QUESTION: Mike, my question is about new client retained search. I recently filled the role and then they hired a second candidate from the group of finalists. They want a discount since they hired two candidates from one search. They pay timely and it was an easy process. What would you give them? It was a 26% fee agreement with 1/3 in-house. Vin, Connecticut
ANSWER: Great question because this is the flip side of retainers, right, because the retained firms sell is their time and effort. They have invested in the process. On contingency I would not give a discount. I know that is not your question, Vin. I am just sharing this so everyone reading this can understand the distinction. Also, notice the odd fee, not 25%, not 30%, but 26%.
At 26% fee agreement, the client hired two people off the same search. In the past when asked to give a discount on the second candidate hired, I would ask, “Let me ask you in the situation where I presented five candidates, you interviewed four, you brought two to finals, and then you hired someone internally with one position, how much would you pay for me for having the number two and number three candidate that really validated the fact that you are guy that was internally referred was the best one?”
The client would respond, “We would not pay you anything.”
I would reply, “Nor should you, it is not under your agreement. I would accept the fee if you wanted to pay me, but technically you owe me nothing.” In that situation, the recruiter took all the risk and if they make two placements from the same search, God bless them, they should take two times the fee since they provided twice the value.
In this situation since the client invested in the search, in my heart of hearts and I can see by the tone of your question, you feel they deserve a discount, and I agree with you. The first thing I would do is see what they think is fair.
I would say, “You know what, you are right. You invested in our process and it yielded you two candidates, which does not happen often. It happened one other time and the client did not ask for a discount, so I did not really have to think about it. What do you think is fair?”
The client might request 10% off? Not 10 points. Not like 26 of 16, but 26 to 23.4. You may agree to that request, except you do not want to be that quick in negotiating if it was too easy. If they give you a number that is low, like oh my gosh, I never thought I would be that small of a discount, say to the client, “Interesting. I can probably make that work. I need to check with a couple people. Can I get back to you in the next few hours?” Never make it look easy.
If the client says that they want half off, that is just not going to happen. If this was contingency I would not be open to having the conversation. The fact that you invested in the search and in the process is what opens it up to discussion, but you need to get what you think is fair. Half off is just too big of a number. At that point, I would just come out with the number that you are comfortable with which is probably closer to 20% to 25%, knowing that you are comfortable giving up 25%, and knowing that they are going to hear 25%, but when they hear it from my range of starting at 20% to 25% they feel like they got the better deal when they negotiate 25% because they got the high end of the range.
In the end, you know the quality of the relationship with the client and that they pay timely. You might have to play with that a few points either way, but I think that is a really fair thing. They may ask for a smaller number, which is why I always go to what they think is fair first. Fantastic question. Thank you.