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When to Offer a Discount on Search Fees

QUESTION: Mike, I have just executed a retained search for a new client for a search for them. They are still interviewing my shortlist, but I just informed me that they may want to hire two of my candidates. There is a potential of two placements from the same search. I have not been asked if I would do anything for them on the fee, but I am sure it will come. So my questions are: Would you offer some sort of discount if there is a second hire from the shortlist or not? If yes, would you offer this upfront, without being asked, in the hope, it might sweeten their mind to make the second? If yes, what would you consider offering? What percent discount on the second fee or perhaps be more creative and offer a credit against a future hire or something else? Thoughts and ideas would be welcomed. Thanks. – Sean, UK 

ANSWER: That is really a great question, Sean. You have some economies of scale here. They paid you a retainer, which is one of the reasons I might consider a discount. However, I am not going to recommend you discount the fee. Let me share my reasoning with you.  

One, I would not offer a discount on the placement fee without them asking. Period. People might feel that stance is a bit harsh. How many times have you worked your butt off, presented a shortlist of four people, they got to the offer stage with 1 or 2, and right before they pulled the trigger they hired somebody internally, whether it was from their own internal list or a resume from an internal recruiter. Have they ever offered to pay you for your work? To be clear, ethically, they do not have to, so I am not beating them up.  

Would you offer some form of a discount on the second shortlist or not? Here is what I do when people want a discount. I say, 

My team is fully engaged in the search and if you hire two of my candidates, that is wonderful. You are going to get a phenomenal value because we are going to save you a whole lot of time doing a whole other search.  

This response emphasizes one of the benefits to them to hire two of the candidates I presented.   

I do not know how big the fees are going to be, but I might take five percentage points  – since you are in the UK what would be £5,000 if it is a £25,000 to £30,000 fee – and apply it to the next search they give me. If you offer a discount now, that is goodwill. I am not saying they are not going to appreciate it, but I have no guarantee that they are going to appreciate it to the point where I want them to appreciate it, which is more business.  

So I might say, 

This is budgeted in, but here is what I will do. I will give you a £5,000 ($5,000 if you in the States) off the next search under the same terms and conditions.  

You said this is on retainer, I would still charge them a whole retainer on the next search. The discount would be taken off the backend on the fee. That is a huge win-win. One word of caution, do not leave the discount off out there forever, I would have it expire in 12 months or 18 months. 

That is an example of how I would respond to a request for a discount.  If a discount does not come up, I would not bring it up.  

In terms of ways to incentivize them to hire the second person, I imagine this person is making £80,000 to £100,000 a year. If you take off £5,000 or £10,000, and my best guess at UK payroll is 20% to 25% including benefits, that sum is a small slice. They are going to hire him or her because he or she is outstanding. A small discount is not going to influence their decision to hire. The client may say it does, but it does not. It just does not pass the test of reason that if I have somebody I am drooling over, I am going to pass up because I cannot get £5,000 off of a one-time placement fee.   

Fantastic question. I appreciate you submitting it.

Photo by Artem Beliaikin on Unsplash

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