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The Fordyce Letter

Straight Talk for the Recruiting Profession


Articles by Paul Hawkinson

TFL archives

Recruiting Recruiters



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As our survey shows, practitioners are beginning to again restaff. As hiring becomes the order of the day for many, we thought we would reprise this article. It is as applicable today as when it was first published.

If ever there was a key ingredient to the success of any placement or search organization, it has to be in the quality and caliber of the people on the “front line” . . . the consultant, counselor, account executive, recruiter . . . or whatever you choose to call these people.

Yet, surprisingly enough, far too many recruiting firms let this area grow fallow by sheer default.

As one manager told us, “Listen, it’s hard enough to get someone to work a desk as it is, much less having the option to pick and choose who I’m going to hire. I’ll give almost anyone a chance.” And his success in keeping turnover low was reflected perfectly in the fact that his firm uses “desk names” rather than “real people names.”

His philosophy was simple! “If they haven’t been placed within two weeks or if they are desperate for a place to spend their days, I give them a desk and a phone and tell them to have at it. Who knows,” he sighed, “they’ll at least stir up some dust, may make a placement, and might even wind up finding themselves a job for which I can collect a fee.”

This, of course, is absurd. If we ever heard a more fallacious reason for letting someone represent an organization with its customers and clients, we can’t recall it. But the glaring reality is that it is often true and frequently denied.

No one likes to see an empty desk, cubicle, or office . . . but in the majority of cases, an empty desk is better than filling one with the wrong person. While an unfilled consultant opening is a drag on profits (since you still have to pay nominal expenses to maintain the empty desk, phone, etc.), it is insignificant when compared with the profit-dampening mischief that can be caused by an incompetent or inept inhabitant.

Let’s face it, a consultant is primarily a seller . . . but unlike the salesperson who can face a buyer with a product, having the assurance that their product won’t change, consultants deal with a host of intangibles, very few of which can they ultimately or totally control. Ours is a “people” business . . . and people talk . . . many times saying exactly the wrong things. No matter how well “coached” a candidate is about a particular company or the opportunity they offer, they have a penchant for saying “the wrong thing at the wrong time.” Think how happy (and wealthy) we’d all be if every candidate (or employer) followed the script as we envision it every time we sent a candidate to be interviewed by a potential employer.

Consultants must, by the very nature of their “product,” be a major cut above the average peddler. They must be creative, blessed with an overabundance of empathy, enjoy those better things in life that money can buy, be reasonably intelligent with good verbal skills (able to paint word pictures), be bold and unafraid of failure, be familiar with the business world and its needs, possess emotional stability, be sensitive to the needs of others, and have what one manager calls “true grit.”

“I look for the semi-controllable maverick who not only walks on water, but carries his own lake with him just so he can prove it whenever the need arises,” according to one owner whose average consultant tenure is six years. His philosophy: Hire the best and place the rest!

Not one of his consultants came from an ad seeking consultants. Although he admitted running such ads from time to time, since it permitted him to place the ad (always sales oriented) into the Help Wanted section of the paper rather than buried in the “Employment Agency” section, the only thing these ads brought him was increased traffic for placement purposes.

“The unique qualities I seek,” he continued, “are not usually available in the type of person who answers my ads.” Four of his people are ex-employer/client personnel. “After working with them as customers and watching them in action, I knew I wanted them on my side. The courtship, in one case, took 15 months . . . but it was worth it to us both. Twenty years ago, when I first got into this business, I’d hire them if they were breathing and available, but no more. You get to recognize a certain ‘glint in their eye and an enthusiastic spring in their step’ when you meet the potential winner.”

Probably one of the most difficult tasks in recruiting recruiters is to define exactly what must be done to become a success. The average person thinks of the job in one of two ways: either just a matter of putting candidates and jobs together; or as a day-in and day-out telephone hustler trying to talk one person into hiring another. Misconception about the placement and search business is widespread among those who have not had firsthand experience or exposure. And surprisingly, many managers, whose job it is to screen people for others, find it almost impossible to screen for themselves.

Once you’ve decided to pursue a particular individual, you must have a well-ordered and persuasive presentation about the business you’re in and, where necessary, the specialty you handle. Don’t assume that your candidate knows either your company or about the business in general. Do assume that you’ll have to begin at the beginning with your presentation . . . because no matter what your candidate tells you, you can be certain that they are laboring under many misconceptions.

They’ll want to know how long you’ve been in business, how many offices or branches you have, your network affiliations, how many people you employ (along with success stories), your prestige clients, your approximate dollar volume, your future plans, your benefits, a realistic recitation of the income possibilities for them, your training program, your reputation (among both clients and competitors), and why you are currently seeking to hire them. You must excite them.

Now that you’ve told your side of the business, taken your candidate’s temperature, and concluded that there is a mutual interest, it’s time to dig a little deeper into their background.

Be a little negative. Remember, you’re interviewing for a job where the right man or woman can (and should) make between $80,000 and $200,000. Make them come to you. Let them try to convince you to hire them. If you’ve done a proper presentation of the opportunity, they’ll do just that.

Sit back in your chair. Relax. Be comfortable. When you ask them a question, really ask it. Don’t be mechanical. Make notes while they’re talking. Use such things as:

- Uh-huhs.
- Good.
- I see.
- How do you mean that?
- Why do you feel that way?
- Tell me more about that.
- What makes you say that?
- Anything else?
- Give me an example.

You’ll find that by properly directing this initial personal interview phase, not only will you acquire the type of information you need, but you also maintain the control necessary to make the decision seem to be yours . . . rather than theirs.

After candidates have “passed” this initial interviewing session, many managers use one of the many commercially available aptitude tests as a bridge to the next step. Make sure, however, it is one that can be completed by the potential consultant at home. Also be sure that you can grade and evaluate the test yourself, without having to utilize an outside firm to get the results.

Not only does this provide you with one more step in the “negative” selling process, but it is also a useful tool in determining “real” interest in the job you have to offer. This is judged by the speed with which they complete the test and return it to you. Some may even ask if they can complete it in the office. Others will complete it and hand-carry it in the next morning, mail it “Express Mail,” etc. If they do any of the above, you’ve got yourself a “hot prospect.”

But . . . never grade the test while they are in your office. Rather, it is far better to tell them that it must be sent elsewhere for grading and evaluation, once again because of the negative selling impact.

We are not suggesting a test merely as a “device” in your hiring process. It should be selected because of its prospective ability to evaluate sales ability and those unique personality traits that are indigenous to our business. Although the results are of secondary interest, the type of test selected should convince the test taker that it is being given for a valid reason.

We have also found that managers with staffs having longer than average tenure tend to utilize some form of telephone test somewhere in their selection phase. Since the phone is such an integral part of the business, it strikes us as elementary to test a candidate’s ability to use and effectively communicate with the major “tool of the trade.”

The most effective telephone tests seem to be those in which the candidate is given the application of a fictitious job-seeker. He should role-play over a phone, attempting to arrange for an interview with the role-playing employer (you). How well candidates are able to identify and accentuate the positive, field objections (thrown in by you), and generally handle an effective sales presentation on a telephone can tell you a lot about their success potential.

“It’s easy to say that telephone selling isn’t frightening,” related one manager, “but I’ve seen real pros freeze up when they have to perform via Ma Bell. Before I started giving telephone tests to prospective consultants, I found that a number of them, who I thought loved the telephone, were spending six hours a day calling Time & Temperature and Dial-A-Prayer after I hired them.”

Once you have gone through the preliminaries, and you’ve decided this is your next superstar, it’s time for the final hiring interview. Although much depends on the rapport that you’ve built during the prelims, we still recommend that you have your secretary, receptionist, or another employee call the candidate and schedule the final chat.

Even though you will have already answered the majority of the candidate’s questions, you’ll find that this last session will be the time when they’ll ask those “nitty-gritty” ones that they hadn’t the courage nor the desire to ask during the “Gee, I wish you’d hire me” phase.

There is only one way to treat a potential consultant’s questions during this phase – TOTAL HONESTY.

As in any hiring situation, a certain amount of “romance” is necessary, but you do neither of you a favor by not, at this point, letting your candidate know exactly what he can expect . . . in terms of your training program and, afterwards, during the first couple of weeks on the desk.

Those first few weeks can be devastating to a person who is used to instant results, and you must prepare and program them for what to expect.

Of course, the ideal situation is to have the consultant start immediately . . . but in many cases, they must give notice, and this period is crucial to maintaining their interest in joining your organization.

Many managers, in order to stress the importance of sticking by the decision to join their firms, make a “big thing” of the amount of work and preparation the manager must do to define the new employee’s area of activity, the research that he must do to make sure there is as little downtime as possible before getting the consultant productive and in making other preparations for the rapid assimilation of the new consultant in the organization. Telling them that news releases and publicity will be prepared and released, having them complete the necessary tax forms NOW, etc., go far toward making new employees feel as though they are already a part of the firm and lessen the chances of their “backing out” after telling their boss they intend to leave for a new job.

A word of caution is in order. Successful people in our business come in all sizes, shapes, and personalities. Do NOT try to hire a mirror image of yourself or of some of your best producers. True, there is a definite “success” profile for these people, but they can certainly be packaged differently.

When this writer first entered the recruiting business in the late 1950s, he was given an applicant, a desk, a phone, and the Yellow Pages. The extent of the training period was as long as it took to say, “Find him a job.” Although it worked, it is not recommended procedure.

The first few weeks must be highly structured and will dominate your time unless you’re one of the very few who enjoy spending their time continually restaffing your organization.

Seal your deal with a handshake, follow it up with a “kiss” letter to the new employee (and his wife), and make very sure that, from the very first day, they get the guidance and understanding they’ll need to “make it big” in the business. It’s well worth it. As Euripides once wrote, “A bad beginning makes a bad ending.”

TFL archives

Editor’s Corner



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“It’s never too late to become what you might have been.”

I recently thought of this quotation from George Eliot when one of our readers asked me why they should consider attending the next Fordyce Forum. After almost five decades in and around the business of placement, recruiting, and search, I am still somewhat mystified as to why some people soar and others fail in this business.

For a profession whose foundation is built around our ability to find exceptional people for others, I am at a loss to explain why we do such a lousy job of talent selection for ourselves. I suppose that’s why doctors are cautioned against treating their own relatives – but that’s another conversation for another time.

I know it’s heresy to point this out, but it’s a problem worth mentioning here since many of our readers have expressed an interest in expanding their consulting staffs. I am certainly not exempt. I have hired hundreds of people for this business. I can count on both hands and one foot those who have made it long term.

There is no proven template, although I have seen dozens of attempts to construct one. I once managed an office where the owner had a series of tests that had to be passed before consultant candidates could be considered. He had been a high-ranking sales executive with an office equipment firm prior to buying the franchise, and he assumed that if these “tests” were good enough for hiring Dictaphone salespeople, it should be good enough for the recruiting business. It wasn’t! In fact, the best hire I ever made was a guy who flunked every one of the tests. And the mediocrity of the pretested consultant staff I inherited should have convinced him of the error of his methodology.

While I’m not totally against tests, I usually don’t much care about the actual test results. There are other reasons to use them.

Dale Dauten, syndicated business columnist also known as The Corporate Curmudgeon, had a column wherein he differentiated between “work” and “job.”

Perhaps we spend too much time extolling the “job” and the magnificent benefits it can bestow on the successful practitioner and not enough time focusing on the “work” involved in achieving that success.

That’s the philosophy we’re following in putting together Fordyce Forum 2008. The speaker group will concentrate on the “work” involved – tips, techniques, tactics, and strategies that have made them the power players they are, proven success formulas that will help you to personally move up the performance ladder and give you an insider look at the types of people you should seek for your own firms, if and when you decide to expand. Their wisdom will undoubtedly make you a better performer as well. Fordyce Forum 2008 is designed to give you a “master’s degree” in our business. Although we don’t want to discourage the many rookies in our constituency, because they can also profit from their attendance, but they should know that this program will not be the ABCs of Rookieville. This is a serious conference for serious practitioners. No matter how you spend your off hours in Las Vegas, this is knowledge you won’t want to leave there.

For those who are seeking a blueprint for hiring newbies for your staff, I recommend “So You Want to Be an Executive Recruiter,” written for a Dow Jones publication. It is one of the better selection tools for recruiting recruiters. It provides a realistic view of the expectations and can be accessed at http://www.webco.cc/recruiterarticles/So%20you%20want%20to%20become%20an%20executive%20recruiter.pdf.

For a more specific column on Recruiting Recruiters, I have included a reprised TFL column later in this issue.

I recently asked a number of practitioners for their prognostications on the business for 2008. Although a few noted some slippage during the last quarter of 2007, most were sanguine about the future of their business despite the emergence of the economic gloom-and-doomers who always come out during an election year.

A few mentioned that some of their smaller client companies have put things temporarily on hold because of problems getting business loans due to some financial market uneasiness over the subprime difficulty, but overall, things are looking rosy – at least to those who answered my inquiry.

Persistence, perseverance, and determination. Once you have decided to “go after” a particular company (or companies), how diligent are you in your attempts to succeed? How soon do you give up?

A guy with whom I once worked made a list of the 10 companies with whom he most wanted to work. He had called all of them many times with no success, but he was steadfast no matter how many times he got rebuffed. I left the firm but we kept in touch, and every time he put one of those companies on his client list, he called me. Some of these companies were worth the effort, but a few were not. Nevertheless, it became a challenge to him for them to come aboard – and after a couple of years, he had done some business with nine of them.

Forty-two months after he had constructed his list, he called to tell me he had finally cracked Company #10, a small but well-regarded company in the financial services business. He had been wooing the CEO and told me that the CEO had finally called him in for a personal meeting about a VP-level search (which he got). The CEO had called him and said, “OK, I give up. You have contacted me every two weeks, either by phone, mail, voicemail, or email, for over three years. If you are that persistent with me, I have to assume you are equally tenacious with potential candidates, so I’m going to give you a chance to prove it.” He found the right person within two weeks. His stubbornness got him a check for $76,000 and two more senior-level openings.

Worth it? You bet! He has a plaque over his desk that reads:

Don’t stop trying: remember, it is always the last key that opens the lock.

Dr. Phil opines that the best predictor of future behavior is past behavior. Even when you’re moving forward, it’s a good idea to glance occasionally in your rearview mirror. There are a number of ways to move forward. Some think it is training, some think it’s a new job, some think that God is the best co-pilot. Others rely on planning, tactics, and techniques, and still others feel that future success is a combination of life ingredients lived up to this point in life – a firm foundation for achievement to come.

This month, we have the views and philosophies of a number of high-impact recruiting stars. Some may work for you and your staff; some may not, but this issue gives you a diverse number of strategies to ponder.

TFL archives

Editor’s Corner



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Get your 2008 calendar out and mark June 4-6 for the second annual Fordyce Forum 2008, at the Flamingo in Las Vegas. As fantastic as our inaugural forum was in 2007, this promises to be even better. FF 2008 will be another blue-ribbon gathering of the profession’s proven power players – one you won’t want to miss. Details to follow soon.

Where to find new consultants? Have you seen the stock market recently? Want someone who is already indoctrinated into the smile-and-dial world and used to being paid on a commission basis? Stock brokerages are losing good people in droves. Got the hint?

One reader wrote: “I spent valuable time, which, in the end, was thoroughly wasted, with a candidate I recruited. He was perfect for the position but insisted that, since I came after him, he should be considered not for the position I had, but for the position a step or two up the organizational chart, even though he was unqualified for that job. Did I miss something with this guy?”

Career levitation – moving to an out-of-the-box job or jumping several steps – just doesn’t happen in the real world. Unrealistic expectations are naïve and must be addressed up front unless you enjoy pain. I wrote many years ago in the Rap Session series (www.rap-session.com), “Children rarely skip grades and employees rarely skip job classifications on their way toward the top. There are good (and some not so good) reasons for this, but the fact remains that there are a lot of steps between a cost accountant and VP finance or a design engineer and VP engineering. To allow a candidate to assume that you can be the catalyst to leapfrog the normal process borders on the absurd. You might be able to eliminate one step, but that’s about it. Don’t stroke your own ego by deluding the candidate. They must agree to the reality of this situation. If they persist, forget them.”

As to moving from one industry to another, my advice was the same: “No industry exists in a vacuum. Skills are occasionally transferable. Of course, it’s easier to place someone within the industry in which their experience lies. For the aerospace engineer with 20 years of experience, it is unrealistic to attempt to place him/her outside the defense industry at the same salary. And 20 years of selling cosmetics will not qualify someone to sell industrial equipment. Along similar lines, a highly specialized employee with a very large company just may not find a market for their skills in a smaller firm where versatility is admired. These points must be made where a candidate’s only interest is in a dramatic career change.”

While watching some of Joe Pelayo’s new DVD program “21 Days to Increase Your Billings,” this old dog learned something new. Joe is a big biller in the senior-level financial area, and he revealed a reason for engagement fees or partial retainers that I had not contemplated – the initial contact with the candidates, especially for senior C-level assignments. There is no mystery about our business anymore, especially amongst the executive glitterati. The “meet me behind the potted palm” days are long gone. They are hip to what we do and how we do it, so they’ll more than likely ask, “Are you a retained headhunter?” If you’re not, the odds that they’ll take you seriously diminish dramatically.

Does that mean you need to be 100% retained? Nope! Even a small engagement fee will allow you to tell them you’re “retained” and keep a straight face.

Next time a hirer big shot refuses a full retainer and insists on only contingency, tell them you need some sort of commitment fee for the reasons mentioned above. It eases access to the impact players you need and will result in a better talent pool.

Many have asked why the TFL archives are not available on the Internet. Well, good news is right around the corner. Stay tuned for the details.

This is the month when we traditionally take stock of the year we’ve had. Whether this look in your rearview mirror is a happy occasion or a sad one, it’s the time when many decide to stay in the business – or look elsewhere. Ours is an easy-entry/easy-exit business. For some, it’s just a job. For many others, especially old-timers, it’s a “calling.” Nothing has brought this home to me more than something written by frequent contributor Neil McNulty. I have published this inspirational offering below. I thank Neil for sending it to us.

I wish all our readers a happy holiday season and remember, December can be one of the best months of the placement year.

TFL archives

Editor’s Corner



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I recently conducted a mini-survey regarding the industry’s usage of job boards in their practice. As expected, I received answers ranging from “I never use job boards” to “Most of my placements come from the job boards.” I also asked how much of their revenue came from these job board resources, and almost no one could answer definitively.

Frequent contributor Frank Risalvato’s initial response was the most representative of the group:

“I’m bracing myself for what will surely be ‘lots of flack’ email from the ‘I can’t believe you actually use job boards’ crowd. I can hear it now: ‘You’re not a recruiter if you use a job board!’

“I’m not saying I rely on such as the focal point of our business – I’m a damn good direct/cold call style recruiter and cold call almost every day. But it makes no sense at all to be in the ‘recruiting business’ and not have access to some of the nation’s most often used electronic forums – even if it is for ‘poking around’ or ‘flirting with the secretaries’ of the managers you are trying to reach.

“It’s amazing the information I get – just from admin staff and secretaries/office support types. If you are a good ‘direct contact’ (cold call) style recruiter, then you ought to extract even more benefit from HotJobs/Monster, etc., as you should be able to network your way ‘past the dud’ résumés and get to the ‘gem candidates.’

“In my humble opinion, if you can’t derive benefit from a job board – even if the results are dwindling these days compared to past years – you are a lousy recruiter. To me it’s like putting a driver in the seat of a Ferrari and not being able to get past 55 mph.

“For the record, we’ve purchased national accounts with HotJobs and Monster since 1998. Some years I buy the résumé search package of one but not the other. Other times (such as the past two busy years) we decided to spring for the résumé search capability with both sites, which my research specialist and I use side by side.

“My monitor/screen setup is such that I tie together three flat-panel LCD 19-inch screens. I usually have Monster on one, HotJobs on the opposite screen, and in the center my database/email calling program. If we’re not actively searching that day, I may have email application on one screen, candidate interview/client call tracking software on the other, etc.

“I can have my eyes on two job boards correlating and comparing information found there with our internal database on the third screen and do this pretty much all day/every day while banging out scores of calls.

“I don’t think we ever had an instance where we did not earn the entire $9K/$10K annual website fee for the entire package within weeks if not days of purchasing it.”

TFL archives

Evolution



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The Merriam-Webster dictionary defines evolution as “a process of change in a particular direction.” I could not find a word for “a process of change in NO particular direction.”

In an effort to be more responsive to the needs of those entities that pay our industry’s bills/fees, there has been not only a blurring of the lines between “search and placement” and “staffing” but also a conglomeratization of the various methodologies, processes, and practices. As one practitioner told us, “Anything for a buck!”

Last month, Placements & the Law columnist Jeff Allen again revealed a half dozen different fee options for those in the direct (permanent) placement business. That’s a start, but we’re seeing a wide range of transformation in the quest for revenue.

What used to be considered the major players in the temp industry are moving into direct placement – and many of the permanent placers are moving into the temp or interim space. There have always been hybrids in our business, but because of the inherent differences between the business models of each segment, the temp activity of the mainly perm placers has often been handled as a separate entity. Temp is considered a “business,” while perm has been viewed as a “practice.”

I recently spoke before a major international organization known primarily for permanent placement. They will be moving seriously into alternative business opportunities such as contracting, RPO (recruitment process outsourcing), interim executive placement, temp to perm, and other variations. Because of their size, commitment, and presence, they will be a force with which to be reckoned.

I queried several of our readers as follows:

1. Have you begun to offer service alternatives to clients and potential clients? If so, what have they been and how has this worked out for you?

2. If not, do you anticipate doing so in the future?

3. Have you noticed a change in the way business is done – and how? Please elaborate.

Jim Doherty of Systems Personnel, Inc., said, “We have offered contracting services to clients in addition to permanent placement for a number of years. It is all part of providing service to a client. With the business downturn in early 2001, many TPRs went onto the corporate side. Companies still think they can reduce cost and do it better themselves, but the corporate admin items do in most former TPRs and they are not as effective. The Internet has broadened geographic limits and improved the speed of the process. More email than phone interaction with candidates and companies. Email is efficient but not always the most effective. Recruiting is still a personal contact sport.”

Alan Elmont of Technical Staffing Specialists wrote: “Our corporate office in San Francisco began offering outsourcing services over two years ago. There is also a separate business entity that has provided contract labor services for many years. In LA we still provide direct hire contingency placement exclusively. At some point we will open an office for our contracting company in Los Angeles. Only in that email now is available for data exchanges, actual sales still happen the old-fashioned way, via dialogue.”

Jennifer M. Scott, a relative newcomer to our business and principal of HireEffect, started out by offering a range of alternatives. She said: “My business is new – founded just this past April. I offer a range of consulting services to my clients in addition to contingency search. I have found that there are employers, especially smaller companies, who do not wish to work with a traditional TPR, and I offer an alternative. I act as an extension of their HR department, and can offer service and pricing options based on their needs and wants. At this point, since I have only a few clients, I can offer my services on a project basis (e.g., I will staff an entire department, a new venture, multiple salespeople, etc., for a flat fee); I can offer consulting services at an hourly rate (e.g., train hiring managers on behavioral interviewing techniques, help create/define an employee value proposition, create/design an onboarding process, etc.); and I can offer contingency search. So far it is working out very well, although as an independent operator, I need to keep my client base rather small. Therefore, I am also working many splits with other independents, including splitting temp business if one of my clients needs a temp/temp to hire candidate, since I am not set up for temp payroll. While I have not ‘changed’ my model, I did start something that I consider to be rather unique. . . .”

Marilyn C. Durant, MS, SPHR, of Durant Resources Group, Inc., opined: “I have seen a change in the way the contingent business has been done. More than in the past, some clients are setting unrealistic hiring criteria. We are also seeing that we need to offer fee alternatives such as multiple search discounts, contract recruitment, hiring and/or retention bonuses, reduced percentage on fees, and, at times, submitting candidates with a signed contract and having to fight for payment or delayed payments. Making changes to the fees has assisted in closing some deals, but it has not made it any easier to find quality candidates in today’s tight job market.

We have not had to deal with this in the last 12 years, and it is more obvious in the nonretained mid-management and senior management market. There is a skills shortage, and rather than hire “talent” with potential, they would rather wait for a candidate with long-term stability in an unstable market. Quality candidates who have been victims of corporate changes are not being considered without a hard sell, and more often than not, they won’t even talk to them. Educating them is a slow process and candidates can be lost, not to mention the time needed to close the search.

We are also seeing more and more clients hiring in-house junior recruiters who have shortsighted vision and/or no authority. They are given the title and asked to go out and make it happen. They rarely have a hiring budget and live off the job boards. They are sometimes threatened by external resources as a reflection of their own lack of competence rather than seeing the value in third-party partnering. It is still better to have the relationship with the decision maker.

In a very tight and competitive job market, we were warned years ago that it was going to get tougher to find good talent. We must continue to learn from each other as we remain ethical and competitive in our profession while trying to satisfy our clients’ needs and achieve results.”

Jim Sullivan of Galaxy Management Group, Inc., shared his views (and the views of many other respondents) as follows: “We’re not offering any service alternatives at the moment. We’re real busy keeping up with the perm and contract positions we have. I have a small boutique, and clients are keeping us very busy with the ‘bread and butter’ positions. I can’t see adding anything else at the moment without adding staff. I am seeing a change in the way business is done. It feels more ‘procurement oriented’ than ever. I see long-term clients pay more attention to $ than ever before. I’m not saying they are looking to save, but I see them having many layers of service. Some they do themselves; some they farm out for a fee.”

Donna L. Friedman of Tower Consultants echoed the remarks of many when she wrote, “I believe Tower Consultants’ success over our 19 years has been that we have been razor sharp in our focus and have consciously avoided considering becoming all things to all people. We are a boutique retained-search firm specializing exclusively in the search for human resources professionals, and our HR clients have often told us that they appreciate our not selling them a host of other services. My best advice is to celebrate what you do best and if you’re really good at it – stick with it.”

Fran Timson, manager of ITPCS and Executive Search, shared a diverse view: “We have been offering our clients perm, contract, and contract to hire since 1999. We found that we have a better relationship with the client when we can respond to all of their needs and it provides a much better basis on which to ask for an exclusive. Within the last few years we have also provided outsourcing for a client’s software and hardware Helpdesk Center, and that has worked out very well. I think that any company doing perms or contract only in this market needs to reevaluate their model. It is very frustrating to have a great candidate (in a seller’s market) and not be able to place them in a position if they only want perm or contract.

We are seeing more clients who want to reduce their number of vendors. In order to be a true partner instead of just another vendor, I believe you need to use your sourcing and recruiting experience to a client’s best advantage. We are finding that clients want their vendor partners to know the inner workings of their company and be able to handle multiple types of jobs, i.e., contract or perm.”

Robb Norris, CPC, Practice Lead – IT, Inteqna, shares a Canadian viewpoint: “Please remember that I work in the Toronto market, and the Canadian IT market functions differently than the U.S. What I see as the differences between the two (and I have worked for a U.S.-based company in Toronto that functioned like a U.S. company in the Canadian market) is that most major Canadian IT recruiting firms do the full range of staffing/recruiting now. They almost all provide contract staffing, full-time placement, payrolling, contract-to-perm (temp is not really a term we use in this industry, as we generally are more corporation-to-corporation contract arrangements). We have not begun to offer service alternatives. Nothing seems to be driving us to do so. Although we have some competitors that do offer managed vendor services, we tend to shy away from those – especially if we are one of the secondary vendors. I have noticed a slow but steady move to making our services much more of a commodity rather than a valuable business solution. This has been caused by two major issues. 1. When the market was very soft, companies began really squeezing vendors like us on margin. It is not uncommon to find major contract buyers with set contract gross margins of 15% – hard to make a living at that rate. 2. Because of #1, there are several large competitors that have decided to go after the large client with low margins in order to capture market share and effectively shut out competitors in those large contract buyers. The fallout from this is that now, even though the market has tightened up for candidates, many companies are still trying to dictate lower fees/rates, despite the lack of supply. With the prevalence of job boards as well, access to a large number of candidates (not exactly the best candidates, either) gives companies the false impression that they can find top-notch people easily and on their own. A lot of recruiting firms (especially IT recruiting firms) have fallen into the trap of just surfing the job boards for the quickest and easiest candidate – also contributing to our own suicide by job board.”

Michael Shaffer, CSM and president of Management Recruiters & Sales Consultants of San Francisco Bay, said: “We will be starting a contract division in Jan ’08. We really have not had to change service alternatives with our clients or prospective clients. I have noticed a change in the independent side. We seem to be running across lower fees being offered, but it has not made a difference in our fee structure. There are agencies strictly gathering names and presenting them to clients as a low fee alternative. We are not offering that service as well. There are firms signing clients to agreements to act as a clearinghouse for many recruiters throughout the U.S. After a firm presents a candidate on a specific opening, they can then have direct contact with the client. The clearinghouse firm does the billing and offers a 90-day refund. They will attract only the weaker recruiters who choose not to market or do not have the skills to market. Our position is that we replace candidates only. No Refunds. We have not had the need yet to offer service alternatives and will probably not do so in the future other than contract staffing. In candidate-driven industries, we have noticed a number of huge counteroffers. We have had to improve our counteroffer skills and qualifying skills with these candidates. A positive change I have noticed is that clients are far more perceptive in modifying their hiring process for us; e.g., expediting their hiring process and decision making as well as shortening the number of interviews required for a hire. They are also more open to coaching (interview prep) and selling their opportunity.”

Miquel Purvis McMoore of KP Companies emailed: “We have begun to offer service alternatives to clients and potential clients. In addition to direct-hire options, we now offer temporary staffing, temp-to-hire, and contract services. We’ve also provided research and explored recruitment process outsourcing (RPO) with a large client. We’ve added a diversity search specialization, which is in high demand for all of our clients and has attracted more business. Diversity search done right is worth its weight in gold. More and more business is being done electronically. With the use of video technology, we found, it makes email more fun and personable. My executive recruiters get more responses from their email marketing than from traditional cold-calling tactics. Additionally, as with other functions of HR, more and more companies are realizing a value in RPO. These are just a couple of changes I’ve noticed in the way business is being done as it relates to recruiting.”

Thomas Fagan of Staff Accountants wrote: “I am a senior recruiter in the accounting/finance industry. I speak with candidates/clients in all industries. My firm has been in operation for almost 18 years and has established solid relationships with local CPA firms to Fortune 500 companies in both audit and tax. We do approximately 95% perm placements, very little contract/temp assignments. More than half of our business deals with public accounting firms (local to national). I have not noticed a higher demand (at least in the last two years) for alternative-type hires (contract, temp to perm, etc.). So I guess to address your question, we are not seeing the need to offer alternative services. I would attribute this to the current demand for the types of candidates we place (mostly CPA types in audit/tax). This market has become much more of a ‘candidate driven’ environment. I do not see this changing anytime soon (as the demand is growing).

I have noticed a change in the way business is being conducted on both the candidate and client side. Candidate profiles have become a major issue; we are finding that we need to ask more questions, redundantly re-ask the same questions, to make sure we are getting the same answer. Counteroffers are at an all-time high. It seems as though a large percentage of candidates are going through sometimes three to five interviews, while never having the intention of making a move (I know I do not have this kind of time to waste).

Also, I may be showing my old-school mentality here, but there seems to be way too much electronic communication going on. Whatever happened to the phone?!? This business, as well as society as a whole, is becoming extremely introverted . . . I will get off my soapbox now.

The only other topic I would make mention of is the use of electronic job boards. I find this tool to be less of a time saver and somewhat of a crap shoot. I find most of the candidates that are posted on these J-boards to be marginal at best, and the above-average performers with whom you network have been or will be contacted by a dozen + of your competition. I say direct recruiting passive candidates has been and still is the way to go.”

Bob Eskridge, CPC, CTS, PRC, CSP, President of Eskridge & Associates and a Board Certified Physician Recruiter, seems to be embracing the new paradigm. “We have been very busy this past year in expanding our offerings – some traditional, some not so traditional. We started out doing just contingency perm three years ago and within six months quickly moved into contract and temp staffing, called locum tenens in the physician world. We also expanded into government contracting as well. Most recently, we launched a full-service travel agency to assist primarily our locum tenens physicians with all the travel details. It has been a huge success so far. It is www.eskridgewwtravel.com. We have teamed with Recruiter Relocation to assist our physicians in their permanent moves. We are also looking into starting up a medical licensure company within a year to assist physicians with getting the appropriate licenses for states they want to work in. No moss growing here.”

One correspondent asked if we thought that the traditional placement models were in danger of extinction. My answer is no. Are they being challenged? Yes, for some areas.

Some practitioners want to build empires; some want to stay in their homes and quietly earn a great living without all the distractions of trying to manage their way into greater prominence. The majority of traditional recruiting firms aren’t sure what they want to do.

I continue to have conversations with many potential hirers who indicate that a good many wished there were more options to the process of filling their empty chairs, especially in the area of fee elasticity or in the service alternatives offered. Several, for instance, said that they had piles of résumés through their ads and job postings but didn’t have the time to wade through them to separate the good ones from the bad. This was a common complaint, especially among those who posted their ads on a job board. One hiring manager complained, “I’ve gotten hundreds of résumé submittals forwarded by our understaffed and clueless HR people, most of which are totally off the mark since they didn’t prescreen most of them. My department has suffered some terminations and I’m doing the work of four people. I just don’t have the time to spend valuable hours wading through unqualified prospects or overpriced prima donnas, only to find that they’re not what I really need.”

We, as an industry, have been conditioned to sell ourselves as “full-service” providers. When asked for a discount, we are programmed to say, “And which of the 30 steps in the (search/placement) process would you like us to dispense with?”

Yet what we’ve found is that many employers think they would like it if we offered unbundled services, cafeteria style. And hundreds of recruiters have heard their clarion call. Sometimes, standing firm on a full-fee service arrangement can be counterproductive, especially when that dollar amount may be attainable through another methodology.

In the past, we have mentioned many other methods used by recruiting firms to enhance (or protect) their revenue stream.

A large number of respondents asked for clarification of some of the alternative revenue sources. We won’t cover the details of RPO since that topic was covered in the October issue by columnist Margaret Graziano, but here are the general topic areas you may wish to explore:

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.

While it is unlikely that most employers will be willing to relinquish total control over any aspect of their employment activities, there are a number of RPO deals out there, and in some cases, these have produced worse outcomes than the chaotic results they were meant to replace. One RPO provider’s employee forthrightly admitted that all they were doing was surfing the job boards and forwarding the results. He was frank about the fact that absolutely no creative recruiting was being done and that their success ratio was abysmal on almost all but the low-level clone type jobs.

Another problem for the traditional fee-per-placement practitioner to get into any form of “temp” services is their inability to obtain the necessary financing and back-office help. There are a number of firms offering these finance and back-office services, but it’s a business that normally requires more time and financial commitment than most traditionalists are willing to endure.

Here are just a few of the functions that have been successfully outsourced:

Sourcing of candidates – Some just generate names; others go further into the search process (screening, interviewing, qualifying, ranking, candidate report writing, and even occasionally checking references). Many search firms have offered their in-house research services on an a la carte basis, but there is a thriving business by freelancers who charge from $90 to $110 per hour. The most common method of payment is an hourly (plus expenses) charge, but there are a few that charge by the project. Almost 400 of these specialists are listed in The Executive Search Research Directory (www.rsronline.com) along with their backgrounds, operational methods, costs, and specialty areas (over 290 of them). Assignments may be position-specific or a more generalized assignment such as: “We always need ____, so keep our pipeline full.” Some will work only with companies, some only with searchers, and most will work with both.

Another source of revenue for recruiters with good investigative/sourcing skills is to perform research for other search firms. Several who had in-house researchers find it more cost-effective to hire an outsider to do it.

Wording on a typical proposal might begin with:

We invoice at an hourly rate of $____ for a minimum of 25 hours at the beginning of each project. We are reimbursed for actual telephone costs. Timely progress reviews are made by telephone, and a written report is submitted following each 25-hour segment.

Screening of candidates – 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 and 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 wish list. After all, if screening is just based on the résumé, you have nothing to rely on except what the candidate has divulged. Third-party verification and evaluation is a most important ingredient at this stage of the prehiring 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 either on an hourly basis or for a predetermined project fee based on replacing in-house costs/functionality. (In-house assessment skills are rarely as good or unbiased as those of an outside evaluator.) One tangential benefit noted by practitioners who engage in this sideline is the accumulation of usable résumés that don’t pass muster for the client but may be useful for future placement activities.

Responding to employment inquiries – One of the biggest complaints from job seekers is the fact that their résumé submissions go into an HR “black hole.” Companies that previously ignored unsuitable applicants are trying to polish their PR image through some form of communication and often outsource this task. 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. This is normally handled on an hourly basis.

Checking references – This self-explanatory function has been selectively outsourced for years. The trend continues to grow. There are 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 (and has been) be 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 that produces its own career center for exiting employees. More than one recruiting practitioner has become the coordinator for events like these, issuing invitations to companies 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 its own relocation department (which few do), the details of moving people can best be done by an outside specialist in the area. Several exist independently, and a number of practitioners are offering this as a sweetener when moving out-of-towners.

Administering skill/aptitude tests – More often done by temp firms than permanent placers, this can be a profitable sideline.

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

Maintaining applicant database – Often, the scanning in and maintenance of applicant files from a varied number of job boards and similar sites can be done by an off-site vendor or by an on-site contract employee. The number of firms doing this is rapidly growing.

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 obligation 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

Knowing the lingo for the outsourcing and staffing industry could almost be described as a “core function” in itself. You need to know and recognize the following list of common outsourcing/staffing terms and definitions:

ADMINISTRATIVE EMPLOYER – The company that manages all payrolling, employee benefits, and other human resources functions.

CARE & CUSTODY EMPLOYER – The company that manages the day-to-day employee activities such as the hiring and firing, salary increases, promotions, and performance appraisals.

CO-EMPLOYER (Joint Employer) – The legal relationship between two or more employers in which each employer has actual or potential legal rights and duties with respect to the same employee or group of employees, as well as the specific legal consequences of that relationship.

CORE COMPETENCY – A business strategy wherein a company concentrates on what it does best – the functions and/or staffing that are considered central to business operations.

FACILITIES STAFFING (Functional Staffing) – The provision of temporary workers to handle a particular facility, department, or function for a customer.

OUTSOURCING – An alternative staffing option involving the transfer of a department or business function in an organization to an outside supplier.

PAYROLLING (Payroll Service) – The practice of placing an employee on the payroll of a temporary-help company.

PROFESSIONAL EMPLOYER ORGANIZATION (PEO) – An organization that contracts with a business to supply human resources and benefits consulting and becomes the administrative employer of the customer’s employees. The functions most often administered by a PEO include payroll administration, employee benefits, risk and insurance management, regulatory compliance and reports, and recordkeeping. The customer is billed for actual costs plus an administrative service fee. The customer retains responsibility for the product or service it provides, and for direct supervision of the employees. There are more than 700 PEOs in the United States. (This function was formerly termed “employee leasing.”)

While many practitioners engage in some of the aforementioned tasks as a way to level out profit peaks and valleys, it is important to recognize the main focus of your business and not become diverted into sideline activities at the expense of your core business. And before you take the plunge into peripheral activities, you have to know what your time is actually worth. Will the time and resources spent on these secondary activities come at the expense of making full-fee placements?

You are probably already performing many of these functions for your own purposes, so to take on clients for less than full-service tasks may be a profitable way to keep underutilized researchers or other less than productive staff members busy. Just be sure that these efforts are worth your while and don’t diminish either your bottom line or your ability to capture full-fee business when it comes your way.

There may be a tendency to become self-victimized during some periods or by some employers by succumbing to the requests for fee discounting, but many times this can be overcome by just steering the conversation toward a different way to get paid. Veteran practitioner Russ Riendeau wrote about a number of alternatives for good times and bad:

“Some of these fee options are not familiar to managers, so practice patience when explaining them and stress the benefits of creative arrangements.

Option 1. Standard rates are a maximum 30% fee. Period. You run the show your way. This is a great stand to take if you anticipate the manager or company to be difficult to work with. If your opinion turns out to be true, you’ll still make money despite the difficulties.

Option 2. First hire 30%. Second hire 25%. Third hire 20%. This is pretty basic and easy to remember, AND easy to see how much money you’re losing.

Option 3. First, second, and third hire, full fee. Fourth, fifth, and sixth hire, 25% fee. Seventh, eighth, and ninth hire, 20% fee. Not a bad way to structure it if the searches are easier to fill, and you won’t need to do extensive recruiting or reinvent the wheel.

Option 4. A flat fee reflecting a reduced fee based on projected first-year earnings. This is a popular approach because everybody knows what the charge will be from the start – no questions asked. The problem can be that this fee can stay at this amount for years and you’ll be skeptical of approaching the client to increase it. You may want to find a way to convert that flat fee into some kind of percentage amount. That way inflation will take care of keeping the fee in line with rising costs and salaries. Or build in a yearly cost-of-living increase to the flat fee. The bottom line is: don’t get locked in to a number for life.

Option 5. Engagement fee, 25% of estimated fee paid up front, nonrefundable, to ensure commitment on the client’s part that the search is for real and urgent. This tactic works well in a strong economy where candidates are scarce. It tells the client that you’re serious in wanting to work with them, but need their commitment to the project so your recruiting costs are covered, should they change their minds and not fill the opening. Point out to the client that all your costs are incurred at the beginning of the search, so to ensure against any losses, the engagement fee protects this. I will consider discounting the fee slightly if a company is willing to give me an engagement fee. The odds go up to fill the search when they have invested dollars with me already. (Engagement fee is also an excellent way to nurse your client into future retainer business. They will see that it doesn’t even hurt!)

Option 6. Base fee on cumulative salaries of hires. Example:

0 – $100,000 of salary dollars – 30% fee
$101,000 – $200,000 salary dollars – 25% fee
Start back at 30%

This is a great way to lock in a client to long-term savings and to building a relationship with you. A win-win all around. You can adjust the ranges of salary discounting to fit your industry pay scale, and maybe set it up to provide approximately three hires in the first group and three in the next.

Option 7. Sign a national agreement in return for a reduced fee. Note I didn’t say contract, but agreement. It’s less commitment for the client, yet it creates a synergy and understanding that will go a long way. Do indeed sign a contract if you can, guaranteeing that the client uses only you and pays your fee. But if you have not done a lot of business with them yet, it might be hard to get this signed. Be patient and keep performing above and beyond the call – a contract will come.

Option 8. Run an ad. They pay and you collect résumés and screen candidates. In return, you reduce your fee and keep additional leads and candidates generated from the ad. This is a good way to source some additional candidates, but it can be time-consuming and downright depressing getting numerous calls from those seeking a change without the qualifications or preparation. I don’t do these too often, unless business is in the dumps.

Option 9. Regular fee agreement – a 10% discount off that amount. Clean and simple.

Option 10. Reduce fee slightly if paid in 10 days. A 2% net 10 is textbook discounting in business. It’s worth a try.

Option 11. Avoid extended guarantees. If you need to comply, consider a 50% refund after 60 days, for example, rather than the full amount. Or prorate the refund over the length of the guarantee. Remember: You’re a recruiter, not an insurance company.

Option 12. Get a retainer. These are easier to contract than you may think. The only difference between a contingent fee search and a retained search is the method of payment, not the method of search. The full-time retainer firms attempt to paint a mystical picture of how they seek out and secure talent for client companies, but the approach is not much different. I do retained searches with companies I have worked with in the past or if I have a good understanding of their business. A retainer can be great, but if the company is unsure of its needs, you can be sucked dry of time and energy seeking out a candidate that doesn’t exist. Use caution when accepting a retainer search. If you primarily do contingent work, you have the option of walking away from a contingent search. It’s a little tougher when you have a retainer contract that needs to be fulfilled.

If the fee gets too low, walk away and find a better one. Low fees are a pain, and the managers expect miracles. Stand firm; they will come back to you when they’ve frustrated themselves with cheap fixes and poor-quality candidates.”

Jeff Allen’s Placements & the Law column also discussed fee options from a more legalistic view in last month’s issue.

Yet another great option to increase profitability is to join a network, association, or other affinity group with whom to cooperate regarding job orders and/or candidates. Much as we think the word synergism has been overused, it fits in the networking context. It is defined by Webster’s dictionary as “The combined action of two or more . . . agencies to achieve an effect greater than that of which it is individually capable.”

Cooperation with others is one of the easiest ways to extend your reach – through either associations or networks. Over the years, our surveys have shown that those who collaborate with others through formal or informal networks or associations earn more money than those who go it alone.

The franchises learned this lesson long ago, and it is one of their biggest selling points. Employers frequently tell us they prefer doing business with firms that have cooperative alliances with others. Sharing candidate data or assignments can be particularly important when economic uncertainties are present. But it can also be important during boom times or bad because it allows practitioners to extend their business boundaries beyond what they can reasonably handle themselves – and into areas with which they may be unfamiliar.

Although there is supposedly a semantic difference between networks and associations, that distinction is beginning to blur as associations often facilitate fee-splitting (a traditional bailiwick of networks) and networks (at least the larger ones) have taken on many of the traditional trappings of associations (education, conferences, lobbying, etc.).

Size of the membership of networks seems to have little to do with how much revenue a member can make from the affiliation. Those with small memberships are often narrowly specialized and regionally restricted, and their very focus can make them more efficient than a larger group without separate core groups.

On the other hand, larger groups can offer peripheral benefits not available through the more tightly organized ones. If, for instance, as an insurance specialist within a compatible network group, you receive an assignment that is far afield from the network’s purpose, you have nowhere to go with it, whereas as a member of a more generalized network, you have a better chance of farming it out to a member whose specialty happens to coincide with the client need.

Is a network membership going to automatically make you more money? Of course not! You pay for a telephone, but unless you use it, it will not make any money for you. The same holds true with networks. Cooperation (which is what networks are all about) is a two-way street. If you go into a network with a unilateral mindset, you will lose.

Some trainers have advised against networks or other cooperative arrangements. We disagree. Network members tend to react much quicker to client requests for speed, and a bigger talent pool is becoming increasingly important to hirers.

Later in this issue, Margaret Graziano, a practitioner we greatly respect, gives her opinions on the industry in a way you can understand from the viewpoint of an already successful career that is evolving in different ways. Take heed.

TFL archives

Gotcha!



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You’ve presented the perfect candidate, and interviews have taken place. An offer is about to be made (and probably accepted) when you get the call from an HR representative who tells you they won’t pay you a fee because (pick one):

- The candidate was already in our database.
- We (would have, could have) found the candidate on a job board.
- Our hiring manager already knows this candidate.
- Another recruiter previously sent the résumé.
- We’re hiring the candidate for a different job.
- The time lag between the referral and the hire was too long.
- We didn’t have a signed agreement.

Many of us have been haunted by one (or more) of the above scenarios, since they are the top seven reasons cited for fee avoidance. As one reader told us, “This news was about as welcome as a whoopee cushion in a church service.”

When we queried folks on both sides of the spectrum (HRs and TPRs) the answers were vastly different. It is not likely to change until everyone in the hiring process agrees to some standard, and the odds of that happening are about as likely as Ralph Nader becoming our next President. The only antidote is to have a signed agreement with the employer before you submit any candidates. And many readers are now requiring a signed agreement with the candidate as well. We tend to get so euphoric when a company tells us about their urgent need that we refer candidates without a written agreement. Most, if not all, of the horror stories we hear wouldn’t have happened if a contract had been signed.

Let’s look at some of these excuses:

The candidate was already in our database.

The operative question should be “How did the candidate get there?” Were they direct respondents to a company’s website or ad, referred by another third-party recruiter, the result of an employee referral, or just one of hundreds (or thousands) of résumés down-loaded from a cybersource?

This is one of the downsides to the Internet. Companies that have paid big bucks to access the database/job board world are prone to harvest as many folks as they can. All the filters in the universe won’t prevent useless candidates from getting in. They can, however, screen out the very people they may want.

If a recruiter brings a candidate to the attention of the hirer, even if the candidate was previously found in the database by the company, the recruiter should be paid for the recommendation. In the real world, no in-house recruiters want to admit that they blew it.

As long ago as 1996, Gary Knisely of Johnson Smith and Knisely said, “The search business is not about names. It’s about understanding your client’s business from a senior management perspective – as an insider, not an outsider.”

We (would have, could have) found the candidate on a job board.

And a thousand monkeys typing on a thousand typewriters will sooner or later re-create the Iliad and the Odyssey.

Just because they’re in the database or on a job board, that doesn’t mean they’ve ever been noticed (much less contacted) by the company. They’re probably also in a phone book somewhere, but that doesn’t qualify them as an applicant or candidate immune from a recruiter’s fee.

Should a recruiter who harvests thousands of résumés from the Internet, then sends them to thousands of potential hiring companies, deserve a fee if one of these shotgun efforts results in a hire? Absent any intervening events, a fee is probably due. After all, the company would never have known about the candidate even if the methodology used to get that information to them is less than professional.

Should a recruiter who refers a candidate with the candidate’s knowledge and authorization be prohibited from collecting a fee if the company uses that referral to go back and find the résumé in their database, even if they never previously found it in their database or acted on it? That’s a problem we hear of on almost a daily basis. I wish there was a definitive answer to this growing predicament, but there probably isn’t. Unless there is a signed agreement between the parties, you are probably at the mercy of the hiring company to do what is right. Having a résumé in a massive database that does not pop up until prompted by a recruiter should be treated as though that database résumé never existed, and the recruiter should be paid the fee. To do otherwise is just unwarranted and borders on dishonesty. But no hirer wants to pay a fee, and they sure don’t want their own ineptitude pointed out to them. So you can expect this to be an ongoing problem.

If recruiters were paid just for supplying a name, the most valuable tool might be the phone book. We are paid for getting the right candidate to say yes. Trainer Larry Nobles told our readers, “When I ask recruiters what our real worth is to our clients, I generally get answers like finding candidates, screening candidates and referring the top ones, etc. We seem to think of ourselves as an old Yenta who is constantly trying to make the right match. However, our worth to the client is not at the beginning of the search but at the end!

“If we recruited 50 candidates for the position and screened them down to 10 to present to our client, and three were interviewed, two offers were made, and none accepted, then of what worth are we? None? No, worse than that! We just cost everyone a lot of time and money. Our client loses money every day that job goes undone, so our worth is not to initially find candidates. It is to eventually get the best one to go to work for our client. In fact, one VP told me that my worth wasn’t that I could find good candidates for him, but that I could help him hire them.”

And just because a candidate resides in the company’s database, that doesn’t mean a hiring company will ever find them. The following true story from one of our readers is illustrative in this context:

Roy M. ran a large firm (almost 1,000 employees), with hundreds of thousands of résumés stored in his HR department’s database. Roy’s firm had a critical opening that cried out to be filled because the vacancy was costing his firm several thousand dollars a day in lost business and a major potential contract depended upon having this unusual skill in house. The previous employee with this particular knowledge had been unexpectedly and permanently disabled. The HR staff had done their due diligence by performing all the keyword searches of their database’s residents, to no avail. The job had been advertised extensively and was posted on several job boards as well as the company website. HR had pleaded with employees to take advantage of the generous referral bonus the firm offered, but no suitable candidates had been surfaced. They didn’t want to pay a fee, but Roy was screaming at them every day to get this job filled, so they gave the opening to several search professionals, including me. After all, they were desperate, and the shouting from above was getting louder with every passing day.

I was one of the “lucky” search firms who were given the opening. This was an “anti-agency” firm, one with whom I had tried unsuccessfully to do business for several years, so I was surprised to hear from them. The closest I had previously come to doing business with them was when they sent me one of those ridiculous third-party recruiter agreements I refused to sign. They sent it again after calling me about this opening, and I still refused to sign it.

Serendipitously, I happened to have the perfect person for the job. I called the candidate, who confirmed the fact that he was absolutely ideal for the position. His résumé did not mention the vital experience needed for this particular job because it was prepared with a different opening in mind, but through extensive interviewing I had uncovered the fact that he had experience that exactly matched the needs of the company.

I mentioned the job and the company to him, and he was excited about putting his oar in the water. However, about six months earlier he had submitted his résumé directly to my “client” for a different job in a different department, and he had received a “Dear John” letter. He had also put his résumé on several Internet job boards, but none of the experience necessary for this job appeared in his résumé because he considered it to be peripheral in nature, it existed two jobs ago, and he was told to be brief in his submissions.

I rewrote his résumé to reflect that portion of his experience that mirrored the job specification. No hyperbole. No lies. No fudging. I checked his references to verify what he told me. Then I called the HR person who had first contacted me. I said, “I have good news and bad news. The good news is that I have a candidate who is a perfect fit for your critical job and has a definite interest in working for your company. You may or may not want to turn this into a conference call with the hiring manager. That’s up to you based on what I’m about to tell you.

“Here’s the not-so-good news. This person applied directly to your company several months ago for a different job, and you turned him down. Also, this person’s résumé is on the Internet in several places. Even though I’m sure he’s in your database, you will never ever find him. He can be on your payroll one week from today, but before I release his name and set up the personal interview, you must agree in writing to pay our full fee and to accept all of our normal terms. I am aware of your company’s predicament and the fact that your firm loathes doing business with people like me. I am also aware that this will probably be the last time I’ll ever do business with you. If you are agreeable to these conditions, I will email his résumé to you without his contact information or name, along with our service agreement. Within 24 hours, you must email your acceptance of our agreement to me, at which time I will release his name and arrange for the interview. If I don’t hear from you within 24 hours, my next contact will be with Roy. Check your email within the next half hour to see his résumé, and I await your return communication.”

Within an hour and a half, I received a return email confirming our agreement, and an interview was arranged for the following afternoon. After a four-hour interview session with everyone involved in the hiring loop, an offer was made and accepted. One week later I received a check for $33,000.

This is a job for which I would never have considered doing an actual search because it was a needle-in-a-haystack, time-consuming chance to almost guarantee failure. Nor would I have done business with this company under their terms, no matter how much I might have needed the business. The fact that the appropriate candidate was already in my inventory and that we had discussed this rare skill was pure luck.

Our hiring manager already knows this candidate.

How many times have you heard a variation of “Hey, I know this guy” from an employer attempting to avoid paying a fee for someone you refer? Or “Our sales manager already knows this guy,” “Our engineering manager worked with her at another company,” or “We knew about him already.”

Does the fact that someone in a hiring company knows or knows about your candidate shield them from the liability to pay a fee? Judging by the calls we get, the answer is a resounding YES from the hirer side. Unfortunately, knowing about a person and knowing that he or she is willing to consider a new job are often far different animals.

The scenario almost always happens this way: A candidate is referred to a company. Somewhere in the review loop, someone says, “Hey, I know that guy.” Often the recruiter is told there is no interest and then, mysteriously, the person is hired through a personal contact made by the person within the company who knows him. How does a recruiter still get paid?

In the absence of a direct declaration of candidacy by the candidate having recently submitted a résumé for the job in question, a fee is definitely due to a recruiter who brings the candidacy to the attention of the hiring company. Jogging an employer’s memory about a bygone acquaintanceship should not negate the obligation to pay the fee.

The obligation to pay for the referral comes with more than just mentioning a name of a potential employee. Truth be told, probably every new employee previously knew someone within the company they joined.

If knowing (or knowing about) someone allowed a hirer to disaffirm the payment of a fee, no fee for a senior-level search would ever have to be paid since these high-visibility openings are almost always filled by individuals who are regularly in the news or who hobnob at some level with the very people who hire them. The fee is paid because the recruiter is able to convert the person from an acquaintance to an interested and active candidate.

The key words are “proximate cause,” “substantial cause,” “efficient procuring cause,” or even the shorthand nicknamed “but for” terminology.

In olden days, when “applicants” sat across the desk from “counselors” and signed a copy of the “send-out slip” before going on an interview, there was little question as to the source of the referral. Nowadays, when a recruiter in Peoria might arrange for a referral of a San Mateo candidate to a company in Flushing, getting a “send-out signature” is a little tougher. The paperwork and documentation of the event still occur, but for paper trail file purposes only.

Much of the attendant anguish of the “We already know about this guy” syndrome can be allayed by proper candidate preparation, but even that can confound in these days of faxes, email, and the Internet, when candidate backgrounds can be instantly broadcast to a gaggle of potential hirers, often without the knowledge of the candidate – what we refer to as drive-by shooters.

Another recruiter previously sent the résumé.

This assumes that a fee will be paid – to someone – just not to you. It is known as a Candidate Source Recognition or Candidate Ownership problem and may be the cause of more heartache than any other employer pretext. It is also the excuse that causes employers to, perhaps, be liable for the payment of two fees. Much depends on the written agreements involved.

Many years ago there existed an organization called the Professional Employment Research Council. It was formed as a liaison between HR types and TPRs in an attempt to educate employers on how to work with our industry. It didn’t last long, as it appears that many human resourcers are uneducable, but one good thing that did come out of their efforts was the verbiage regarding who should get paid when duplicate referrals are made. Their solution (which they tried to teach to employers) was to insert the following into all written communications with recruiters:

In case of more than one referral, the source whose referral caused the action leading to the eventual hire will take precedence. No fee will be paid unless the hire was the direct result of interest initiated and stimulated by the agency.

This “stimulation of interest” policy elicited some positive action on the part of many firms. Its use was encouraged with the following attempt at enlightenment:

Any employer who puts that simple phrase into an agreement will eliminate 90% of all the agency fee disputes that they might ever have so long as they require everyone to sign the agreement. They will also eliminate any requirement for logging in or date stamping résumés, which can substantially reduce record keeping expense. Most fee disputes result because one résumé (or phone call) got there first, but another (duplicate from another source) actually stimulated interest and resulted in the hire. Case law and arbitration history clearly favor the “stimulation of interest” method as more equitable than “résumé logging.” In other words, the one that stimulated interest usually wins in court, so why not make that company policy.

Résumé logging or “first contact” as a policy actually invites fee disputes when situations like the following occur: Recruiter A sends in a résumé in July when no opening exists. Recruiter B sends in the same résumé in October when an opening does exist. Both claim a fee. Recruiter A sends in a résumé in July and there is no interest. That same applicant initiates direct contact via an advertisement in October. Recruiter A claims a fee.

Recruiter A, knowing of the “first contact” policy, rushes in a poorly prepared résumé taken over the phone in order to beat out Recruiter B. Recruiter B interviews the applicant and significantly improves the résumé, sending it in a few days later. The second résumé stimulates interest. Both recruiters claim a fee.

Recruiter A sends in a résumé which is logged in and routed to Engineering Manager #1, who puts it in his bottom drawer or his waste basket. Recruiter B sends in a résumé several weeks later which is routed to Engineering Manager #2, who calls Recruiter B with some questions about the candidate and then subsequently hires him. Both recruiters claim a fee.

Note that none of these problems occur when the phrase quoted above is worked into the agreement. Most experienced recruiters actually prefer the stimulation of interest approach because they’ve all had problems with résumé logging and most consider stimulation of interest the only fair way.

Because the scenarios are endless and often exasperating, attorney Jeff Allen recommended scrapping the “causation” frustrations by merely using a calendar date as the benchmark denoting who gets paid. He recommended that the following be put into all of your agreements:

Client shall pay a placement fee to (name of your business) if Client hires or otherwise engages the services of any candidate referred by (name of your business) in any position within one year from the date of the last communication from (name of your business) concerning said candidate. This shall also include direct or indirect referrals by Client of said candidate to any other person or entity within one year. Said fee shall be paid by Client regardless of the claim of or obligation to any other party regarding a placement fee for said candidate.

Short, sweet, and contractually unassailable. While it might not be the fairest method to determine who gets the fee, it puts the “causation” issue in the back seat.

We’re hiring the candidate for a different job.

“You submitted your candidate for Job A. He didn’t fit that position so we hired your candidate for Job B; therefore we don’t owe you a fee.”

An old standby – in fact, one of the oldest tricks in the book. But it’s still very effective because the placer ties their own hands with the fee schedule.

Changing the “position” is totally within the power of the employer. So you’ll be somewhere between a rock and a hard place unless you use words like:

The fee shall be due if the candidate is engaged to perform services in any capacity as a result of the referral.

“Different” can mean “difficult” if you neglect to use these words. It doesn’t take much to change the job duties so that they appear to be different from the JO. Statistically, this happens over half the time anyway. An employer doesn’t really know what the job will be until it hires someone. If the candidate’s ego will be bruised by a lower title, a different one can always be used. The employer just says you weren’t “engaged” to “perform” a search for that job.

What can you do? Exclude anything in your fee schedule that ties you to a title; and instantly review the actual job at the actual compensation with your still active candidate.

The time lag between the referral and the hire was too long.

“Your referral was nine months ago and we only recognize referrals for six months or less.”

This is one of those clauses we find in almost every placement service agreement (PSA). Companies love to stockpile or warehouse candidates until their referral period is up, then surprisingly, they show up on their payroll with no fee having to be paid. It can happen purposely or because of “hiring freezes” or “position on hold” situations. We know of one of the big CPA firms as well as several software vendors that deliberately wait until Day 366 to make contact with candidates submitted under a one-year fee bounty. Here’s a typical example of the words and music put in the agreement of a Fortune 100 firm:

Notwithstanding any other provision of this agreement, Recruiting Firm will not be entitled to any service fee unless Company retains a candidate within one year from the date Recruiting Firm presented such candidate to Company and such candidate was not previously presented to Company by any other entity. Moreover, if a candidate presented by Recruiting Firm is rejected by Company or rejects an offer made by Company for a position described herein, Recruiting Firm shall receive no fee even if the same candidate is later presented for the same position by another recruiting firm and is thereafter hired by Company.

We didn’t have a signed agreement.

“I know you sent us an agreement to sign, and if we’d agreed to your terms, we would have signed it. Since we didn’t sign it, there is no agreement to pay you a fee for this hire.”

How often have you heard “It’s being reviewed by our legal department” or “The hiring manager hasn’t finished looking it over”?

Attorney Jeff Allen’s Placements & The Law column in our March 2004 issue was entitled “Getting the Employer’s Signature Agreeing to a Full Fee,” in which he spelled out the ABCs of the methodology. In a previous writing, he succinctly explained why:

This excuse is probably the most predictable prestidigitation in the entire bag of HR tricks. You’re the dealer, and you deal the trump card to the employer – a fee schedule (or letter) that has a place for the signature of the hiring authority.

It’s a great idea: Get the employer to sign while the tears are falling. The only thing is, you don’t. You think the JO is so urgent that you start recruiting, presenting, referring, and sending out candidates even before the schedule arrives.

Not much incentive for the employer to sign. Considering that human resourcers and supervisors often don’t have the authority to sign legally binding documents anyway, there’s even less chance you’ll get it back. If you do, it’s probably signed with invisible ink. Still you go on thinking you have a deal – everyone is so nice.

Then one day the tears turn into a smile. The next day the smile turns into a grin. Eventually the grin turns into a chuckle. They play the trump card as they cackle, “If we’d agreed to the fee, we would have signed your fee schedule.” Now it’s your tears that are falling. A little levitation levity makes for lively litigation. Only you’re the loser.

You must not have a place for the hiring authority’s signature on that schedule unless you won’t begin the search without a signed copy. A fax or email authorization is fine. A promise isn’t.

Implying acceptance by the “acceptance of referrals” is a dangerous way to do business. Particularly when you can’t even prove knowledge of the fee. But that’s what you’ll do no matter what this lawyer says.

No matter how agile your lawyer, some states require that fee agreements be in writing. There will be more states following suit. And some states require that you be licensed or “registered” to be eligible to collect a fee from a client in that state regardless of a signed agreement. If you think that getting an agreement signed before working a JO is just a minor inconvenience, perhaps you’re in the wrong profession.

TFL archives

Editor’s Corner



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A reader sent the following scenario and it has a familiar ring to it, as others have written on the same subject. This one, however, has a bizarre twist.

Recruiter has an exceptional MPC (Most Placeable Candidate), and he calls the hiring manager of a company with whom he has previously done a lot of business. Hiring Manager (HM) requests an immediate interview since he just lost a similar person and wants to fill the position as soon as possible. He hasn’t even written a requisition to send to the brand-new HR guy yet. HM loves the guy, makes an offer, thanks the recruiter, and asks for the invoice to be sent directly to him for approval. There was a previous open-ended signed contract with the HM and he is deeply grateful for this coincidental stroke of luck.

Shortly after sending the invoice, the recruiter receives a call from the new HR Manager saying that no fee will be paid for the following reasons:

1. There was no authorized requisition for the opening.
2. The HM had no authority to bind the company to a fee.
3. The recruiter was not on the new approved vendor list.
4. The recruiter had not signed an agreement with HR (nor had he been invited to do so) even though he had a long-standing relationship with the company and signed agreements with this and several other HMs.
5. The company had found the hired candidate’s résumé on their database from a couple of years before and probably would have contacted him on their own.

We’re hearing more and more stories like this where a new HR guy or gal says, “There’s a new sheriff in town, and everything you’ve come to expect has been turned topsy-turvy.”

Of course, The Fordyce Letter has addressed almost all of these objections many times in the past, but frankly, even though the rebuttals sound awfully good in print, they rarely get the required positive response when bounced off the eardrums of the HR person you’re trying to persuade.

So, I was surprised when this practitioner took a road less traveled. Not necessarily one I would have suggested or supported, but one that worked in the final analysis. He asked a number of his industry friends about this new guy and learned some disturbing things about him, both professionally and personally.

Rather than walk away from a $35K fee or give a large percentage to a lawyer, he called a friend who also happened to be a private eye and requested what he described as a “deluxe” investigation.

What he received was evidence of prior fraudulent dealings involving splitting of fees with pet recruiters while with two previous employers. He claimed a degree he did not have, which had been missed by previous employers who never checked his academic credentials. Two DUI convictions popped up, and he’d had several romantic affairs in the several cities where he had previously worked. There was even a videotape of this guy in the back seat of a car with a female coworker, and it was obvious they were not discussing business.

So what did this practitioner do? He called the HR guy and invited him to lunch – something the HR guy didn’t want to do but was persuaded that it was in his best interest to do so.

At lunch, he told the HR guy, “Whether you know it yet or not, I am now your new best friend, and I will expect my check within 48 hours if you want to keep your job. Not only am I now #1 on your preferred provider list, but I will have complete access to those hiring managers with whom I have very successfully made placements in the past. I will not sign your agreement. You will sign mine. I expect to have first crack at all your openings within my niche or I will have no choice but to reveal your tawdry background to your boss and your boss’s boss.”

He told me the HR guy’s attitude went from arrogant and obnoxious to respectful and humble. Since our practitioner had his contract with him, he had it signed on the spot.

I do not know how the relationship has developed, since it happened only a few weeks ago. I do know that the check arrived on time, as did copies of a number of critical openings the company had.

Would I have done this? Nope! I don’t like extortion, and I like to sleep at night. Knowing the company for which the HR guy works, I suspect that his back-ground will surface on its own. One reader, with tongue in cheek, suggested it should be included in the next version of Closing on Objections and labeled as the “Blackmail Rebuttal.” Right!

For more information on these topics, see the “Gotcha” article later in this issue.

Highly successful practitioner Tim Richards sent along the following tip/script to use on employers who try to squeeze you on fees:

“If you want to pay less than our 30% fee we will be happy to oblige you. Please understand that this is an economically driven business and our best candidates go to the employers who pay our rate. That being said, once again, we will be happy to send you their rejects if you want to pay less than the 30%. Given the current market conditions, there are way more employers needing people than there are solid, successful, qualified candidates. So, Ms. Client, I’m sure you understand this business model.”

Many readers ask for “different” ways to charge fees, a topic that Jeff Allen addressed several years ago. Because of the many requests, we are reprising his suggestions in the following Placements and The Law column.

TFL archives

Editor’s Corner



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One of the reasons I sold The Fordyce Letter to ERE Media, Inc., was the fact that, at my age, I didn’t want to climb any more mountains even though there are many more mountains out there to climb. My passion has always been writing and editing the content of TFL and communicating directly with our readers. The grind of dealing with the day-to-day minutiae of the never-ending back-office details took its toll on me. With that part of the business off my back, I can spend more time on the content, and as I’m sure you have noticed (and many have applauded), the content has increased in size and scope.

I have accepted the fact that cyberspace, the blogosphere, Web 2.0, and other technologies I don’t fully understand will be an important component in moving the recruiting information age forward. A bigger presence online and building a truly useful and unique Internet Recruiting Community will benefit all of our readers. The ability to access over 6,000 pages of relevant materials from the TFL archives at the click of a mouse is just over the horizon. The list goes on and on – but I’m not the guy to do it.

David Manaster, the CEO of our parent company, has been looking for that uniquely qualified person to take on these challenges, and I am pleased to announce that Jason Davis has been hired to create and execute the future visions and market the opportunities that will take TFL subscribers up new intellectual tributaries, leading them to innovative, expanded, and more profitable opportunities than I ever envisioned.

Jason Davis is not an unknown entity to me. He is one of the top players in the recruiting blogosphere, with the added benefit of actually having been there, done that. He’s worked a desk, run a firm, created a split network, run one of the more active blogs, and made a well-recognized name for himself throughout the profession as an innovator and pacesetter.

He started recruiting in the semiconductor industry in 1993 and started his own firm, called Davis Search Group, in 1997 and built it into a very successful and profitable recruiting firm. From day one he started subscribing to The Fordyce Letter and said, “It was one of the best things I did. It is amazing to think about how many placements were created/ done/saved utilizing some piece of information that I got from The Fordyce Letter.”

While actively building his recruiting firm, he started a network called Splits.org that focused on the semiconductor industry. Very quickly it grew to 65 members with the help of some very active and interested members and generated many millions of dollars in agency fees over a three-year period. Then, he read an article in TFL that talked about what makes a good domain name for a recruiting firm. The suggestion was that if you recruit in the software industry, softwarejobs.com would be a great name to have. The light bulb in his head went off, and soon he was the proud owner of hundreds of recruiting-related domain names. This was really the beginning of the next successful journey of his life as a trendsetter in the recruiting industry.

After the market took a hit in early 2000, his interest changed from being a recruiter on a day-to-day basis to writing about the recruiting industry. He acquired the domain name Recruiting.com and built a very well-known blog under that name.

I could not have written a better job description for someone to contribute to the next phases of TFL than Jason’s background. It is as close to perfection as I’ve ever seen. As Jason told me, “I promise to do everything I can and use all of the resources available to me in order to generate more readers and more visibility to our fantastic industry and, most importantly, provide more and more value to those who currently subscribe. It’s going to be a great journey.”

Jason has one request for readers: “It would be great if you could tell me what article you have read in The Fordyce Letter that you feel has had the biggest impact on you as a recruiter. For me, as I said before, it was the article that talked about domain names and recruiting. It was a real career-changing article.”

Jason can be reached at (416) 995-3693 or emailed at Jason@fordyceletter.com. Let’s all give him a hearty Welcome Aboard.

TFL archives

Editor’s Corner



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The first annual Fordyce Forum, held in New Orleans this past June, far surpassed any expectations I may have had. We were after those power recruiters for whom there were very few options at other conferences. By putting together a group of presenters, most of whom are $1million producers themselves, we succeeded in attracting about 200 of this country’s premier professionals and a couple from South Africa and Australia as well.

ERE Media, Inc., our parent company, already holds three conferences every year for the HR community, and they are consistently ranked as the best in the business. Their experience along with their truly amazing staff provided a flawless conference. We will definitely have another one next year, so stay tuned for the dates and venue before you commit to any other meetings.

Exhibitors were amazed at the caliber of attendees and have already reserved space for the next one – and 97% of the attendees rated the conference as excellent or good.

Here are a few comments from attendees:

“For a first conference, it was exceptionally well promoted, well organized, well run; fantastic presenters, great topics. Very worth my time/$.”

“Great job, Paul. I’ll bring back my senior recruiters again.”

“I liked that it wasn’t a replica of NAPS. It catered to more senior recruiters. The speakers were very useful.”

“Love the fact that most speakers have industry current involvements, some actually still working a desk. Everyone was very friendly and willing to share ideas and concepts. That was a pleasant surprise.”

“Extremely validating to understand that all recruiters have similar frustrations such as wild-goose-chase searches, unethical clients, unruly candidates, counter offers, etc. Also validating to understand where I stack up against my colleagues, and what it takes to bill $1MM.”

“Excellent. Please do it again!”

“Keep it blunt, candid, and outspoken just as this one was. I will attend again. Very good stuff. When is the next forum?”

“I loved the access to such successful recruiters. The motivation and enthusiasm for our industry was phenomenal!”

WHEN TO DUMP A CANDIDATE?

The past two months, we covered when to terminate a relationship with a client/employer. But what about dumping a candidate? When do you do it? Why?

What is a candidate? For many in our business, the term “candidate” is an ambiguous one. Just because someone answers an ad or a posting or just walks into your office or calls or emails, are they a candidate – or just an applicant? Is there a difference between someone who approaches you rather than being recruited by you? If you get a résumé from a guy working at Jiffy Lube wanting to be considered for a senior engineering position, is he really a candidate? Of course not!

Most recruiters consider applicants to be candidates only if they meet the minimal requirements for a job assignment and have been seriously considered by or successfully set up for an interview with a client. Some practitioners in our business get apoplectic over a couple of words: “agency” and “applicant” – words that many consider demeaning. So instead of calling things what they really are, we use terms such as “executive recruiting,” “executive search,” “executive shoulder tappers,” and the like. Applicants become “candidates,” “nominees,” “panelists,” “finalists,” etc.

Not to belabor the semantics of our nomenclature-obsessed practitioners, but there are times when you have to cut the cord with an uncooperative “candidate.”

What may surprise many of our readers is the fact that over 50% of practitioners still (very successfully) use the MPC (most placeable candidate) approach. In this scenario, should we refer to the MPC as “bait”? Probably not in our best interest, no matter how true it might be.

Dave Staats, premier producer and Pinnacle Society member, said: “Beyond being a candidate for a search, I only ‘work with’ about one candidate out of 100. Real MPCs are so rare I just don’t have much time to do my business that way. That said, whether for a search or not, I was taught to establish a ‘social contract’ with my candidates. As my Pinnacle Society colleagues have said, ‘Be excellent to each other’ and actually . . . just mutual honesty and trust. Also, Richie Harris said, ‘We must have total trust, complete honesty, and a common goal.’

“Once this is established, if it is violated, I drop the candidate like a hot rock because if they’ll do it to me, they’ll do it to the client. I know that sounds like a ‘Whatever, Mr. Perfect’ response, but it’s one of the few I do actually live by. Life’s too short!”

Another reader wrote, “Everybody says that talking about candidate control is somehow politically incorrect. Maybe so! You can’t really ‘control’ another person, but you can motivate, persuade, stimulate, inspire, and encourage them to do that which you want them to do and, hopefully, it is in their best interest as well as yours. The word is control, no matter how you try to obfuscate it. If you hear that someone is ‘sleeping’ with some-one else, do you really expect everyone to think they are off snoozing together? Of course not! Once I begin to lose ‘control’ over a candidate, I try to fine-tune the relationship. If that fails, I don’t need the aggravation and I will drop them from consideration. I do, however, make it crystal clear to both the candidate and the client that if, at some later point, they decide to climb into bed with each other, I get a fee for making it happen, even if under duress.”

Another reader warned, “I have had more deals go awry because of spouses than any other reason. That’s why I always interview the spouse of any finalist. If I sense any vacillation on their part, I move on. I had one candidate tell me to never speak to his spouse because he wanted to surprise her with the new job she had been nagging him to find. He took my client’s offer, reported for his new job in a distant city, and I thought everything was OK until I got a visit several weeks later from an FBI agent. Seems he never told his wife he was leaving, and she reported him as a missing person.”

Addressing both the client and candidate sides, one long-tenured reader said: “Seems like I have fired about half of the big player companies in my niche (and it is not that large). I am doing business with fewer and fewer companies, but I am having the best year I can remember. However, even with some of my better clients, I am feeling a strong push by HR departments to keep control of the turf they gained in the past few years. I have either fired or turned down chances to work on many job openings mainly because of the companies demanding low fees of 20% or less, long payment terms, unreasonable guarantees, or such ridiculous HR demands that I ignore the great contacts I have spent years building and go through them (HR) with all communications. It is as if they are trying to punish me for being effective in my job. At least if I choose not to do business with them, I can still keep my contacts.

“I have been reading The Seven Habits of Highly Effective People, and it seems to me there are a lot of companies out there that are trying to squeeze the productivity out of everything without replacing or maintaining the things that make them productive in the first place – the employees, vendors (recruiters included), customers, etc. I try really hard to not work for those kinds of companies, if at all possible.

“It seems like this has been happening more and more as larger companies have purchased smaller companies, and when they get larger they seem to, sooner or later, get around to thinking they can turn recruiting into a commodity vs. an art. Nowadays many hiring companies want to be our competition, and they try it, but only a few can cut it. What they can do, however, is make it much tougher for us good recruiters to do what we do well. When I run into one of these companies, I run the other way fast. Life is too short, and I have too many kids left to put through college to let these companies control what I can earn.

“Regarding candidates, if they are already all over the Internet, and already working with other recruiters, I rarely even bother with them. I always like to put the odds in my favor as much as possible, and working a candidate who is all over the net is a sucker bet.”

If your “candidate” is already on the market when he contacts you, you can expect a lower level of cooperation, especially if he has already contacted several other employers or recruiters. But never forget, if you are responsible for bringing a recruited “candidate” into the job-changing mindset, she will probably also become a very active jobseeker on her own – which is definitely not in your best interest. She will be weighing your client’s situation against others she has found on her own or through others. It’s known as The Better Deal Theory, as pointed out by Terry Petra (TFL – 3/07), and maintains that “before a person closes any kind of a deal – including marriage – he always worries about the fact that there may be a better deal down the road. It’s an uncontrollable instinct: at the last moment, the thought has to at least occur to a person that he might be missing out on a better deal somewhere else.”

Some of the reasons for dumping a “candidate” are:

- Lies about their background, education, salary, etc.
- Unwillingness to schedule interviews
- Reluctance to provide timely feedback
- Failure to return phone calls from you or your client
- Drastic changes in requirements for a new job
- Uncooperative
- Spousal reluctance
- Inability to make decisions
- Attitudinal problems
- Prima donna syndrome

As Dave Staats says, “Life’s too short.” Many of these reasons mirror those about when to “fire” a client.

One final word of warning: If you decide to dump a candidate, make sure you continue to follow up on all referrals you have made with them and let them know that if they accept a job through one of your referrals, a fee is due. Many candidates develop a “crawdad” attitude because the client has intimated (with a wink and a nudge) that they’d sure like to hire them but the fee is just too high – and they think that doing something to get themselves “dumped” by the referring recruiter just might get everyone off the hook.

Remember, we are the choreographers in this business, and when one of the dancers decides to do their own thing, they must be replaced or re-educated.

Tony Beshara, a legendary multimillion-dollar biller who does more placing than searching, has a very useful program for keeping his candidates in step with the process he directs. Like the gentleman he is, he has offered to share a Candidate Prep technique with our readers (see This & That for more information).

VOLUME DISCOUNTS. Can you imagine telling your best consultants that the more they bill, the lower their commission/bonus rate? As far as we know, only the government tax collectors think this is the way to operate.

Now that business is strong and employers are beginning to feel the talent shortage pinch again, there’s an ongoing propensity for fee-haggling. When times were tough, they said they couldn’t afford us. Now that times are better, they’re dangling multiple assignments in our faces as the incentive to recruit on the cheap.

In a perfect example of a “what’s wrong with this picture” scenario, an employer approached their best recruiting source (35 hires so far this year) and said, in effect, “Since you know exactly what we look for and you’ve done such a sterling job for us during the past several years, we’ve decided to pay you less per placement.”

Another firm that used a long list of recruiters decided to scale back the number used to only those who had collected X dollars in fees over the past year. At the same time they decided to cut back their fee cap from 25% to 20%. In a sense, they were saying, “Congratulations, you made our approved list of recruiting sources, so you can work harder to make less.” Shortsightedness in all its glory!

But how do you handle the request for volume discounts when you suspect that this “fleet discount” proposal is merely a ploy, as it often is?

Publications that carry advertising learned long ago that when a potential advertiser tells you that they plan to advertise in every issue if you’ll give them a discounted rate, they usually plan on only one insertion. To service those with honorable intentions, they came up with the “earned discount.” The same is true in the recruiting business.

Of course, discounts make sense in some cases . . . even for recruiting. There should probably be a monetary trade-off for a 10-placement deal. You’ll save money by not having to re-incur marketing/business development costs for each of the openings; you won’t have to learn the cultures and idiosyncrasies of 10 different firms since all placements will be with the same firm; and your sourcing efforts will be more efficient, especially when all the openings are for similar types of people. There are other factors as well.

If you have a true exclusive (is there really such a thing?), it may be worth a discount, but stuff happens. What if the openings are frozen after the first two placements? What if some are filled by employee referrals, thus reducing your true multiple-placement opportunity? What if (you fill in the blanks)?

Here’s one example of how these types of deals can be formulated. Suppose you’ve been asked to find 10 digital design engineers, all at the $60,000 level. At your normal 30% fee, these fills would give you $180,000. You’ve been asked to do the job for 25% fees, which will bring in $150,000, or $15,000 each.

Explain to the employer that you have no objection to a $30,000 discount as long as the deal is done as expected. But also explain that the lion’s share of your time and cost expenditures will be up-front and propose the following formula:

Placement 1 @ 30% $18,000
Placement 2 @ 30% $18,000
Placement 3 @ 30% $18,000

Placement 4 @ 25% $15,000
Placement 5 @ 25% $15,000
Placement 6 @ 25% $15,000
Placement 7 @ 25% $15,000

Placement 8 @ 20% $12,000
Placement 9 @ 20% $12,000
Placement10 @ 20% $12,000

TOTAL FEES $150,000

If the employer is not yanking your chain, they should have no problem with this formula. The bottom line is exactly what they wanted; the payout, however, protects you against any unforeseen termination of the search effort while still covering your heavier up-front costs. You’re moving the “what ifs” into the employer’s court. If they tell you no, they’re telling you that (a) there won’t be 10 placements and (b) they want the advantage of the cheaper placements at the front end.

Another formulation bases fee percentages on hire-in salaries rather than on which number the placement happens to be, but it’s complicated, unwieldy, and more applicable to multiple deals at varying salary levels than openings at the same level. The only advantage to this type of calculation is that it discourages the temptation on the part of employers to hire the cheaper ones first and defer the more expensive hires until the discount threshold is reached.

A third way is to give a discount coupon applicable to future fees, but as one practitioner told us, “We’re in the talent business, and coupons smack of pizza peddlers, not professionals.”

Whatever deal you structure, make sure that volume becomes reality before offering volume discounts for what could turn out to be only one or two placements.

Here are a couple of volume discount proposals used by readers:

- 1st and 2nd annual hires – billed at regular fee.
- 3rd and 4th annual hires – billed at 5% reduction from regular fee.
- 5th and 6th annual hires – billed at 10% reduction from regular fee.
- 7th and 8th annual hires – billed at 15% reduction from regular fee.
- 9th and 10th annual hires – billed at 20% reduction from regular fee.
- 11 or more annual hires – billed at 25% reduction from regular fee.

And here are a couple more:

- There is a volume discount available for multiple placements during a twelve (12) month period. Should your company hire a second person from us during a twelve (12) month period following the first placement, we will compute the service fee as 30% of the total compensation to be earned by the candidate whom you employ during such candidate’s first twelve (12) months of employment. We will rebate your company 3.3% of the fee charged on the first placement. For all subsequent placements during the twelve (12) months following the first placement, service fees will be computed as 25% of the total compensation to be earned by the candidate whom you employ during such candidate’s first twelve (12) months of employment.

- We will rebate to your company 5% of the fee on the previous two placements. The invoice for the third placement will reflect this discount.

Although fees have devolved from the benchmark 30% over the past few years and many recruiting firms have now acquiesced to this lower standard by decreasing their fees to a maximum of 25%, I feel that now is the time to get them back to where they ought to be – 30%. If 25% is presented as the standard, employers will want a discount from that percentage. It’s human nature. If you already know they’ll be asking for a discount, the starting point for that concession should be 30%, not 25%. In fact, we have long advocated changing the conversation on discounting. I don’t know why most think the next available discount from 30% should be 25%. How about 28% or 27%?

Many have decided that, since they already have more business on their plate than they can handle, they won’t discount at all . . . and they’re getting full fee. Let’s face it – our business is all about alleviating pain. We probably won’t be asked to accept a search unless the employer has already tried everything else. If your toilet is overflowing, you won’t be asking the first plumber who shows up for a better price.

One of our readers recently cashed a $212,000 check from a company that had already been unsuccessful through the Heidrick & Struggles search process. Paying two fees in that amount indicates real pain.

But how do you approach the employer limbo contest where their only interest is in “How low can you go?” Here are some possible approaches:

HOW SEVERAL PRACTITIONERS REPLY TO “WE NEED A LOWER FEE!”

1. “I understand that you would like to solve this problem as inexpensively as possible. No one likes to overpay. But our fees are based on an analysis of our expenses along with a reasonable profit. I seriously doubt that I can talk my boss into accepting this assignment with no profit, so I must ask you which of the elements of a complete search would you not want us to perform?”

2. “While there may be some area in which we can achieve a compromise, it almost always results in a less than satisfactory outcome. Just as you would want the best available team to perform a family member’s open-heart surgery, I’m sure you’d be hard-pressed to tell us which of our crucial functions you can do without.”

3. “Our fees are based on the proposition that your search will be performed by a seasoned and successful veteran rather than a rookie, that the full resources of our research department will be brought to bear on your problem, and that our net will be cast to cover the entire universe of potential candidates. One or more of these components must, by necessity, be scaled back or ignored if the fee is reduced as you ask. This, I’m afraid, will compromise the final result in a way we can’t condone, so if your demand for fee reduction is firm, we’ll have to bow out and recommend that you seek that low bidder you’re looking for.”

This #3 scenario indicates that you care, but not enough to lower your standards. That’s a powerful negotiation tool.

Two more approaches to “Why won’t you lower your fee” are:

4. “It’s been a very long time since someone has even asked us to negotiate a fee. That issue was laid to rest some years ago, when the hirers of the country negotiated and agreed with the personnel consulting profession that the established standard fee for our services should justifiably be 30% (or whatever you wish to make it). Survey after reliable survey indicates that 30% is a fair amount and that employers who ask for, and get, lower fees end up with substandard results.”

5. “I’m not at liberty to even discuss fee reduction on a contingency search, but if you want us to handle it for 25%, we’ll be happy to do so under an exclusive retained agreement with expense reimbursement factored in. If you wish, I’ll start preparing the retainer agreement right now.”

From an old pro who swears this works more often than not:

6. “I suppose I don’t object to your asking me for a dramatic discount in the fees we normally charge, but if you’ll bear with me for a moment, I’d like to think out loud about your proposal.

The company for which I work has a sterling reputation for ethics and for success, both with employers and with candidates. We have never compromised on the quality of the services we provide. I’m proud of that, and that’s why I feel I’m privileged to be with the best.

I’ve spent many years learning my profession. I’m very good at what I do, and the greater percentage of my business comes from repeat clients who obviously feel the same way about my work as I do.

Our fee schedule is based on the same factors as almost everyone else’s. They are similar because everyone in our profession knows that our charges are fair, competitive, and reflective of the actual costs of doing business. Those who have cut their fees in the past just aren’t around today.

I didn’t spend years honing my expertise, gather-ing vital contacts, and building my reputation to agree to work for Bargain Barn prices just because someone was insulting enough to ask. As a matter of fact, I’m positive that I couldn’t effectively work with a company whose sole criterion was price rather than value and quality of service. Shall we proceed?”

The use of script #6 takes practice, confidence, and a bit of chutzpah, but for those who are able to master it, it often works to turn lowball wheeler-dealers into full-fee clients. The following is based on pure logic.

7. “I’m sure we wouldn’t be discussing this if your need wasn’t a critical one. Is that correct? (If yes, continue. If no, end the conversation.) My success is based on my track record. All I have to offer is my expertise and my time. If all my clients willingly pay me 30% – and they all justifiably do – on which assignments would you logically expect me to spend my time? One for which I’ll be paid 30% or yours, where my time will be spent for considerably less? For the amount you offer, I’ll be happy to do a file search, but if you truly seek an impact player who can make a difference to your business unit, the fee is 30%. I’m sure you’ll find dozens of others in the Yellow Pages.”

I still occasionally receive subscription checks addressed to me at the old TFL address in St. Louis, probably because that address is already programmed into an automated check-writing program. While I forward them to the New York headquarters office, this sometimes delays the renewal or the subscription start date. While you’re reading this, take a moment and change the address from P.O. Box 31011, St. Louis, MO 63131 to ERE Media, Inc., 580 Broadway, Ste 304, New York, NY 10012.

I am still totally responsible for the content every month. For me, that’s the fun part. Even better, all the back-office functions are now the responsibility of ERE’s outstanding staff in New York. So if you have a subscription problem or question regarding renewals, address changes, switching from mail to email, subscription delivery problems, etc., you can call (212) 671-1181 or email help@ere.net. For conversations about the business in general or questions in particular, you can still call me at (314) 965-3883 or (preferably) email your comments or questions to me at: TheFordyceLetter@aol.com.

I still want to hear from you.

Last month, we addressed several ways that practitioners are accelerating fee payment from slow-pay clients. Long-tenured and very successful practitioner Neil McNulty (McNulty Management Group, Virginia Beach, Virginia) weighed in on his methodology with the following:

Trouble getting paid? Use the following procedure and you will rarely face that problem again.

Day of placement, invoice the hiring authority (the direct report senior to your candidate) with your invoice as a Word attachment and terms “net due receipt of invoice.” Call the hiring authority to confirm receipt of the invoice and conclusion of the placement. It’s OK to leave this on a voice mail and email. This can sometimes result in payment prior to start date. Some employers may think that your candidate will not be allowed to report for work until after you are paid.

On the start date, email and vmail the hiring authority and tell him, “(Candidate) is excited about reporting aboard today and beginning his career with (name of company). Can you let me know when you sent our check for payment for his placement? It is already (x) days past due. Thanks!” Of course, no check was sent.

On start date plus 10 days: “(Hiring authority), we still have not received payment for (candidate). I am beginning to feel very uncomfortable here, that perhaps (placed candidate) is not performing up to your expectations. Please call me and let me know what the problem is. Thanks.” Of course, 95% of the time the placed candidate is doing fine and the employer is simply delaying payment, but your message will begin to make HIM uncomfortable because the last thing he wants is for you to contact his employee and plant seeds of doubt in the placed candidate’s head about his performance.

On start date plus 20 days, leave the following voice-mail message: “(Hiring authority), since we have not received payment for the placement of (placed candidate’s name), I can only conclude that he is not performing up to your expectations and that he is not working out. I have a duty to inform him of that. Please call me right away. Thanks.”

Ninety-five percent of the time, you will receive an immediate callback. If not, then it means you are correct in that the employer is unhappy with your placed candidate. In that instance, you should inform your hiring authority that he needs to either terminate the placed candidate immediately, or pay you. Do not fall for the “we need to give him more time to get his feet on the ground” excuse. Such placements never succeed, and you will not get paid anyway.

If you receive an immediate callback, which is the vast-majority result, you need to tell the hiring authority, “(Name), from my experience in these things, the only time companies are slow to pay for a placement is when they are unhappy with the placed candidate. Since you have said that is not the case here, I need to receive payment within three business days. If I do not receive the check in three business days, I have a duty to contact the candidate and inform him that IT IS MY OPINION that you are unhappy in some way with his performance because you have not paid the fee for his hiring.” Note: Be sure to state “it is my opinion” because you cannot say “he is unhappy” if you cannot prove it is true.

You will receive your check within three days if the company is happy with the hire.

TFL archives

Associations, Networks, Franchises, Alliances, Coalitions, Etc.



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What role will they play in our future? Will they get bigger or smaller? More influential or less?

“I work the accounting specialty with a number of well-established clients. Frequently, they ask me for help on openings in manufacturing, sales, and other disciplines I do not handle. Since joining one of the major formal networks a few years ago, I have averaged making eight extra placements a year with candidates from my non-primary specialty provided from my network partners – almost $100,000 a year for sharing a hot job assignment with a full-fee-paying client – revenue opportunities I would have missed before joining a network.”

This response from a reader echoes the results of most practitioners who take advantage of the growing number of cooperative affiliations in our business. Not only are the traditional networks growing in number, but some of the associations have branched out to include these types of coalitions. And some networks are taking on the mantle of associations. Franchises, of course, have always trumpeted the fact that they provide the ultimate in collaborative efforts between franchisees who may be working in dissimilar specialty areas, but the lines between these disparate groups is very blurry these days.

The Internet, aside from birthing a number of new and different types of networks, has changed the face of recruiting. MySpace, Facebook, LinkedIn, and other organizations initially established as “social” networks have changed the landscape dramatically by linking like-minded people, which often culminates in affiliations between recruiters (and others) that probably wouldn’t have occurred otherwise.

Trainer and practitioner Bob Marshall once said: “As the Internet has grown, so have the networks and associations that are driving (and responding to) the demand for shared data-bases. The relative ease with which information can be stored and accessed has enabled both specialty and generalist providers such as NPA, RON, Top Echelon, IPA, and First Interview (as well as several state associations like GAPS) to serve a greater number of recruiters and, in turn, capture a higher percentage of overall industry billings.

“With the scarcity of candidates coupled with the incredibly fast-changing environment in which we work, recruiters will need networks and associations more than ever. Contacts, information, support, and speed are all by-products of a network affiliation. I see additional ‘networks’ being formed (both formal and in-formal) as more recruiters recognize the potential value of working together.”

Attorney Jeff Allen has called networking of all types “the underrated underground that makes recruiters more placements.”

Some time ago, Terry Petra said: “Historically, membership in state/national associations grows proportionately when the economy is strong. This is also true for affiliations with networks and franchises, as well as in-formal coalitions between individual firms and groups. This will continue in the future. However, there are other factors that are contributing to the growth of these groups.

“For individuals and firms within the staffing industry, success in the future will increasingly require access to and application of ‘world class resources.’ As the ‘big get bigger,’ local and regional staffing firms will be edged out of their markets if they cannot compete on the qualitative scale. Access to the combined resources of the right group will allow these firms to leverage their relationships while, in many instances, outperforming the larger players through process excellence and timely deliverables.

“Membership in state, regional, and national associations pro-vides staffing firms with opportunities for networking with peers, access to certification and educational programs, as well as operational and technological purchasing discounts. These benefits of membership will only increase as competition in the marketplace heats up. We are in the age of outsourcing and qualitative differentiation. Membership in organizations and affiliation with shared resource pools will increasingly allow staffing firms to successfully compete in the marketplace of the new millennium.”

Trainer, author, and industry speaker Steve Finkel has noted: “Associations and networks fare poorly in a recession, a fact conveniently overlooked or never known by those currently involved in such entities. Membership renewals dwindle precipitously, and abysmal attendance at multi-day association gabfests results in major financial losses.

“Networks also disappoint in a recession. To put together a successful placement on a net-work requires a serious client, a committed candidate, and a competent consultant on both candidate and client side. The absence of any one of these participants means ‘no sale’ – and the likelihood of all four being present in a slow market with many qualified and unemployed candidates on the market ‘for free’ is remote. Networks do well in candidate-short boom times such as we have today.”

Not only is formal network membership on the rise, but the number of informal relationships is also increasing . . . along with the usual attendant problems.

The urge to split a fee with another recruiter can be a strong one, especially when you have received a job order outside your normal realm. We are constantly receiving calls asking for the name of “someone who specializes in ____.”

But the press of time often tempts practitioners to forget that these relationships should be formalized to avoid the usual disputes that arise from such alliances.

Another reality was brought to the fore by frequent TFL contributor Frank Risalvato, who lamented in an ERE and NAPS article (A Cure for the Sounds of Silence) that too many recruiters, when asked for help or cooperation in filling one of his openings, never respond to the request one way or the other. He also expressed concern that the same silence too often occurs in dealing with a client company when a recruiter is unable to produce a suitable candidate on a timely basis. We agree with Mr. Risalvato that silence is unacceptable behavior in either situation, but the fact remains that most recruiters, especially when presented with a split opportunity with another recruiter, will only do a quick file search for candidates to refer. To expect a busy and successful recruiter to take time away from a full-fee search to spend time on a search where they will receive only 50% is unrealistic.

Most honest network providers know that their success depends largely on luck or serendipity. When a member posts an opening to other members, it is unlikely that any of them will do more than search their databases, and if, by coincidence, someone in their files happens to meet the specifications, a deal is done. Otherwise, there seems to be no reason for further communication, and most practitioners who submit an opening through the networks implicitly under-stand that unless their network colleagues have a match, the niceties of communicating their failure to find one is neither expected nor necessary.

We have published below a sample Cooperative Placement Agreement for those who wish to work with others. These are not cast in granite but cover most of the situations that should be addressed in these types of agreements. Believe us when we tell you that a large percentage of the complaints we receive revolve around problems that occur between people in informal split arrangements.

COOPERATIVE PLACEMENT AGREEMENT

THIS AGREEMENT is to facilitate placement networking between ______ and _______. In consideration of the mutual terms, covenants, and conditions herein, whenever a candidate is recruited by one of the associates for placement by the other, both associates hereby agree as follows:

1. Placement fees received by the placing associate from an employer shall be shared with the recruiting associate if a candidate who is recruit-ed by it is placed with said employer.

2. Any division other than one-half (1/2) to each associate shall not apply unless agreed in writing by both associates prior to disbursement of the placement fee.

3. The complete fee and guarantee agreement with any employer shall be fully disclosed to the recruiting associate prior to referral of said candidate.

4. Placement fees shall be disbursed within five (5) business days of receipt from the employer, but shall be retained by the referring associate until expiration of the guarantee period.

5. Guarantees shall be honored fully; the referring associate shall be responsible for any refund, and the recruiting associate shall be responsible for any replacement. Until said guarantee is honored or expires, no disbursement of the placement fee shall be made.

6. Candidate information received from the recruiting associate shall not be disclosed to any other recruiter without the consent of said associate, and shall be used only for the purpose of effecting the original placement.

7. Communication with the employer or candidate shall be only through the associate who originally contacted said employer or candidate.

8. No unsolicited résumés shall be submitted by either associate to any employer without the prior written agreement of the associates.

9. Any potential conflict (duplication of employer or candidate information, un-acceptable fee or guarantee provisions, etc.) shall be resolved prior to the referral of any candidate.

10. Any formal step involving a recruited candidate’s prospective employment (initial interview, second interview, offer, turndown, etc.) shall be related as soon as possible to the recruiting associate.

11. All shared candidates and job orders shall be originated by each associate through its own recruiting or business development and not from any other source wherein a financial obligation exists.

12. In the event that both associates to this agreement wish to enter into a three-way cooperative networking agreement, the terms of said agreement shall be separately negotiated in writing prior to the referral of a candidate.

13. The recruiting associate shall have the right to payment for three (3) years after the last communication regarding said candidate. If a candidate contacts the referring associate directly through an independent source more than one (1) year after the recruiting associate’s last communication, no payment shall be due. If a candidate responds to any solicitation or follow-up to determine availability, the candidate shall still be considered supplied, regardless of whether he or she has changed employers.

14. The referring associate shall not contact a candidate for networking or additional referrals without the consent of the recruiting associate. If referrals are subsequently generated from the candidate, they will be considered recruited candidates. The referring associate shall furnish all information on said candidates to the recruiting associate.

15. The referring associate shall not use a recruited candidate or their background information for any general business-development purposes. Said information shall be used only for the purpose of effecting a specific placement.

16. During negotiations between a candidate and an employer, the referring associate shall have the authority and responsibility for all communication. The recruit-ing associate shall cooperate fully, rendering whatever assistance may be requested. To the extent that this provision may be inconsistent with other terms of this Agreement, the associates shall comply with it to effectuate the mutual placement.

17. In the event that an error or omission in connection with the placement results in a claim, the associate responsible shall not seek indemnification or pursue a claim against the other associate unless said associate contributed to the error or omission.

18. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association, and judgment upon the award may be entered in any court having jurisdiction thereof.

19. In the event that it becomes necessary to enforce or interpret any term, coven-ant, or condition of this Agreement, or any part thereof, the prevailing associate shall be entitled to reasonable attorney’s fees, actual arbitration and litigation costs, and any other necessary and proper disbursement in connection with enforcing or defending its rights herein.

20. This Agreement shall remain in effect continuously until revoked by either associate by written notification to the other. In the event that it is revoked, the terms, coven-ants, and conditions of this Agreement shall remain in force for a period of three (3) years with regard to candidates recruited, referrals of said candidates, use of shared information, and contact with candidates or employers.

Although we recommend net-working as a tool, different practitioners may require different affiliations. Some networks have several affinity groups within their own structure. Some reach out to other “affinity” networks when there are not enough members within their own network. And although franchise group members are discouraged from reach-ing outside their own franchise membership, many do so anyway – usually camouflaging their identity by joining under a different firm name. Rather than list all of the networks and associations, we recommend going to Bill Radin’s very informative website at: http://www.billradin. com/recruiting_resources.htm#Recruiting%20Networks.

There have been a (very) few problems with the formal networks that police their membership and enforce their agreements. But miscreants occasionally slip through the enforcement filter. One of these dodges involved people with a sideline of a “secondary sell,” where they’ll ask applicants (often harvested from their network colleagues) for some amount of money (usually from $50 to $95) to broadcast their résumés to either a list of companies from their database or promise to post their résumés in an online computer database to be accessed by potential hirers. We’ve seen dozens of versions of this scheme over the years. If the average search/placement fee was $15,000 for a $50,000 placement, then it would take 300 “marks” putting up $50 each to equal the revenue from one fee. To get $50 out of 300 chumps, you would probably have to contact 3,000 or more of them. This is the main reason why we decry these efforts as penny-ante.

In a similar scam, we noticed that a member of a major network put out (in bold and blazing lettering) a NOTICE OF MEMBERSHIP TERMINATION to its members in good standing.

It seems that the transgressing (now ex) member was gathering up résumés from the network and sending them a postcard pitch for putting their résumé on the Internet ($40) or rewriting their résumé ($95), or offering some other cockamamie confidential version of the $40 service for $100.

Caught through a “decoy” network candidate and learning that there would be no split fees of any kind with the members who submitted the canvassed candidates in the first place, the network wisely ended the relationship as a violation of the “network spirit.”

All in all, though, network membership has been a big plus for those who have joined one or more of the well-established groups. The track record for informal networking relation-ships makes up the largest portion of the complaints we receive – especially among those where the relationship was formed only through a telephonic “handshake” – so beware and know that there are still those who would rip you off.

Frequent contributor and celebrated diversity recruiter Frank X. McCarthy chimes in below with his views on networking.