It's The Headhunter Fee, Stupid!

Employers seldom complain about the services of headhunters, it’s the headhunters’ fee that has become their pain point.

A few months ago I was a presenting at a seminar to about 35 business owners and HR professionals. The topic of the presentation was “How to Recruit like a Headhunter” and during the presentation I made the statement “if you are not using headhunters as your primary recruitment weapon, then you are not hiring the best talent in-the-market”

One individual took offence to that particular statement and became very irate. He literally stood up from his seat and while pointing his finger directly at me he said “you don’t know what you’re talking about-because we hired some pretty good people-and they are working out just fine-and we didn't use headhunters”

Without any hesitation, here’s how I responded:

Sir, you are absolutely correct…you really don’t need headhunters to hire the best talent on-the-market. However, what would you say was the difference between the best talent in-the-market and the best talent on-the-market?

I watched his eyes rolled over into the back of his head as he struggled to find a good answer. But, without waiting for his response, I asked if anyone in the audience knew the difference between the best talent in-the-market compared to the best talent on-the-market. What I heard was a number of resume related answers such as: the ones with the best resumes; or the ones presently work for the big brand name organizations or the ones that were educated from the most prestigious universities.

My reply was that they were all very good answers, but they were not the number one answer. The number one answer is; the best talent in-the-market are most likely the individuals that are not active searching for a job. Why? It has been my experience that to be wooed by a competitor is the expectation of the top talents. They don’t get excited just because a job that matches their skills and experience was advertised-they have to be strategically motivated and sold on that particular job opportunity.

So, if you are not using headhunters, then you are hiring the best talent from only the individuals that are actively looking for a new job. And, there is a significant difference in the caliber of talent when you compare the ones that are actively looking to the ones that are not actively looking for a new job.

To prove my point, I tried to get the audience emotionally involved in the debate. I took a quick survey by asking four simple questions. The questions are as followed:

How many of you know of someone that is actively searching for a job? Almost everyone raised their hands.
How many of you are actively searching for a new job? Three individuals raised their hands.
How many of you are not actively looking, but would listen to details about another job opportunity if you believed that it could be of some interest to you? Half of the number of individuals in the room raised their hands.
How many of you are not actively looking, but would seriously consider another job opportunity because you were convinced that the job would not only improve your present standard of living it would also advance you career to the next level? Almost everyone raised their hands.

I pointed out that the result of that survey was similar to recruitment activities in a niche market. The best talent most likely will be from the group of individuals that are not actively looking. So, if you are not using headhunters-you are not hiring the best talent from the entire talent pool; you are hiring the best talent from a small puddle.

With all the new recruitment apps that are available, the big job boards and the growing appeal of social media are you trying to convince us that headhunting is the most effective recruitment method available, was the question asked by the same individual.

I said yes it is and I will tell you why!

The reason headhunting remains the most effective recruitment method is because as headhunters we recruit ahead of the need!

Recruit ahead of the need; I’ve never heard of that, he said.

I said: it means that we don’t wait for a job to become open to start recruiting individuals to fill that job; we recruit the individuals for a job before that job becomes open. And the only way that is possible is if you are committed to building relationships from a recruitment perspective. But, you also have to be passionate about recruiting to be committed to it; and when you are committed you will live and breathe recruiting 24 hrs a day, 7 days a week and 365 days a year. A good headhunter will know who the most talented individuals are, they can identify the hardest workers from the slackers, they know the ones that operate below the radar screen and they also know the ones with the most potential. They do the hardest part of recruiting for you-which is developing relationships.

Apologetically, he said “I didn’t mean to imply that headhunters were not effective, but what are your options if you don’t have the budget to pay headhunter fees?

Therein lies the problem, the headhunter fee. But it is also a tremendous opportunity for headhunters to make more placements. How? They just need to do a better job of re-selling the economic value of using professional headhunters or demonstrate creative ingenuity in the pricing of their headhunting services.

The economic value is more profits; because the employers that hire the best talent often win and retain more customers. Also, why not allow your competitors do the hiring and the training? You simply rely on headhunters to recruit their best talent from your competitors after they are trained. Paying jeadhunter fees will be a drop in the bucket compared to cost savings realized in salaries paid to average performers and profits generated from superior performances of the headhunted talent.

By re-pricing, I‘m not suggesting simply to reduce your placement fees, but in addition, offer a variety of recruitment services that can be tailored as a solution to the unique needs and budget of your clients.

If all headhunters charge the same placement fee, does it mean that they all provide the same level of service? No, but that is the perception. Nothing will change until we change something and that perception is a good place to start.

Comment by Pamela Witzig on January 15, 2013 at 1:55pm: Yes, always off-radar Mark. Stephanie, I'm amazed recruiters didn't send references. Good ones have them on their Linkedin profiles and more delighted clients happy to give references. A recruiter worth their salt will make a *rifle* approach for you.

Comment by Ted on January 15, 2013 at 2:14pm: Good points all but let's drill down a bit. The recruiter networks and establishes great relationships with various people. Over the years he/she places said person in job after job as the person's career takes off. Each time the recruiter places the same person they get a fee. Sounds great for the recruiter, great for the person.....but how about the company which paid the fee for the "top-talent" only to see them leave before they get sufficient return on their investment. Who does the recruiter work for?.......the talent......or the company that hires the recruiter? I have been hiring recruiters for over 25 years. Here is what I have found. There are times when using a recruiter is the best/only solution for a hiring need. Odds are the candidate will have the talent and experience to get up and running very quickly. That being said the candidates who come in through recruiters are more likely to leave "because" of recruiters hitting on them for another "opportunity". The retention rate for candidates who come in through from a headhunter is a concern.....I have tracked it against all manner of hiring (internal job posting, website posting, etc.). Measuring the efficiency of using a headhunter cannot stop at the point of hiring......results need to measured and compared over time.

Comment by Ken Forrester on January 15, 2013 at 3:00pm

One more thing: Headhunters has to be successful in five sales to complete one placement. They have to sell:

The candidate on exploring a particular job opportunity.
The hiring manager on interviewing that candidate
The candidate on being happy involved in the interview process
The candidate on the job offer.
The candidate on resigning from his present job.

If the headhunter is unsuccessful in anyone of the above-he doesn’t make a placement. And he gets paid only when his referred candidate comes in first place-nothing for second or third place.

No. 5 is the most difficult sale because top performers become deeply rooted into their daily routine and way of life. And it takes them a significant amount of thought and time to completely consider changing their routine and life for a new career.

I recruit in an Industry that shifted its focus away from using headhunters. And do you know what happened? The Industry became saturated; many careers stalled and the stronger firms gobbled-up the weaker ones.

Comment by Candace Nault on January 15, 2013 at 3:47pm: Great post and great insight, thank you!

Comment by Mark Hyman on January 15, 2013 at 5:52pm: Ted,

I'm sorry to hear about your experiences. I'm not sure if you are referring to a Recruiter, coming back to recruit the same individuals they placed or if you feel that the previously recruited employees are more apt to pursue positions presented by another Recruiter. If it is the first scenario, I believe you have had a "recruiter" selection problem. A reputable recruiter will not recruit an individual they have placed with a client. It's an unethical practice. Our fees are paid by the client and that's where our loyalty lies. In the second scenario, I believe employees that have had a successful career relationship with a Recruiter are more likely to listen to another Recruiter when he or she calls. On the other hand, I also know that the employees that haven't worked with a Recruiter in the past are also fielding those same calls. Employees that move on, do so "because they can" and it's usually going to come down to ambition and professional achievements as the differentiator and not a recruiter relationship.

I encourage anyone considering a recruiting firm to check the firm's references. There are knucklheads in every business.

Comment by Sandra Anderson on January 16, 2013 at 3:42am: Very well stated Ken. I often tell my clients that the applicant you want is the top achiever from your competitor

who is too busy and too well looked after to look at other opportunities. It is my job to make him aware that

there is other opportunities and if he so wish, explore them further! Then you are getting the best.

Comment by Mitch Sullivan on January 16, 2013 at 5:20am: I think the entire concept of "top talent" is incredibly specious because it means something different to so many people.

I'm always dubious of recruiters who trade off this ability to locate this ubiquitous "top talent". It's funny how so few of them talk about their ability to assess what talent actually is.

Comment by Morgan Hoogvelt on January 16, 2013 at 11:10am: So if one is not looking for a job it automatically makes them the best talent? Is there a part of this group of non-lookers that may be people who are not good like the iconic staple guy in Office Space. He wasn't looking for a job...is he top talent?

Comment by Tiffany Branch on January 16, 2013 at 11:28am: @Morgan, I agree. I get tired of hearing that the "passive" talent is the "top talent." I've worked with a lot of folks who never looked for a job because they were content with their org or position. It didn't mean they were the best. Sometimes, the "best" knows when to start looking because perhaps their org isn't allowing them to grow, be innovative, etc. Or perhaps it's their commute, too much travelling, not happy with their compensation.

Comment by Pamela Witzig on January 16, 2013 at 11:32am: My goodness. I don' think anyone made a claim that all passive candidates are top talent. That pool is where the most qualified are found however. Job boards are far more apt to have the has-beens, wannabes, job-hoppers, etc.

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