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What to do When an Existing Client Wants a Discount

I lead a direct hire business unit which is 90% me, under the umbrella of a temporary staffing firm. Our temporary staffing clients all expect a discount from the search division based on the volume of business we do on the temp side. Would you give me some ideas to help navigate the potentially risky mine field of existing temp staffing clients wanting, needing the search division. Thank you. Jeremiah from Columbia, South Carolina

Answer: That is a tough, but great question. You are correct, Jeremiah, it is a mine field. There are a couple ways you can approach it. One, before you get into a conversation on a recruiting fee, you really need to go into the diagnostics. When I want to go into a diagnostic, I say, “You know what Mr./Ms. Hiring Manager, before we talk fee, let’s talk about your problem. Let’s talk about your situation. I open to being flexible with you because you have been a great client with the temp staffing division.” By the way, I don’t know if they want a discount off of their low contingency fees, if they do I would say, “Well, I do not work at 20% to start with.”

My first tip would be to raise your recruiting fee even higher than your starting point fee when you quote so you have the flexibility to build in a discount. Their existing fee policy has nothing to do with your fee policy. So, if they want a discount off their already unreasonably low 18% fee agreement, it is a non-starter for me. But I do not want to start there in the beginning because if my whole conversation in the first five minutes is they love the temp staffing side of your company, they come to you for the perm stuff and they say, “Well, before we go any further, let’s talk about the fee” say “I have no idea what you’re problem is. You are asking me to quote a job without knowing what the construction process is going to look like. Let’s determine if we’re a fit for each other first. Let’s determine if you want me to solve the problem and I am sure if we get to that point we could meet where we both feel like we would be treated very fairly. How’s that sound?”

If they get hung up on the fee I am probably going to drop it because now I am in a commodity-based conversation and at least in that mode. I cannot give you any logic for upside on the fee on a stand-alone basis.  The way you are going to get leverage on negotiating the fee is 1)your recruitment process to fill the position and the 2) level of certainty you are going to convey to that client that you are the recruiter to fill the job. And the only way you get that is through asking really, really good questions.

You start with the opening dialogue, and then you say, “So, Ms. Hiring Manager, I want you to imagine you have brought this controller on and you are walking down the hall with him or her and they have had an outstanding first year.  You’re walking in to do their first year review.” I am a hypothetical situation here. “‘You have had an outstanding first year.’ What did they accomplish?” When they answer that question, they are giving you a phenomenal data for what the duties and responsibilities are and they are telling you what needs to get done.

You can back track into “To get that done what are the critical success factors that need to be in place already?” Notice we are asking, basically, background requirements. From there you go to the next question, to determine what the critical success factors are and then you take the recruiting search assignment.

If there is a level of urgency, then, you take them through your process step by step in somewhat boring detail as to what you are going to do to fill it. Right now, we are still completely ignoring any discount requests. Let’s say Jeremiah, your normal fee is 25%, I am just making that up. That is the fee you’re really, really happy with. I am going to go through the whole process saying, “Step one, we are going to put our research team on this; we’re going to put together a list of 80-100 candidates” and you walk them through the whole grueling detail what you are going to do in the search to fill the job. “For us to execute on this search, that represents an investment of 31.2% of the candidate’s first year’s base salary. Are you the one authorized to approve that and what are the things we need to do to ‘dot the i’s and cross the t’s’ to move forward on this project?”

And then, I would just be quiet. Now, if they talk about discounting, I could say, “Well, you know what? I appreciate that but, you know, this division has its own profit and loss statement. We are not able to leverage any of the work on the temp side because we are recruiting for a perm position. For a candidate in a perm job is an entirely different database and an entirely different process than filling a temp staffing job, so when we quoted that 31.2 %…” See when you use a very specific number, it looks like you have thought through your costs and profit margins, but it is really a random dart board number. It is just incredibly powerful to use a very specific number.

They may come back to you with 18 or 20%. You could reply “Twenty percent is not profitable. If we execute on the search the way I just talked about we are going to execute on and it is going to cost us money to do it and as much as we love you on the contract side, I just cannot execute to that on the perm side. What I can do for you is I can do 28.5% or I can do 27.5%, which is still “a 10% discount.” See, if you discount 3 points off of 30, that’s 10% off. It’s not 3 points, 10% off. And that is how you can honor a discount.

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