they were not the number one answer. The number one answer is the best talent in-the-market are most likely those individuals who are not actively searching for a job.

Passive v. Active


It has been my experience that to be wooed by a competitor is the expectation of top talent. They don’t get excited just because a job matching their skills and experience was advertised; they have to be strategically motivated, and sold on that particular job opportunity.

So, if you are not using headhunters, then you are hiring the best talent from among only the individuals actively looking for a new job. And, there is a significant difference in the caliber of talent when you compare those actively looking to those not actively looking for a new job.

To prove my point, I tried to get the audience emotionally involved in the debate. I took a quick survey by asking four simple questions:

  1. How many of you know of someone actively searching for a job? Almost everyone raised their hands.
  2. How many of you are actively searching for a new job? Three individuals raised their hands.
  3. How many of you are not actively looking, but would listen to details about another job opportunity if you believed that it could be of some interest to you? Half the individuals in the room raised their hands.
  4. How many of you are not actively looking, but would seriously consider another job opportunity if you were convinced the job would not only improve your standard of living, it would also advance you career to the next level? Almost everyone raised their hands.

Big Pool v. Puddle

I pointed out that the result of that survey was similar to recruitment activities in a niche market.  The best talent most likely will be from the group of individuals that are not actively looking. So, if you are not using headhunters, you are not hiring the best talent from the entire talent pool; you are hiring the best talent from a puddle.

With all the new recruitment apps that are available, the big job boards, and the growing appeal of social media, are you trying to convince us that headhunting is the most effective recruitment method available, was the question asked by the same individual.

I said yes it is and I will tell you why.

Recruiting Ahead of Need

The reason headhunting remains the most effective recruitment method is because as headhunters we recruit ahead of the need!

Article Continues Below

Recruit ahead of the need; I’ve never heard of that, he said.

I explained it means we don’t wait for a job to become open to start recruiting individuals; we recruit for a job before it becomes open. And the only way that is possible is if you are committed to building relationships from a recruitment perspective.

But, you also have to be passionate about recruiting to be committed to it; and when you are committed you will live and breathe recruiting 24 hrs a day, 7 days a week and 365 days a year. A good headhunter will know who the most talented individuals are; they can identify the hardest workers from the slackers;  they know the ones who operate below the radar screen; and they also know the ones with the most potential. They do the hardest part of recruiting for you, which is developing relationships.

About that Fee

Apologetically, he said, “I didn’t mean to imply that headhunters were not effective, but what are your options if you don’t have the budget to pay headhunter fees?”

Therein lies the problem, the headhunter fee. But it is also a tremendous opportunity for headhunters to make more placements. How? They just need to do a better job of selling the economic value of using professional headhunters, or demonstrate creative ingenuity in the pricing of headhunting services.

The economic value is more profits, because employers who hire the best talent often win and retain more customers. Also, why not allow your competitors to do the hiring and the training?  You simply rely on headhunters to recruit the best talent from your competitors after they are trained. Paying headhunter fees will be a drop in the bucket compared to the savings realized in salaries paid to average performers and from the profits generated by superior performances of the headhunted talent.

By re-pricing, I‘m not suggesting simply to reduce your placement fees, but in addition, offer a variety of recruitment services that can be tailored as a solution to the unique needs and budget of your clients.

If all headhunters charge the same placement fee, does it mean that they all provide the same level of service? No, but that is the perception. Nothing will change until we change something and that perception is a good place to start.

Ken Forrester is managing director of A.W. Forrester Co., a national search firm (954-722-7554) that specializes in employee benefits consulting, health insurance brokerage, and sales. He started his recruitment career in 1990 and is responsible for completing search assignments for senior management positions while developing and mentoring junior associates.


47 Comments on “Placement Fees Are Cheap When You Look At Them This Way

    1. How do I do that? I am the only recruiter at my company of 190 employees. I don’t know how to go about building that pipeline as it is so time intensive. I am also not sure ethically how I feel about calling into companies to steal their employees. I don’t know how comfortable employees are getting these calls at work.

      1. Ethically there is no issue you here so long as you word it correctly. When you call into companies you are calling to inquire as to a persons situation. “Hi Kara my name is Will Rosenbeck and came across some of your information today. Hope im catching you at an ok time, but I wanted to see if you might be interested in speaking with me about an opportunity I have at Company ABC. Is there a better time we can talk?” Companies HATE it, thats why there is a gate keeper more often then not. A passive email, Facebook message, Twitter Post, Linkedin invite, Google+ are all ways you can be passive reaching out to candidates with other companies while not being overly intrusive. The worst that can happen is you get hung up on; but I will give you some of the best advise I ever got when I got started in this business. “Recruiting is like baseball if you can bat .300 for life, your in the hall of fame”

    2. Kristen, That seems simple enough but correct me if I’m wrong…Your in-house recruiters receive a salary on a recurring basis, either weeekly, bi-weekly/monthly, right? If I am correct, where is their motivation to do what we do?…the biggest difference is in motivation…they get paid for showing up, opening their email, reviewing resumes forwarding some, deleting most and at the end of the pay period, they get a check. For us who are actively recruiting top-talent out of your company, we only eat what we kill, meaning if I DON’T make a placement, I don’t get paid! and THAT is why you can’t “rain your in-house recruiters to employ headhunting passive candidate pipelining….You’re also probably having them do other corelary HR functions too. We hate that!

      1. Where’s the motivation for any salaried person to do what they do then? Or should we all be freelance contractors?
        Perhaps the accusation can be levied the opposite way – the in-house recruiter is (by your comment) under no pressure to recruit so is more likely to wait for the most suited person rather than place someone who may not be optimum in order to get paid.
        Having worked both as contractor and permanent, the truth is somewhere in the middle and much more dependent on the person involved – there are contractors who regularly milk the system by working excessive hours and permanent staff who do nothing but check email.

    3. Plus in house people will only leave a recruitment agency because they cant handle the pressure. Trust me, the agencies that phone you, have a better class of recruiter in them.

  1. Nice article and so true. If you were to replace all incidences of Headhunting with “in house Talent sourcing” and “Headhunters” with “Talent Sourcers” it all would still ring true. I find it amazing that often times the business doesn’t understand the value in using professionals who know how to reach out into the passive market for talent. well written.

  2. This type of thinking is exactly why when you look at resumes you see they are only with an organization for 3-5 years max. Then the next person comes in changing what they don’t like and imposing their own policies. Sometimes there is a need to bring “new blood” into an organization but don’t let someone to force your hand.

  3. Committed career oriented recruiters are hard to find. The rookie (2 years and less) are not the good recruiters you define as “will know who the most talented individuals are; ….can identify the hardest workers from the slackers; …know the ones who operate below the radar screen; …also know the ones with the most potential.” So you have to source the right recruiter to get the value you are implying above. Speaking from experience being on both sides of the recruiter (great ones and no so great ones).

  4. Great article, Ken. We have increasingly transitioned our retained executive search business to be strategic talent acquisition initiators for our key clients especially in emerging areas (Digital, Social) in advance of client’s request for our services.

    1. I don’t really agree that recruiting and hr functions are at all the same realm! Agency recruiting involves sales, negotiation, pr, research, and much more. We are talking recruiter=sales.

  5. A great article. But it saddens me that in 2013 we has an industry still need to write articles as such. Just as frighting is that for some reason we still have a lingering few HR professional and key decision makers that may need this explained to them. To me this speaks volume of both parties envolved in the equation. We need to ask what are the short comings or solutions within this dilemma?

  6. Ken, this article struck a cord with me. Here in Australia companies are going down the in-house recruiting option, with exceptions of course, and their main reason for doing this is purely financial. I recently went to a seminar on recruiting via social media, and I argued exactly your point regarding the puddle vs. pool idea with an in-house recruiter working for an engineering contracting company. Clearly she was recruiting volume rather than top executives, and I think this is where a lot of people haven’t yet grasped that there is a big difference. Good article.

  7. Great article. Absolutely agree. As a headhunter I know market & people in my industry quite well. My first task is to read in client’s mind his expectations, than make calls to inactive candidates in my huge network & sell them new opportunities.

  8. In-the-market = Pool, On-the-market = Puddle That means you have to adapt your approach, tools and effort to catch the right candidate. Also note that once hire and in placement, the “floater” candidate from the Puddle may have bring a stronger interest and drive for the position then “in-depth” candidate from the Pool.

  9. Hi,
    Both the head hunters and bankers are fair weather friends. When the talented candidates are in well settled jobs they try to lure them with opportunities and try to build their data base. I am yet to see a head hunter who develops good relations with
    a candidte, where as developing a relation with a recuiter makes more commercial sense.
    But when those candiates who have proven their worth time and again, are in dire need of a change owing to various reaons the head hunters act like demi gods. This makes the very purpose of recruiting in advance defeated.
    It is hard to find the head hunters who recruit in advance – by way of spending enough time with potential candidates, by doing research on the business growth trends that project the requirement trends of the specific / general set of competencies at the leadership levels.
    Hence in most of the case we get off the shelf, stock canidates and the fees appear exorbitant for this reason.
    Kind regards
    Dayanand L guddin

  10. Todays Head-hunter also needs to be expert at assessing and evaluating candidates. Company’s will pay headhunting fees if they perceive you are providing more valur than just identification of high potential candidates.

  11. There are certain levels of an organization that may require a headhunter. Some organizations do not allow their internal recruiters to seek candidates from competitors and that is where a headhunter could be successful especially when it deals with executive opportunities. There are organizations that use both forms of recruiting and it works.

  12. I know many headhunters and used many. All headhunters are average at best at finding talent. Ken’s comments remind me of a marketing campaign for generic ceral.

  13. From my experience as a job seeker, I have yet to meet, or talk with, a headhunter that calls, or returns calls, unless there is a position that fits my skills.

  14. I liken our fee to a 5% insurance guarantee against a possible mis-hire, which can cost you $1,000,000! Don’t we look pretty reasonable in comparision? Great article!

  15. I will apologize at the beginning for my rant…I am simply amazed at all the illiteracy in the comments, as well as in the article itself. Are we all in such a hurry that no one uses spell-check or proofreads what they’ve written? I’ll admit I’m a bit OCD, but if we don’t know the difference between ‘then’ and ‘than’ or when to properly use an apostrophe, how are we going to be able to identify an appropriate candidate for any position? (Wm. Rosenbeck – if you’re a career .300 hitter in baseball, “you’re a candidate for the HOF”… not “your”.)

  16. Building relationships with talented people, who may or may not actively seek careers/work with your company, is a year round, basic responsibility of everyone in a company. Internal recuriters can lead this undertaking, capture and massage these many relationships to find talented people, passive or otherwise, Ultimately, sourcing people
    is everyone’s responsibility. So, the sooner employees, executive and internal recruiters operate this way, the better the costs, the better the new hire. Til then….’headhunters’ will enjoy lucrative ableit challenging careers.

  17. Dear Ken Forrester

    It’s really a Delight for me to read your letter and a thought provoking, as if I am a budding headhunter. You have given lot of inspiration far from seven sea’s.

    D Bhanu Prakash
    India, Hyderabad

  18. It completely depends on the organisation. If a company puts together a clever EVP and communicates it properly, with a good in-house recruiter there should be little need. Niche media for example is an extremely good way of putting your brand in front of passive jobseekers and compared to headhunters is less expensive.

  19. I think of in house recruiters as more HR people, they are filling positions within one company, so it may be hard for them to keep a steady pipeline of recruiting from everywhere.

  20. For some organizations, fishing in the puddle is all they can afford and all they need. I think many recruiters forget that and only see the world through a perspective where the are dispensable. I also believe the puddle is getting bigger than most people want to acknowledge. With 75% of the working population open to new opportunities and a database the size of LinkedIn, the puddle is more than adequate for many organizations. There will always be a need for the outside recruiter who operates with a scalpel. Recruiters like to paint this as an either/or but I believe the answer is both.

  21. As a candidate that is often approached by head hunters and recruiters alike, I will say that the fee is what turns me off. Any employer willing to pay a headhunter, is willing to pay me that money as a sign on bonus. I’ve never once worked with an outside agency for a job. Usually, if you’re next job isn’t coming on the inside track through networking at meetups or other industry related events, it’s probably not the opportunity you’re looking for anyways.

    1. Motoprog,
      Utilizing a recruiter isn’t always the best choice. If you find your next job through your personal, professional network, then that’s great. However, as a recruiter, roughly 75% of the positions that I’ve been asked to fill for my clients are unadvertised and exclusive to me, so in other words, unless you know me you won’t get a shot at my jobs…and guess what, my open position MIGHT be a better next career step than that job you found on your own.
      I know the value I bring to the table for both my clients and the candidates with whom I work. I’ve changed lives and I’ve helped already successful companies become even more successful by helping them acquire talented folks that they would otherwise not have. I am an executive recruiter and I love my career.
      – SS

  22. Ken–Great article. One last point. Individuals will not cultivate relationships with internal recruiters because they only represent one company. If I am looking for a job, am a passive job seeker, or not looking, I would want to hear from someone who has a pulse on the entire market and not just one company. And if I am called about a job when I am not looking, making a career change is a huge decision. I would want to know about other potential opportunities in the market before make such a big decision. An internal recruiter cannot provide this value to the candidate.

  23. As recruiters we are not all created equal. Some of us are truly worth the fees we charge and others…not. Some of the negative comments about in house vs. Agency are comical and petty. Earn you fee/salary every day. Do work that you will want to brag about.

  24. This was just a PR campaing pro-headhunters, with the classic rethoric technique of a spin-doctor….
    We all know that many top-positions are taken based on semi religious belief in superiority, because X was already important in company Y, so X will be even better in company Z. With higher wage. It’s 90% fake. Top-managers often dance around in an endless dance of failures, but manage to get all blame off them, and get headhunted to the next overrated job.
    If business only would start to understand, that MOST top functions are getting overpaid and underperformed, through the sole circular mechanism of ‘job-hunter religion’.

Leave a Comment

Your email address will not be published. Required fields are marked *