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 Steve N Odell on January 17, 2013 at 3:15pm: great article Ken. How about a couple of comments from a 44 yr vet of recruiting.

1. References- Any pro recruiter will have them. Testimonials are posted on our website and can be contacted if authorized.

2. Liza mentioned market intelligence. True. And sometimes it's necessary to educate a client about salary for a particular position in a certain geographical area. Why even allow the client to engage in a discussion if candidate is not in the range. And why let them make an offer that you know will be rejected?

3. Tiffany is brave enough to make a statement "how would I justify my position if I used a recruiter always". You said what we all already know. Some think that way. They won't work with us but the hiring mgr will because he is the one feeling the pain. That's why we market to managers?

4.Al mentioned opportunity loss. We focus on healthcare. We place NP/PA's. Sometimes a client will not engage us because our cost of services is $2500 more than they want to pay. These are people who generate revenue. If it takes a month or two longer to fill than I could that is lost revenue that would easily be offset in a month. Yearly? Wow.

5.To HR or in-house recruiters- You do wear a lot of hats and don't have the time to do what we do full time. We have a call accounting system to track everything. Most of our recruiters make 100+ calls per day and log 3-4 hours on the phone. That's actual talk time. That's why recruiters can produce candidates that you would never have access to.

6.Paul and Paul- 142 or 147 placements? Hmmm. I have never seen anyone make that many placements in a yr in 44 yrs.(speaking direct hire not contractors) I don't know what area you work but that is outstanding regardless.

Comment by NARESH CHITTURI on January 17, 2013 at 11:57pm: Very well written ! Thanks for sharing your experience with us.

Comment by Dyll Davies on January 18, 2013 at 4:15am: Good post Ken. The problem is that many clients don't even understand the difference between passive and active search and therefore bracket "all recruiters" together. As you say head-hunting is a skill and something that takes many years to perfect in terms of network and relationship building: something simply not possible for any client or any job board or social networking site to match. But "recruiters" often have such a poor reputation generally that clients have an inbuilt resistance to recognising these simple facts.

Having said that I like turn this round and say clients get the recruiters they deserve. If you think poorly of recruiters, hell you know you'll probably end up working with poor recruiters! Screw them to the ground on fees, engage multiple recruiters on the same contingent role/s and the monkeys scrabbling on the floor for your business will probably eat the peanuts but not do too much else. Think strategically and work with a single, well-researched and qualified specialist recruiter - as part of a multifaceted general approach to recruitment -and hey presto, you start to find your headcount is being filled with top talent at a reasonable price. QED!

Comment by Sandra McCartt on January 18, 2013 at 10:43am: Excellent article ken. I like your style.

Comment by Mike on January 18, 2013 at 2:11pm: Nice, all well put!

Comment by Brian K. Johnston on January 18, 2013 at 2:59pm: Ka-Ching!

Comment by Harry on January 19, 2013 at 1:28pm: Sorry,... this is a bunch of malarkey. Have you seen what it looks like from the other side,... at most 2 'headhunters' have taken the time to get to know me,... and what 'talent' I can bring to the table. However, 99% of the calls from 'head hunters' are broker type calls.

In reading the many comments in agreement -- its clear -- there is group think going on,... I am not a headhunter,... but in order to comment on this 'single minded posting' I had to comment.

What can one tell about the ocean to a frog born and living in a well?

Comment by Sean Rigsby on January 20, 2013 at 8:43pm: Excellent Article!!

Comment by Dyll Davies on January 21, 2013 at 3:17am: Harry. I love your metaphors but I am not sure what point you are making. If it is that not all head-hunters are good then I would agree. (I am by the way.) But the point of the article was surely pointing up the difference between using a (good) head-hunter and just relying on job boards, social media and advertising to find your 'talent'? To stretch your metaphor to breaking point: what can you tell about the ocean if you don't know it exists?

Comment by Ken Schmitt on January 21, 2013 at 3:44pm: Ken, outstanding article! After 15 years in the industry, it has been my experience that the only reason a client balks at our fees, is because we haven't done an effective job of presenting our value. It is incumbent upon us as headhunters and owners of search firms to demonstrate how we will save out clients money in the short and long term by finding what I call the "best talent", rather than settling for the "available talent". Our new Perpetual Recruiting model does exactly this. Thanks so much!

Ken Schmitt

President/Founder TurningPoint Executive Search

www.turningpointsearch.net