QUESTION: I am working on a proposal and want to get it out really quickly. I am offering two fee options, a flat fee, and a percentage of first-year guaranteed compensation. In reviewing an article from your blog, you highlighted and supported the magic number of a 28.6% fee. Should I share what happens at the 28.6% in offering a flat fee? How do you calculate it? Would you require a contract for multiple positions throughout the year? I worked with a firm that set their fee for each position because we filled nearly 20 job openings for this company that year. Your thoughts, please. -Heather
My opinion is, and I did talk to this individual at our event, so I got more clarification. They had yet to speak to the hiring manager. They had talked to somebody who would be influential in the hiring process, and they said, look, I have got to know what the fees are before we go any farther.
It is a game you cannot win. It is a game you can only win if you are just going to lowball the fee, which is why it is a game you cannot win because if you win it at that, you still lose.
I NEVER quote fees until I diagnose a problem. Uncover what is going on in the situation. Talk to a hiring manager. I will not quote fees if I have a conversation with HR, even though I use them as a part of an incredibly tight strategic triangle.
In this situation, I would get back a hold of that person and say, look, we cannot go any further on price. I respect that, but I do not know how to price this because I do not know the complexity of the situation, from what I understood, three senior-level executive positions. I don’t care what she expects. I go, you can use this strategy to your benefit in that, in my humble opinion, anyone who quotes you a price without understanding the complexity of the problem is negligent, and I would question them as a service provider.
Let’s invest X amount of time. Let’s go through what you are looking for, the timetable, the complexity of what you need to get done. Is your expectation from a compensation, duties, and responsibility standpoint, in alignment with the marketplace and compensation? Because quite frankly, if you are out of alignment with your compensation structure and your expectations of the candidate’s background, even at a 100% fee, I do not think I can sell it. It would be negligent on my part to tell you that I can do so.
As it relates to that part of the question, it is at the end of that diagnosis that I begin my prescription. If I can fully identify what they are looking for, the duties and responsibilities, the selling points, I can see based on my knowledge of the marketplace, that there is relative realism between their compensation and their expectations, then I want to identify what is the pain of this position remaining open each incremental month? What does not occur in your company if this position is not filled? What are the consequences?
This is where a lot of recruiters need to spend more time. You will be surprised when you dig into those areas. One, you will notice the hiring manager has not really thought about it. They are overwhelmed with so many other things that they have not thought about it. Our job, as true professionals, is to throw them down.
If you hear as a recruiter, I do not care if it takes six or eight months, Mike; it is more important that we find the right person and that I am getting this job done. Run away from that opening. There is no urgency. They are going to look for Mr. or Ms. Perfect. How can I tell you that? Because I took a lot of those openings. You will just be the market researcher for them and probably the person they would have hired while they were looking for Mr. or Ms. Perfect, and they will want to revisit that person. That person we interviewed three months ago, are they still available? They’re probably not. No. They are gone. They are gone. Especially on contingency benchmarks, low likelihood of fulfillment.
On the second part of the question, if I did flat fees, which I have done, in my head, again, we knew our metrics. We knew how much it was, but I will use a round number of a $100,000 salary. I would do that 28.6% so that’s $28,000. Suppose I’m going to discount it with money upfront or on contingency. In that case, I might say we will do the first two at $28,000 but the next two at $26,650 – again, I do not like using round numbers – and the next two – in very small, incremental discounts based on the closing of the activity. Not you will give us 10 positions, and we will do them all for $25,000. You might only make one or two placements, and you have given them a quantity discount.
So, when I did flat fees, I usually did our first couple at our standard fee, the next couple at a discount, if I am going to do it that way, and compress it into a timeframe. These must be closed over six months, eight months, or 12-month period, not into perpetuity. Then the clock resets at the end of that period. Because a quantity discount spread out over five years for a handful of positions is not what I think most of us want.
Those were two great questions, Heather. Those are the two answers, but NEVER quote a price without doing a diagnostic. If they go, look, I will not talk to you until you let us know what your fee is, then I go if I am hearing you correctly, 100% of your decision is based on the price, and based on that what I know is going to happen is I am going to lose because I am rarely, if ever, the cheapest on the front end – notice these words – cheapest on the front end. I know I am usually always the least expensive on the back end. That is a conversation you are not even willing to have, so then I will respectfully pass.
If they let you pass after that kind of justification, you are dealing with somebody buying on price. Some of you might sell on price. I used to, a little bit early in my career. I almost starved. When I shifted to value is when my billings skyrocketed.
Again, Heather, thanks for that great question. There are some quick tips on going forward.
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