Are Recruiting Fees Going Down?

I remember about 2 years ago I had my first conversation with Harry Joiner. Since then we have always enjoyed our weekly calls about domain names and recruiting. This week we each bought a new one but that is another post.

Getting back to our first conversation, Harry told me that he was convinced that agency fees were going to go down because he could not see how the market could sustain those fees given all of the new technology out there that was making the job of recruiting easier.
I said no way, fees are not going down and recruiting is not getting easier.

So my question to Harry today is do you still think fees are going to go down, and have your fees gone down since we spoke about that 2 years ago?

My feeling is that sometimes people get so lost with this new technology that when the time comes for them to call the recruiter, they really have to get the person hired so “the fee” is less of an issue. If the recruiter asks the right questions, they will see this and negotiate as big a fee as possible.

Are fees going down? Not today, and it's not something I would worry about if I were just getting started as a recruiter.

Comment by Maureen Sharib on September 14, 2007 at 1:00pm: Your post reminded me of the blowback I sometimes get for sharing my telephone sourcing skills- they say things like "Why are you telling the secrets? They won't need us (third party recruiters) if they know our secrets! They won't VALUE us as much!"

"Are you kidding me?" I always think to myself. "Secrets?" "These are secrets? I don't think so - they're just time consuming, baby, and if you can ease that pain they have there will always be a need (and a good value) for your services." And NOT at any kind of reduced rates, any time soon. It takes warm bodies to make most sales...
Maureen

Comment by Harry Joiner on September 14, 2007 at 2:16pm: PREDICTION: Fees will erode, especially for line-level contingency searches; the one's currently at 20%.

Look: I have been a recruiter for three years. Few people know less about recruiting than me.

However, before becoming a recruiter I was a marketing consultant, and before that I was a frozen beef trader for 7 years.

I know what it's like to compete day-in/day-out in efficient markets where one is only as smart as one's dumbest competitor. It's tough to survive in a market where one has no perceived differentiation other than price. Efficient markets are brutal, and they manage their tenants as nature would, with neither malice nor pity -- and they abhor a vacuum.

Traditionally, the market for human capital has been inefficient; characterized by "asymmetric information" and populated by recruiters who have profited from the fact that clients and candidates did not have access to each other's information.

All that's changing, making the market for human capital more efficient.

In the future, things like Online Communities, the Semantic Web, Artificial Intelligence, Virtual Worlds (like Second Life), the Mobile Web, the Attention Economy, Online Video/Web TV, Rich Internet Apps, Personalization, and Internationalization will set the current recruiting model on its ear.

When that happens, the recruiters who lack a meaningful differentiation (80% ??) will resort to price cutting to land search assignments.

Unfortunately for them, those unremarkable recruiters will be pre-empted at the bottom end of the market by hourly internet sourcers, resume screeners, and candidate profilers. And at the top end of the market, you'll have the Jerry McGuire-types, or Big Billers, who deftly manage the careers of the super elite stars of each industry niche.

"When that happens," as positioning guru Al Reis likes to say, "all of the players in the mushy middle of the market will get killed."

For more info on this theory, Google "Disintermediation 101"

Comment by Peggy McKee on September 16, 2007 at 5:57pm: My fees have not gone down in 9 years of recruiting and I am actually focusing on searches where the fees are higher. The work is the same for any search (at least for me) but the money is different. I agree with "Slouch" that companies will be able to access recruiters with lower fees but the quality will be different from the quality that a specialized recruiter who has industry knowledge and hiring acumen will deliver. Hiring managers who want quality hires will migrate to those of us who can provide them with these candidates. I had a company call me with a position last month and offered me a higher fee to try to get more of my time and attention. Guess what? It worked.

Comment by Harry Joiner on September 16, 2007 at 6:09pm: Like I said, "Few people know less about recruiting than me." I'm still waiting for Jobster to change its name to Recruiting.com ...

Comment by Slouch on September 17, 2007 at 10:47am: Its interesting. John Sumser says this thread is the beginning of an interesting conversation. I agree except that this conversation has been going on for a long time.

It is common for recruiters just getting into the business to be blown away at what companies will pay recruiters for placements but after spending many months recruiting, this mindset changes. The process is time consuming and i believe that 20-25% as the standard is what is needed to run a profitable career in the business both for agency owners and the recruiters working for those firms.

Of course retained search firms work at higher fee levels but I also know a couple who work for less.

If companies choose who they give searches to based on fees alone, there will be problems down the road.

I think every recruiter needs to have a criteria in which they do business which includes what and how they will work. Companies also have a criteria as to how they deal with recruiters. I strogly suggest as a recruiter, you don't change your criteria in order to get business. You already know there is enough business out there.

what you will also find is that every once in a while, you will get an email from a client you do business with saying that they are increasing fees for specific positions. I have seen this lots of times and these fees have gone as high has 45%.

Harry, I don't think Jobster will change it's name.

Comment by bill martineau on September 19, 2007 at 2:42pm: If conducting a search is reaching out to as many people as possible who may assist with a project than technology only changes how we get in touch with people and quickens the pace of those contacts but in no way changes the fundamental job of recruiting & qualifying candidates. That's why the much hyped revolution of corporate recruiters getting all their own people and not utilizing search firms died along with the much promised reductions in fee structures.

Additionally, if you’re competing on fee alone you will deal with this issue daily as someone is always looking to negotiate your price. Compete on your service and your ability to get them the right people quickly and clients will bring you new business at your asking price. So spend your time finding clients that value your work, work your way and pay your price and don’t spend time trying to convert the non-believers.

Comment by Peggy McKee on September 19, 2007 at 2:57pm: Amen.

Comment by Nitin Gupta on September 26, 2007 at 1:43pm: In the last few years, I have seen an upward trend in the number of companies that either want to do it on their own or want to pay a lower fees to agencies. And I think market will become more competitive as we go along. More companies today are relying on internal recruitment departments to find them candidates.

Now granted that internal recruiters may take a longer than outside agencies to find candidates or may not find the same caliber. But CFOs balk at paying 20-25% when they are already paying for subscription costs for Monster and Careerbuilder.

Firms that truly rely on developing relationships with the passive candidates will continue thrive and command a 20% fee. However, agencies that just search the boards to find "top talent" will face price pressure and competition from internal recruitment departments.

The key is to differentiate yourself..