Revenue Options II

Last month, we presented a number of alternative ways to charge for services rendered to search/placement clients. Here are several more ways to earn dollars from client companies.

Although every company’s needs are different, it appears that almost all employers are susceptible prospects for the right presentation to outsource all or a part of the hiring process a diminished, but righteous, way to enhance revenues.

While it is unlikely that employers will be willing to relinquish total control over any aspect of their employment activities, here are just a few of the functions which have been successfully outsourced:

Sourcing of applicants – Typically a research function best performed by a search or search research firm. Assignments may be position-specific or a more generalized assignment such as: “We always need ____, so keep our pipeline full. Almost 400 of these specialists are listed in The Executive Search Research Directory (www.rsronline) along with their backgrounds, operational methods. Costs and specialty areas (over 290 of them). Some will work only with companies; some only with searchers and most will work with both. The directory tries to list only pure researchers rather than search firms who also sell their research capabilities. Most common method of payment is an hourly (plus expenses) charge. (Average hourly rate among those listed in the most recent ESRD was $83.67 but most start at $100 per hour). Some just generate names; others go further into the search process (screening, interviewing, qualifying, ranking, candidate report writing, and even, occasionally, checking references).

Another source of revenue for recruiters with good investigative/sourcing skills is to perform research for other search firms. An excellent example of this technique was included in last month’s Internet Recruiting column by Mark Berger and Wade Haught.

Several hirers who had in-house recruiters doing this harvesting before the recent economic unpleasantness now find it more cost-effective to hire an outsider to do it.

Wording on a typical proposal might be:

We invoice at an hourly rate of $____ for a minimum of twenty-five hours at the beginning of each project. We are reimbursed for actual tele?phone costs. Timely progress reviews are made by telephone and a written report is submitted fol?lowing each twenty-five hour segment.

Screening of applicants – This function has existed for decades but has never been thought of as outsourcing. Basically, the vendor performs initial and/or more in-depth screening of response from ads (print & Internet) and write-in applicants, referring only those who fit the specifications. This has become a much larger task for hirers with the job boards in the mix, disgorging hundreds of hopefuls at a time. Although there are companies selling “selection” software that supposedly does this task with some form of AI (Artificial Intelligence), fact is, a true screening requires some form of time-consuming personal contact with those who hope to survive the “cut” process. Thinning the herd for important professional or senior-level openings also requires that the screeners possess the “soft skills” necessary to truly evaluate the candidate against the actual opening, not just some hypothetical templates provided by the software providers or the job description which is usually nothing more than a committee-generated wish list. After all, if screening is just based upon the resume, you have nothing to rely upon except what the applicant has divulged. Third-party verification and evaluation is a most important ingredient at this stage of the pre-hiring procedure. As much as you hear about hiring becoming a robotic automated function devoid of most human contact, it will never happen.

Much of this work is being done on either an hourly basis or for a predetermined project fee based upon replacing in-house costs/functionality. (In house assessment skills are rarely as good or unbiased as an outside evaluator). One tangential benefit noted by practitioners who engage in this sideline is the accumulation of usable resumes which don’t pass muster for the client but which may be useful for future placement activities.

Responding to employment inquiries – Sometimes, this is a part of the previous function; sometimes it is a stand-alone function to write “Dear John” letters or other canned correspondence to job applicants. It may or may not include a call to applicants to further determine their suitability. Companies that previously ignored unsuitable applicants are trying to polish their PR image through some form of communication and often outsource this task. Normally handled on an hourly basis plus actual expenses.

Checking references – This self-explanatory function has been selectively outsourced for years. The trend continues to grow. A recent cover story related a number of reference horror stories, mainly about miscreants whose tawdry pasts caught up with them after they were put on someone’s payroll. An insurance policy to guard against legal action is highly recommended.

Coordinating college relations/recruiting – Whether a company visits one college or a hundred, this chore is an expensive grind that can be (and has been) more efficiently handled by an outside vendor.

Coordinating job fairs/career centers – Like college recruiting, job fair/career center interviewing is nothing more than an initial screening job probably done more efficiently and economically by an outsider. A spin off to this is the downsizing company who produces their own career center for exiting employees. More than one recruiting practitioner has become the coordinator for events like these, issuing invitations to companies that are still hiring and professionally organizing and managing the event for the shrinking client. Getting paid for this function is quite wide-ranging. Some are paid a project fee for event management and others have designed ways to get paid a fee for each person placed some from the hiring company and sometimes from the terminating company (as an outplacement fee).

Relocating newly hired employees – Unless a company has their own relocation department (which few do), the details of moving people can be best done by an outside specialist in the area. One such firm is Transitions (www.transitionsrelocation.net), a national relocation company serving the needs of recruiters, their candidates and their clients who are often ill-equipped to handle relocation. Transitions president Judy Koelsch contacts candidate families during the interview process, getting feedback which, when transmitted back to the recruiter, frequently helps in making the placement. She coordinates the real estate activities at both the origination and destination sites and because of contracts with major moving companies, can offer generous discounts.

Administering skill/aptitude tests – More often done by temp firms than permanent placers, this can be a profitable sideline. Dr. Wendell Williams (rww@ScientificSelection.com) is an expert developer of hiring and promotion tests and publishes a free newsletter on this topic. One of his articles is reprinted in this issue and the information he provides is invaluable in the area of testing.

Operating on or off-site employment office – A more full-service approach for short-staffed clients with continuing needs.

Maintaining applicant databases – Often, the scanning in and maintenance of applicant files can be done by an off-site vendor or by an on-site contract employee. The number of Internet firms doing this is rapidly growing. The peripheral benefits of this type arrangement are many.

Becoming the employer of record – Many employers want to “test drive” new employees before committing to permanently hire them. Putting them on your payroll instead of theirs gives potential hirers the opportunity to audition them without the obligations of having them on their payroll. Auditions often lead to full-time gigs.

Other functions frequently outsourced are:

Updating Affirmative Action/Diversity Plans

Staffing short duration projects

Employing temporary workers

Outplacing of employees

Training

Drug screening

One of the best examples of variable pricing plans for permanent placement firms was created by trainer/practitioner Bob Marshall. Here it is:

The Marshall Plan

PRICING MATRIX

Item: We need a more sophisticated method of calculating fees.

Item: We want to avoid generalized fee cutting, fee discounting, etc.

Item: We want to give our very professional recruiters a possible alternative when they hear the question about fee cutting.

Item: We want to be on the cutting edge of our technology during the New Millennium in fact, we want to lead that technology.

Item: The Bottom-line: People just want choices it is human nature! Giving hiring managers options is normal even Nordstrom’s gives options.

By utilizing the Pricing Matrix below, we will become more realistic in regards to our service and our inherent time expenditure and receive remuneration more fairly based on what we do. We will also be able to negotiate with hiring managers by saving them percentage points when they give us something in return.

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Methodology:

The recruiter takes the Job Order and then says to the client company contact, “let me plug this information into our ‘computer matrix’ and get back to you with our service charge range. Shall I call you this afternoon at 3:00 or would 3:30 be better?” Then, the recruiter meets with the manager and they agree on the fee based on the answers to the matrix questions and discuss avenues of negotiation (where the hiring manager can save a point or two) in preparation for the “call back” call.

Example:

We write a Job Order that is going to require surgical recruiting (5.5%); there is average urgency (4.5%); they are using other recruiters (5.5%); the salary range is 70-72K (4.5%); we can possibly make 1-2 placements with this company this year (5.5%); the HM takes all of our calls without screening them (3.5%); its ‘fillability’ is average (4.5%); and the JO is fairly complete with some blanks (3.5%). Based on that information, the fee percentage on this JO is 37%. The new service charge on $70-72K would be between $25,900-$26,640. The old 30% fee schedule would have charged between $21,000-$21,600. We are charging a few more points, but, based on the information presented, we will earn them! We are finally being paid fairly and our client companies can reduce their fee load by being more cooperative with us. And we will let them know that, by printing the eight items on which our charges are based in our fee schedules. Our fees will now range from 20%-52%. This negotiation becomes a win-win proposition!

FOR EMPLOYERS

Be loyal: If you find a productive consultant, stick with them. Don’t be a fair-weather client. When you need their services, call them. Don’t re-educate a new consultant for every new opening you have. Constantly looking for a new consultant every time an opening occurs is like a one-night stand . . . dangerous and counter?productive to developing beneficial and meaningful relationships.

Be truthful: If you don’t work with placers or recruiters, or if you only work with a select few, say so. Don’t lead them on. If you do decide to work with a placer or recruiter, give them all the details of the assignment. If you turn a candidate down, tell your consultant the real reason why unless you want to keep looking at misfits. Time is too precious to waste . . . for both of you.

Be reasonable: Overstating needed qualifications or understating the salary dollars available just muddies up the waters. Don’t require a Master’s degree for a job needing a trade school graduate.

Be accessible: Return phone calls promptly. Failure to do so can cost you a shot at the ‘perfect’ candidate. And ignoring phone calls is a gambit reserved for amateurs and egomaniacs. You never know when you may need a favor (or a job).

Don’t over-control: Allow your consultants reasonable access to hiring managers. Departmental culture can only be discerned by direct contact with hiring supervisors or managers. Unless you know every job as well as your own (an impossibility), recognize that your consultant may have a better handle on the real qualifications than you do. After all, it should be you and your consultant against the problem . . . the unfilled opening which is costing your company money.

Don’t be a tire-kicker: Don’t give out speculative job openings or use consultants to supply you with sources of competitive market or salary information from candidates you have no intention of hiring.

Don’t be a bargain-hunter: If you feel the fee for the service is too high or the guarantee period is too short, use another hiring alternative. You’ll probably end up paying about the same with a lot more lost time and you won’t get any tenure guarantee for a hire through the newspaper or the Internet. “Blue-light specials” only exist at K-Mart (and you know what’s happened to them). A consultant’s time and expertise are all they have to offer. If you find one who’s willing to work for less, you can expect to get less of their time and their expertise is probably second-rate.

Respect your consultant: No one knows more about the job market than a personnel consultant. No one! If your consultant tells you your candidate wish list is unrealistic, they’re probably right on target.

Be ethical: Attempting to avoid or evade a fee you owe can have devastatingly expensive repercussions. The last thing you or your company needs is to be on the ‘target’ list of every recruiter in town.

FOR RECRUITERS/PLACERS/SEARCH PROS

Respect your client: Don’t think that you have a God-given right to every opening the client has. Let’s face it, some openings can be filled less expensively through alternative methods of hiring. And, every opening doesn’t require a superstar. Some just need a warm body, whether the client realizes it or not.

Don’t negotiate away your fees: Discounting from your normal fee schedule requires that you provide less than full-service. It also implies that you’re charging too much to begin with. If a client company demands a bargain basement fee, be truthful about those vital things you won’t be able to do during the assignment. And be willing to walk away if they persist. Leave the grief to someone else.

Be truthful: Hyperbole has no place in the placement process. If the candidate lacks the reasonable minimum requirements for the job, don’t give them degrees they don’t have nor years of employment they haven’t worked. Client wish lists can be frivolous at times, but they are the result of committee decisions which are often hard to adjust.

Be resourceful: Companies are not interested in warmed over file-dwellers, net-surfers or ad-answerers. They can get them on their own. Recruit the talent necessary to fill the opening. Be inventive and enterprising. Water-walkers occasionally surface through advertising or the Internet, but your most talented candidates don’t know you exist until you call them.

Be reasonable: If a company representative has a rational procedure for the hiring process, try to follow it. If it is unreasonable or unjustifiable, find a new client with whom to work. Unwarranted guidelines are promulgated to keep you at bay with a company who really doesn’t want to work with you anyway

Be tenacious: But remember, being pushy is not the same as being persistent. Recognize the difference.

Be trustworthy: Ethics and principles are their own rewards. Sharp-shooting and corner-cutting carry a heavy price . . . for you and the industry you represent. Before moving into a “gray” area, think about how your actions would look as the headline in tomorrow’s newspaper.

Recognize your limits: If you aren’t skilled in the specialty needed, don’t fake it. Better to be up-front about it than to live with a botched reputation for failing to level with the hirer or the candidate. Overpromising is for amateurs. Stick to what you know.

Be proud of what you do – You are part of an admirable and honorable calling. Acting otherwise demeans you and your profession.

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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