Six Seconds of Hell: The Right Way To Negotiate Fees

One of the phrases being used these days by the Jet Propulsion Lab has been “six seconds of hell,” which they used to describe the highly technical processes the Mars Lander had to perform in rapid-fire succession during the last six seconds of its entry into Mars. I kept hearing it over and over: “six seconds of hell.” It made me think specifically of the staffing and recruiting business. In our own industry, we frequently have a similar experience, what I call “three seconds of hell,” which occur during two instances of the recruiting process. So when exactly do the three most precious critical seconds in recruiting occur?

  1. When a client hiring authority asks, “What is your fee?”
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  3. When a client hiring authority asks, “What is your specialty?”

Answer either one of these questions incorrectly, and a loud buzzing sound goes off, indicating those of us on the staffing side of the equation just lost the game. Pause a second or two longer than the client deems appropriate, or use a tone of voice or inflection that indicates any hint whatsoever of a lack of confidence or conviction, and, simply put: YOU ARE DEAD! You have lost the deal right there. Of course you won’t find out until later, as it won’t be made obvious to you. But you will make or break the deal during these most two critical issues. For the purposes of this article we will examine only issue number one: The “What is your fee?” challenge. It does not matter if you came highly recommended. It will not matter if you spent two years chasing that client ó whether you sent postcards, fancy brochures, or took him or her to a fine restaurant. The entire process will funnel into the narrow bottleneck of the above two issues at some point. And if you’re not ready, you are as dead as the English Beagle that is now probably part of the Martian dust the U.S. rover will soon be examining. I’ve studied the fee issue with great fascination for nearly two decades. Even recruiters interviewing with our firm who work with the competition are often clueless as to the proper way to address this issue. So let’s move on and examine the do’s and don’ts of fees and where the problems occur. And hopefully, corporations will appreciate us that much more and mutual happiness will be the outcome. First, I’d like to point out glaring examples of extraordinary failures when it comes to discussing fees. Example #1 A recruiting firm (true story), which we will refer to as ABC Search of NYC, sends out a cheap mass mailer. I happen to be on their list (mistake number one: always double-check your list and make sure the competition is not among your recipients!) The letter states briefly: “Dear Client, Enclosed is a pocket schedule of the upcoming Giants Football season. I hope you enjoy the games and remember to call whenever you need IT contractors or technical temps.” The letter is signed, and at the bottom is a line that reads: “PERMANENT HIRES ALWAYS ONLY 15%.” What? Fifteen percent? What is this, Wal-Mart? This firm clearly does not “get it”. They are clueless as to the high degree of one-on-one consulting client companies expect. Instead of placing their emphasis on service, they have chosen to highlight fee. This is wrong. It undermines and cheapens my impression of such firms. Even if I needed a secretary, this would be the last one I’d ever contact, judging by their approach. Next problem: What if I hate football? Apparently no one has ever thought of that at ABC Search. What if I love the opera? Or what if I love Broadway plays? Or art? Or museums? Or hikes, or…etc., etc. Their approach is a gender-assumptive approach that focuses not on the prospective client needs but rather on the self-centered interest of the person that sends these out year after year. Everything about this approach is dead wrong (I happen to know the director of the firm that puts out these ridiculous marketing pieces, and he’s been a diehard football fan with season seats for more than a decade). ABC Search is doing itself a gross disservice and anyone employing such tacky techniques is in desperate need of high-end urgent professional training by a professional recruiting trainer. Example #2 An executive recruiter with 23 years of staffing experience is sitting across from my desk during an interview. This was last year. At one point she asks, “What fee do you charge clients?” Odd question for someone presenting herself as a seasoned veteran. If she were good she would be telling me what her terms generally are to secure long-term relationships! I respond by saying nothing, as this question has always caused me to be very concerned about the ability of the recruiter. If the recruiter is truly capable of delivering a service, the emphasis should be on the competency of recruiting and never the fee. My response eventually, after I have probed and challenged the individual’s skills more in-depth was something along the lines of, “Our fees are set at whatever reasonable level is agreed upon by both ourselves and the client, so that the client is in agreement that the service will be more than worth the eventual investment.” The Right Way To Do It Time and time and time again, I hear recruiting trainers and “gurus” stating that fees should “never be compromised.” Hogwash. Easy for them to say when their income is derived almost entirely from speaking and training engagements ó and not from recruiting any longer! Some say “only 30%,” others will stomp their feet at the podium and insist “25%, never a penny below!” If you listen to some of these “expert trainers” your recruiting business may be in deep trouble! The honest truth is that I have carefully studied, spoken with, and visited the offices of some of this country’s most remarkably successful recruiters. The top 10%. I have also had the pleasure and honor to be invited into some of their homes. The truly successful ones are rarely seen in public. Many will never be seen training. Some may accept speaking engagements on limited occasions; many choose not to. Instead, most successful recruiters simply go on working in their modest offices (most of the extraordinarily successful ones have modest and understated offices as they don’t need nor want to show off). So if you want good advice, do not go to an expensive two day seminar. You’ll probably wind up paying more for entertainment than content. Instead, find out through your local staffing association who is really good and call them directly instead! But I digress. Let’s return to the issue of fees. To summarize… Company: “What is your fee?” Recruiter: “Have you worked with recruiters before?” Company: “Yes, with varying degrees of success.” Recruiter: “What was the rate you agreed to with those which were successful, since I anticipate to succeed as well?” Company: “Well let’s see it was, um, er, 25%.” (Here’s where I get to provide more than what they expected.) Recruiter: “How about we start at 22.5% on this first one, and revisit the fee should you return to us later this year, with the understanding you will provide us 45 days to produce the first two candidates exclusively?” (I always get a yes. Of course, this can be done only if there is ample room in the fee range in the first place. If the current fee is a ridiculous 10% this may not be a feasible option.) Company: “Sounds great! What else do you need from us?” The process then continues or returns to specs or to whomever the conversation must continue with. Once again the answer to “what is your fee?” is: whatever makes the client extraordinarily happy. I have more than 35 different contracts filed electronically, each having only slight modifications from the other. But those slight differences are what the customer wanted and made the customer happy. We have agreements written one way for the pharmaceutical industry and science/PHD searches, another way for insurance, accounting or finance niches. In some cases the managers did not want a discount, they demanded more attentive service. Fine. This was incorporated into the agreement. In other case, the client did not want a lower fee, but they did want assurance that we’d stick with them and help find a replacement within 90 days if the individual didn’t work out. Again, if we thought the nature of the position made a replacement possible, so be it ó 90 days it is! Another common oversight is the long-term value of the relationship. Just as some investors focus too much on what a stock will or will not do within the next 90 days, so the rest of us couldn’t care less about the initial fee, as we plan on revisiting the relationship only after another five years or so go by. So while some are focused on this individual fee, they are often overlooking the value this client may bring year in and out for the next eight years or more! I don’t know about your experience, but in mine, being able to provide a competitive fee coupled with the highest credibility has been a combination that, over the long run, has won many clients away from the competition, clients who return to us year in and out. I have always been more loyal to someone who does more than average for our firm and tend to stick with them during a longer term period. Most corporate hiring managers of any product or service would agree. So stop focusing on fee, and start focusing on what your client’s departmental hiring needs demand instead. If your case is made with conviction that your service will produce outstanding results, the fee agreement should fall into place effortlessly!

President of iresinc.com & Searchwizardry.com Within two years after leaving the corporate world in 1987, Frank Risalvato was earning $21,000 average fees as a search consultant. Each individual fee equated to almost 50% of his previous annual salary in 1987. In 1991 he founded www.iresinc.com, the search firm he continues to operate today. Today his fees are more than double that of his earlier years while working fewer hours weekly. Frank's audio download page on www.searchwizardry.com provides an opportunity to "be a fly on the wall" and listen in to live calls, messages, conversations with clients and candidates. His recent book, A Manager's Guide to Maximizing Search Firm Success has helped recruiters using it lock up partial and full retainers between $5,000 to $45,000 by helping drive home the concept of exclusive/retained over the usual contingency approach.

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3 Comments on “Six Seconds of Hell: The Right Way To Negotiate Fees

  1. Very good job, Frank!

    It was nice to show a solid ‘real world’ approach, to questions we all face. You are very correct, when you say: ‘Trainers can stomp their feet, and insist on 25-30%, as a mandatory condition’, but their paychecks are NEVER riding on such intractable demands!

    Yours truly,

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  2. Good article. I always like your hashings-around, Frank, both here and Fordyce.

    Regarding the interview with the recruiter- I’m surprised you reacted the way you mention. See, I though of it just the other way. Perhaps the candidate was indeed trying to find out if *you* were the ‘15% on all perm hires’ kind of company. This interpretation of her quesntion seemed to have flowed from the way you were shaping your article.

    Best,

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  3. Thank YOU JEFF!!!

    I have found after spending more than a decade carefully observing the ‘TRUE’ experts and those whose expertise is ‘hypersensationalism’ (now there’s a big word I haven’t used much!!) that the latter make for great entertainment but leaves much to be desired in terms of real life applicable lessons.

    Bottom line is flexibility is paramount to establishing relationships whether this industry or any other.

    As for the showmanship and comedy promulgated by some trainers … I’ll leave the hyperbole to them while I focus on practical aspects.

    THANKS GREATLY for the input.

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