There’s something odd about the recruiting industry: the ‘few good clients’ pay for the many more poor working relationships the industry seems to generate. When you cut that 20% fee check, you’re usually covering the cost of 4 other searches that went nowhere. (You’re so nice!) Oh, and the costs some other inefficiencies, too.
The inefficiency of the Industry
With over 10,000 choices, you the client, have more options than you’d care to consider when selecting a recruiting firm. Many recruiting firms seem to be the same, right? Same rate. Same guarantee. Same uncertainty on whether or not they’ll deliver on what they say they can do. When do you want to get started?!
Like any working relationship, yours with a recruiting firm may hit a rough patch. Candidates seem to be coming in too slowly. Salary expectations seem too high. Someone quits after 91 days, conveniently enough. This reality combined with you knowing you have literally 10,000 other ‘same’ options to choose from make for an often, unhealthy, partnership. Kind of like online dating – “thank you, next.”
From the get-go, both you and the recruiting firm are hedging. You, by inviting other firms to join the search. Them, by having a 20% fee and limiting the investments they actually are going to make on your specific search. This only exacerbates the underlying inefficiencies of the industry. Firms start chasing quick wins, not valuable client relationships. Clients expect no relationships and treat recruiters as disposable and, sometimes, with disdain.
This is a significant inefficiency the recruiting industry has brought upon itself. It operates with little expectation of full buy in from the client and often commits little effort in return, hoping for an ‘easy’ big win.
The inefficiency of the Recruiting Firm
As a whole, recruiting firm owners are a risk-averse bunch. I’ve worked with a few… and the structure of how firms work is a reflection of this. Many firms depend on heavily commissioned recruiters to sell and fill roles. This model works well as the cost of the work is only absorbed after the invoice for a successful placement is sent. The challenge with this model is twofold: commissions must be high, sometimes up to 60%, to entice professionals to take on the risk (significantly inflating the fee you pay) and motivation for recruiting firms to invest in the efficiency of their commission-based team is, well, low.
Why take on the risk of the additional cost when you only have to cut a check when you’re getting one? You end up having experienced recruiters handling much of the ‘grunt work’ of the search because no one wants to take on the fixed costs of support staff. Understandable, but this approach contributes to that high fee you’re left paying.
This also negatively impacts a firm’s ability to stand behind their guarantee – heavily commissioned recruiters are not excited or financially motivated to fill replacement searches when compared to full-fee searches they’re also managing. They may be motivated by the continued relationship, but are they confident you’ll stick with them? Are you?
The inefficiency of the Relationship
In the face of a ‘free’ partner, until they prove themselves against the sea of other options, it can be easy to become a bad client, and not even mean to! It’s so easy to end up accidentally as the bad client that many recruiting firms expect only 1 of 5 searches will result in a placement. So, 80% of the efforts will be rewarded with $0. That means you, the good client, cut your 20% check when you make the hire not because that reflects the cost of YOUR search and YOUR needs, but because you’re stuck covering everyone else’s bill. Big surprise you have little excitement when making the check request.
While 20% seems hefty, often there are too many variables for a recruiting firm to be able to reduce their fee confidently – these variables include different hiring managers, uncertain urgency to fill, salary competitiveness, assessment implementations, potential guarantee utilization, additional recruiters tasked with the same search… there are many.
Many of these variables are backed into the status quo of the industry, recruiting firm structure, and how the firm/client relationships have been traditionally structured. So ingrained are these aspects, many do not even question it beyond grumbling about high fees (or ‘bad’ clients).
What You Can Do About It
If you’d like to save on your recruiting, find great talent for your roles, and build a partnership – make sure you don’t just go along with the industry flow.
Invest in your relationship with a recruiting firm that has proven itself to work for you, supports its recruiters, and has a compensation model that aligns recruiter interests with yours. Challenge your recruiters, hold them accountable, and let them do the same. You’ll be rewarded with a sweet, efficient partnership and many happy, new colleagues.