If a consultant had Cash In of $214,357.08 (Ave. fee of $17,863.09 X 12 months) and they were paid the average commission rate of 41.38%, their earnings for the year would be $88,700.95. That’s $10,096 more than the average consultant earnings for 2003, the previous year’s survey results.
That’s with only one placement per month of a candidate earning $71,452 and billed at 25%. What if you could convince the employer to pay you a 26% fee? The fee would then be $18,577. Extrapolated out for a year, the Cash In at a 26% fee would be $222,930 and at 41.38% commission, your earnings would increase to $92,248.
What if you convinced the employer that 27% or 28% was the best you could do? It may not be the 25% they want to pay but these small incremental increases between their offer to pay 25% and the radioactive (in their minds) 30% can increase your income by thousands of dollars for the same amount of work.
Your ability to craft a compromise depends upon your ability to sell the proposition to an employer in need. Isn’t that what our business is all about?
To an employer, that 30% on your fee schedule is the “sticker price.” Ever buy a car for the sticker price? Of course not! You make a low ball offer and usually meet the car dealer somewhere in between that number and the price on the window.
You must be able to reasonably assess an employer’s hierarchy of needs when talking about that search assignment. How really critical is their problem? How severe is their pain? If my finger is bleeding, I’m not likely to price shop for a Band-Aid. I’ll buy them from the first store I visit, whatever they might cost.
If an employer says they only want to pay 25% and you ask for 27%, their mind focuses on the 2%. In their mind, that’s a small differential and, if they’re really hurting, odds are they’ll accept it. They think to themselves, “After all, if they don’t produce, I owe nothing and if they do, it’s worth it to get rid of the problem.
Our industry has been conditioned to think in increments of five (5) when discussing fees. In the old days, when fees were “one percent per thousand dollars of salary” up to a maximum of 30%, there was a lot less haggling. But today, when salaries of placed people are almost always above the 30% doorstep, we’ve conditioned ourselves into a corner when negotiating fees forgetting that there are five different percentage options between 25 and 30%.
Times, they are a changin’. Human resourcers haven’t realized it quite yet, but as Gail Kaplan opined in last month’s TFL, the pendulum is fast swinging back our way.
Let’s face it. By the time an employer decides to utilize a search firm, you can bet they have already tapped every other resource they can find. To blindly accept their edict about a 25% maximum without trying to ease them up a bit indicates that you might be a less than adequate negotiator one of the major skills for which we are paid.
Mr./Ms. Employer, I understand that your policy is 25% and I’m sure you can find someone to accept this assignment for that amount. Our policy for a full service search, however, is 30% and based upon the qualifications you seek and the failure of your other sources to produce an appropriate candidate, it’s going to take some extra effort on our part to solve your problem. Although we rarely discount our normal fee percentage, let me propose a compromise at 27.5% coupled with a 30 day exclusive. Is that acceptable to you?
From a corporate perspective, the difference between a couple of percentage points is miniscule, especially since the total amount of the fee is tax deductible. But resistance will more than likely come from an HR employee who’s a ‘rule booker’ rather than from a hiring manager who just wants the job done … fast.
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Guide: Practical Tips for Remote Hiring
I have, over the years, in good times and bad, found a great reluctance for practitioners to say, “Sorry, I just can’t help you under those terms. It wouldn’t be fair for my other clients.” That’s a powerful psychological strategy. The willingness to walk away puts you in the power seat and, according to many of my high billing acquaintances, often turns a No into a Yes just so the naysayer can save face by proving to you that they have the authority to amend the self-inflicted ‘rules.’
This month’s exceptional article by Terry Petra expresses similar thoughts on the subject of ‘exclusivity.’ Don’t miss it. And, practice how to say No at the right times.
We were asked in prior years about how the owners who regularly work a desk fared. In fact, they fared very well with an average Cash In of $334,820 (Median – $284,625) Average tenure was 15 years. Remember, owner personal production is net/net with nothing deducted except normal operating expenses.
We’ve interviewed a number of these owners in the past and wondered how they performed so well on top of their other management duties. It seems a good portion of their production is because of taking over pending deals of consultants who left their firms. But this is just a small percentage. The real answer is their years of experience and their willingness to work job openings outside the expertise or specialty areas of their consulting staffs.
There are other anomalies we’ve gleaned from the survey results and we’ll let you in on them next month.