Publisher’s Corner

Chicken or egg? Relationship or transaction? Loyal or fickle?

This question came to mind after a call from someone opening a new contingency recruiting business. Her question was, “How much do I pay a rainmaker as opposed to the recruiters?”

Since this was a contingency operation, I wondered why she even wanted to hire a rainmaker. In fact, I’d love to see a job description for “rainmaker.” In the contingency business, everyone working a desk is (supposedly) a rainmaker. Contact a company, acquire an assignment and, voila, you’re a rainmaker.

For the uninitiated in this business, there is a belief that if you hire Lance Goodguy or Sylvia Slick, put them in an Armani suit, give them an expense account and a list of blue chip potential customers, they’ll go forth, mesmerize the target CEOs and bag those firm’s future search business on an exclusive basis, at full fee, forever and ever. Yea, right!

A few of the larger franchises have attempted “relationship marketing.” One of the major franchises is currently trying to re-brand itself (again) because that’s the mindset and background of their new president.  If you’ve got several hundred offices with a broad range of capabilities, it seems like a logical thing to do. For the most part, it hasn’t worked unless these road warriors are also selling the temp and contract capabilities of their firms. The theory is that if you can lock up a company’s temp and contract business, you will also get the lion’s share of the direct (permanent) placement business. The household names in the temp business are trying to get into the direct hire (permanent) business and, in some cases, they’re succeeding, but I doubt that it’s because some pretty person is out there knocking on doors and passing out brochures.

One of our readers who recently left a major franchise told us, “My franchisor has been investing a bunch of money (which is the money from their franchisees) into a national account strategy. The strategy looks great on paper … send someone into GM and ‘write’ their business … every functional position, including potentially the temp business. In practice … my franchise was a collection of fiercely independent owners. They didn’t want to share with their ‘family’ and they didn’t want corporate to dictate to them. The franchise picked up a few contracts and doled them out to their owners. The fees I saw before I resigned were all well below anything I’d take on my own … typically they were 20-25% or some flat fees and the fulfillment office would get somewhere around 75% of that number. To me, that was like herding cats and it won’t work. They are genuinely afraid of Manpower and their ability to attract perm assignments from their temp contracts. Recruitment is a small line item on most corporate budgets, so the ability to move those numbers to or away from any particular ‘recruiter’ is far simpler than any of us want to believe; contract be damned.”

I have often recommended the practice of making periodic key account visits to potential or existing clients. Putting a face to a voice often solidifies a relationship that already exists or is the genesis for forming a new one. But the direct placement business is transactional in nature. Unlike temp and contract workers who are on your payroll, in the perm business you are just a conduit and a broker.

That’s why I question all the blather about “relationships” as the bedrock of the permanent placement business. Most hirers subscribe to the philosophy that, “If I’m not near the one I love, I love the one I’m near.” The main thing that stimulates them into action is hearing about a specific candidate who can solve a specific problem and they’ll take that referral from the Devil if it gets a sticky requisition off their desk. A relationship is the furthest thing from their minds.

Does a close business relationship with a company really matter? Will they accede to your 30% fee because of the relationship or, because of that relationship, will they ask you to help them with their bottom lines by asking for 20% fees? Do you really think because you have been told you have an ‘exclusive’ with a company that they won’t hire the perfect person from some drive-by shooter with whom they have no relationship?

I have a 30-year business relationship with a plumbing company, but they are closed on weekends. My sewer backed up and flooded my basement one Saturday morning. Do you really think I waited until Monday morning when there are 25 pages of plumbers in the Yellow Pages who will work on weekends? As it happened, several basements on my block flooded that day so when someone knocked on my door with an offer to fix the problem, I almost put a lip lock on him. So much for my 30-year ‘relationship.’

I have found that the best way to establish a relationship with a hirer is to successfully perform a transaction (placement) for them. If I place that person with a Hiring Manager, they are the person with whom I now have a relationship. But what about a competitor who has a close business relationship with the head of HR or with another Hiring Manager? Where does that put me on the Relationship Scale?

If I cold call a Hiring Manager with a perfect candidate for an opening I know she has, will she really say to herself, “Wow, that candidate could solve all my problems but, wait – maybe I should call my recruiter buddy before proceeding.” P-u-u-l-e-e-ze!

What we really mean when we talk about ‘relationships’ is loyalty – another elusive term. In my favorite book on this topic, “Making Rain: The Secrets of Building Lifelong Client Loyalty” by Andrew Sobel, his focus is on how well you can add value. But even ‘value’ can have many meanings. What adds value to one client may be meaningless to others. The basics, according to Sobel, are (1) The value you add, (2) The degree of trust you develop, and (3) The extra mile you are willing to go.

I once had a great relationship with the head of recruiting with a huge St. Louis based chemical company. We had gone to college together, socialized on occasion and I had even bought insurance from him when he was peddling policies before he went into HR. They had hundreds of mid to senior level technical and professional openings which they’d send me every couple of weeks. I had hundreds of candidates and referred them to my buddy. After all, we had a relationship. He’d always take my calls and we’d schmooze for several minutes each time. Guess what? I never made one placement even though the job descriptions looked like they were written for my candidates. Excuses were plentiful. Placements were non-existent.

After a few months of being jacked around, I saw the light and turned them into a source. Placed over 100 of their better people over the next couple of years. My formerly friendly relationship ceased to exist.
It gave new meaning to the saying, “Some days you’re the bug; some days you’re the windshield.” One of our readers put it succinctly when he wrote, “If you want loyalty, get a dog.” Amen!

Several readers weighed in on the topic:

Norman Lieberman said, “Over my 25 years in the trenches, I discovered that regardless how happy most firms are with my candidate that they hired, typically they still forget who found that candidate when the next opening occurs. Unless I kept in strong touch and had bonded to some degree, the client has a short memory.  Yes, there are exceptions, but not that many.”

Karen Woodworth, CPC wrote, “With 25 years in this business, I’ve made placements from purposeful and accidental wrong numbers, with long term clients and brand new ones. I’ve had client and candidate relationships that grew intio friendships and friendships that grew into clients. My candidates refer their friends to me and my clients refer their associates. It has been my experience that when you are ‘trusted’ to fill the hard ones, the relationship continues regardless of who either of you works for.  Many of my candidates and clients don’t even remember the name of the company I work for (there’ve only been three in 25  years), but they do remember me and even go so far as to find me personally from the phone book to request my help. The web is not a source I search for candidates and clients, and few find me that way.  I’m a recruiter, simply, a flat out person to person, telephone and net contact.  Recruiter, one who spends most of their time on the phone with friends, associates, candidates, and clients.  Recruiter, one who cares how your dog did in the obedience trials, one who asks how old the twins are, one who elicits information… stores it… and brings it to the table when appropriate.

Steven Goldshore opined, “I am the owner of a 50 employee firm in business for eighteen years and have been a consistent $1M producer for the last 15 years at least.  In my opinion, the subject of relationships can be summarized this way:  ‘quality processes which produce quality candidates develop and sustain relationships.’  The placement process is a contract which requires payment for services rendered.  While it is true that a strong relationship may allow you to fail once or twice, in my experience, these relationships are only a function of what have you done for me lately?  The only real way to sustain continued relationships is to prove day in and day out to the client (and candidate for that matter) that he/she is always going to get the best value for the service rendered when they pick up the phone to call you.  Whether it’s line managers or Human Resources, they look good when you give them candidates they hire in the most efficient manner possible.  Client loyalty, fee percentages, and fee collections are a direct function of level of service provided.    Everything else is fluff.”

Requesting anonymity, another wrote, “I’m working with a new customer because of my prior relationship with a contract recruiter who is no longer working for them. She got us in the door and we filled two key positions.  We’ve made 5 placements since January ’06 (this is March) and they now call us with their openings. I’ve been doing business with one company since the 1980’s.  Every time I have to deal with a new hiring manager or HR person I say ‘I’ve been working with you guys since 1985.’  I’m still doing business there. On the other hand, there is another company which was a major account ($800K in business from ’92 to ’92) until they hired an HR recruiter who wouldn’t give us the time of day.  Companies reward their best employees by giving them awards, raises and bonuses. OTOH, they ask their reliable suppliers to take less in the form of discounted fees, extended guarantees, and longer waits to get paid.”

Another wrote: “The relationship with each hiring manager is critical for the purpose of obtaining the “opportunity to recruit”.  From that point, it becomes the recruiter’s ability to produce which determines if that relationship is developed further or hampered.  Transactional opportunities can and do (with my firm) come to us on a preferred basis.  But we know there have been times where 30-45 days out if we’re not producing from being given “preferred” status that others have been invited in the search party.   I don’t see this as a chicken or egg conundrum at all.  First you must have the 1) Recruiting Opportunity, Secondly) You must be successful in filling it, Thirdly) You must prove consistency in filling assignments which will finally lead to 4) Preferred status and a buzz that permeates the company to use our services.  The borderline between the definition of “company” and “individual manager” is very thin.

Matthew N. Reaves, CPC said,” My little 6-person company has 2 rainmakers right now and I spend a fair amount of my revenues on marketing to generate new business.  Looking over the 22 years I have been in this business it seems that most of our repeat business (and factually, the most productive clients) come from relationships where the client leaves company A and moves to company B … then they take us along with them.  We will frequently continue doing business with the company the executive left as well. Transactions definitely flow from both sides of that ‘egg.’”

Jim McNeal of International Search Partners (ISP) agreed that there is no black and white regarding relationships. “Some relationships are wonderful but produce no placements while a client with which you have no relationship has produced a lot of hires. All depends on the individuals involved. One of our old Partners here did not believe in relationships but he made a lot of placements because he worked hard to find great candidates!” Jim also said that relationships are generally ‘person-specific’ rather than ‘company-specific’ because “after all, what is a company made of? People!  If your point person leaves the company, generally, you are in trouble. Oftentimes, the new person has their own contacts or they do not want to use the other person’s contacts as they blaze their own trail. I have tried in vain to lock up clients as their only recruiter but if a great candidate gets presented, they would be foolish not to take a look at them. The exception to that is in a retained scenario where I demand exclusivity. If a competitor brings in a candidate at a lower fee, they are a weak recruiter and I don’t care who they present.”

Jerry Marymont’s candid comments reflected the observations of many others: “First, I must preface my remarks …. I have been in this business over 20 years … I have made a decent living in it and as crazy as it is, I love this business. I know what I’m about to say might sound a bit harsh and a number of your readers might take offense but my basic philosophy regarding relationships with candidates and companies in dealing on a contingency basis  (and, it has taken me years to develop this philosophy) is: they’re all #@&%. I’m not angry about it and I’m not jaded. I believe that’s reality in contingency search. I keep it in its proper perspective and I instill this basic philosophy in my recruiters.

Relationships, in this business? You must be joking! Think about it! I have a great client (who I might have placed in his present position) and when we talk, you would think he’s my best friend and he has an honest to goodness class A search for us, and 5 minutes after he gave us this 30 day exclusive contingency search, one of my competitors calls him with a candidate that fits his bill and the manager’s success is based upon him filling this opening ASAP, unless I’m giving him a kickback (which I would never do), I have a feeling he will try to hire that candidate. I am sure he will call me afterwards and guarantee me his next exclusive search. Unfortunately, (or fortunately depending upon which side you’re on) I believe he would be right in doing this (qualified candidates in our industry, are incredibly hard to find) … it’s just the nature of our business.

I also teach my recruiters that when a hiring manager tells you that he has an exclusive agreement with another firm (and no money has been paid) and you have the candidate that fits his needs…there is no way that my recruiter will get off the phone without at least getting the resume or the candidate in front of that manager. That, I believe, is common sense business – nothing more nothing less. Again, it’s just the nature of our business.

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By the same token, I have a great candidate that I recruited for a position and we build this great relationship and the opportunity I present to him is exactly what he’s been searching for all his life and 5 minutes after I presented him to my client, a sharp recruiter calls him with a different opportunity…. you know where I’m going with this … It’s just the nature of our business.

Don’t get me wrong. Of course it feels great when a company calls and gives you a search and you have a leg up on your competition, because of the relationship that has been built but, in contingency search, I firmly believe a recruiters success is not based on the relationships he/she builds, but in the work the recruiter puts in, and by work I mean being on the phone with a purpose. To me, contingency search is telephone sales and that means numbers and closing, not relationship building (unless you can transform the contingency search into a retained search … different discussion). If the recruiter is prepared to put in the complete effort that this business requires, meaning that phone does not leave his/her ear, he/she will get their share of openings, candidates, send outs and placements and will build superficial relationships that are kept in its proper perspective. That, I believe, is the nature of our business.

I started with MRI in 1984 took their training and after 12 months of straight contingency modified it to a practice of collecting quarterly deposits, “retainer” fees from 3 clients. I would offer these three clients exclusive service and charge 30% fees that would be deducted from their quarterly retainer.

Over the years I have evolved from this model to taking a separate deposit of 1/3 on each assignment, offering committed service and exclusivity of the candidates. I spread myself out servicing 3 clients and have trouble keeping up with all the openings.

Do I have a relationship with my clients? I think so. They call me when they have an opening, they trust my advice and I trust what they say to me. Will they stay with me if I betray their trust? I would not think so and if they lied to me I would drop them just as quickly.

If I fail to find them the talent will they look for another source? I think they will. If they become a lousy company to work for so that my candidates won’t accept an offer, will I look for a new client? You can bet on it.

This is business not matrimony. I am honest and fair to everyone, candidates and clients, referral sources and vendor. If a vendor over charges me, I will move on to their competition. If a product doesn’t work I shop for another product. This is the bases of the free enterprise system; if you are not an effective provider of service then you lose business to your competitors. Last I checked we are still in a free market system. It is not loyalty it is business and it’s beautiful.

Yours truly,
Tom Graff

Thomas D. B. Graff, CSAM
The Hanover Consulting Group
tgraff@thehanovergroup.net
410-785-1912

In my former life as a recruiting warrior, every time I had to work with someone in HR, I’d suggest to them that, since I was in the trenches on a daily basis, I frequently ran across extraordinary openings in their field. “I’m not suggesting that you are even remotely thinking about changing companies but, as an HR pro, I’m sure you recognize the benefits of learning about exceptional opportunities. If you would give me some basic information about your career progression to date (a resume or data sheet) I’ll be happy to be your confidential eyes and ears in your field.”

Almost three out of four sent me a resume or gave me their basic information. For those who did so, the power dynamic of my relationship with them changed significantly. Suddenly I was in their corner. They took my phone calls; expedited my referrals (to prove how effective they could be) and, guess what – I placed quite a few of them.

Recently I was reminded of a horror story chronicled in SHRM’s HR Magazine     (http://www.shrm.org/hrmagazine/articles/0406/0406SRcadrain.asp) about a company reneging on an offer. Seems a company offered a candidate a job requiring relocation to Oregon. He accepted. Both he and his wife resigned their current positions and since their family dog was too frail to make the move, they put it to sleep. The moving van showed up and while the family was en route to their new city they were informed that there would be no job waiting since the company had decided to close the Oregon plant. The mortified candidate learned that the decision to close the Oregon plant had been made long before the job offer was made. He sued (Meade, et al. v. Cedarapids, dba El-Jay, 9th Cir., No. 97-35836, Jan. 12, 1999) and a settlement was reached.

No recruiter was involved in this case but there are some things you should be aware of when negotiating for your candidates. There are legitimate legal reasons that allow a company to rescind an offer of employment, e.g., bad references revealed, drug test failure, refusal to sign non-competes, etc. Often, companies wait until the person is on the payroll before dumping them since most states recognize ‘at will’ employment but they are more vulnerable to lawsuits claiming breach of contract, promissory estoppel, discrimination, and a few states (California. Colorado and Nevada have statutes that impose criminal or civil penalties on employers that offer work under false pretenses.

If you review the offer letters before your candidate says Yes, look for disclaimers similar to “offer of employment is contingent on acceptable outcomes of such tests and inquiries.”

With counteroffers being almost automatic when your candidate attempts to resign, it may be time to dust off “Counteroffers – Road to Career Ruin” mentioned in this month’s cover story by Steve Finkel.  It is timeless and as applicable now as when it was first written. You might also want to review the decision in (Shebar v. Sanyo, Superior Court of N.J., App. Division, No. A 1544-86, June 10, 1987) also mentioned in the SHRM publication HR Magazine. (http://www.shrm.org/hrmagazine/articles/0406/0406SRcadrain.asp).

One of the strangest reasons I’ve ever heard for using a recruiter is when a high-level hiring manager said, “I always use a headhunter. That way if things don’t work out I have someone else to blame.” Hoo boy!

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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