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 Paul S. Gumbinner on January 15, 2013 at 9:20am: Ken, you got that totally right. Sadly, too many companies settle for good talent, not great talent, particularly at junior and mid-levels. That is why companies almost always pay a search fee when they are looking for truly senior talent, but those same companies ban their own HR people from using us, because they don't really care. Because I am a one industry recruiter, I have candidates I have known for 25+ years and I know what they want and what their skill levels are. In addition, I know their job histories, their strengths and weaknesses - that is knowledge worth paying for.

Comment by Scott Corwin on January 15, 2013 at 9:23am: That was incredibly insightful and well done!

Comment by George Pitts on January 15, 2013 at 9:38am: That was an incredible read. Very engaging. I would have loved to have been at that conference

Comment by Ron Watroba on January 15, 2013 at 9:42am: Bravo Ken. Your experience shows through as does your creative ability, a key attribute that should be expected of all in our profession.

Comment by Tiffany Branch on January 15, 2013 at 9:58am: Great commentary and I agree to an extent, but I will present a different view. As a corporate recruiter I am ALWAYS looking for talent from my industry competitors. It's not because they are necessarily the BEST, it's becuase they know the industry, market, most likely the product, similar systems etc. Oftentimes, I've recruited passive candidates from competitors and sometimes they were actively seeking employment. Talent from competitors is usually a great way to go whether passive or active. The challenge I have and I'm sure some other Corp Recruiters may have is the ability to "poach" from competitors. However, I know ways around it. I stay connected with folks from competitors. Not much different from what you described.

Putting my HR hat on, I've unfortunately laid-off a lot of top talent over the last 10 years. Lay-offs were not always based on retaining the good folks and getting rid of the "low-hanging fruit" as many like to believe. It can become very political, petty and too often based upon who's in the "in-crowd" with some organizations. I've seen many innovative, forward thinking folk end up on the "list" when they were once a "golden-child" because they challenged the status quo, etc.

Also, many of us Corporate recruiters "go after" candidates as well. We all don't sit back and wait until we see what resumes come in through our database. There are many obstacles that Corp recruiters face in some orgs that don't allow them to be more "headhunter-like" but it's not always the case. I'm always networking and connecting with people I feel who are strong in their industry/profession. Not just for my current employer but for future employers as well. When I know a job is about to become available, I'm already on the horn and tapping into my talent base. I'm compensated for filling jobs with the best talent, at the lowest cost possible, while reducing time to fill. Why would I want to use a headhunter for every position? If I did that, how do I justify my existence to an employer?

I will use headhunters for niche or extremely hard to fill positions OR if the number of reqs I am carrying exceeds my bandwidth. I have no problem paying a fee for services rendered. I do expect/request that a headhunter is tapping into resources that I may not have.

Comment by Al Siano on January 15, 2013 at 10:24am: Ken, Well written! What is consistently uncanny is how many leaders, who could elevate themselves and their business, don't fully realize the opportunity losses in hiring without a headhunter! Many in the middle enjoy simple business math, but capturing opportunity takes insight and wisdom that brings the best to the top! This is why top headhunters are often serving those with the vision at or near the top; because investing in our fees can't always be measured simplistically and such authority is not held by those without decision-making authority and wisdom. I assert that a few in the audience who listened to Ken and get it, they could be on their way to the top; we all know that leading top-talent elevates the leader and the organization. As headhunters, we may often be misunderstood by those who don't understand, however those who do understand are those whom we serve with loyalty, who are at the top or on their way there. Let's take a sales pitch from Ken here on how to help some get up the executive ladder; those who listen and learn that is! Thanks Ken!

Comment by Pamela Witzig on January 15, 2013 at 10:54am: Well done, Ken. We sometimes struggle with getting clients to "get" what we do. I think that is because of the many bad models of "recruiters" they've seen that just work with the low hanging fruit of active job seekers or post and pray.

Comment by Bruce Rowles on January 15, 2013 at 11:59am: Very well written - thanks for sharing

Comment by Stephanie McDonald on January 15, 2013 at 1:43pm: I worked for a recruiting manager who sent the team to a headhunting training. While I didn't love the presenter, I loved the material and have adjusted it and ran my own corporate team more like an external search firm.

I believe in using agencies. Recruiting is a shot gun approach, there is no one laser that is going to get you the kill. If I have the budget to double my capacity with a great partner, I'm fine with that. It's no issue w my ego which I have seen in some of my peers.

My one peeve - as a corporate recruiter I get 10 calls a day from headhunters saying that they are different from the other 9 that called. If I tried to engage all of them, I'd never get anything done. I asked for references, but the headhunters thought their reputation in the industry was enough. It got to the point that I just said no to everyone. If anyone has a suggestion on how to vett the good from exceedingly average, I'd love to hear it.

Comment by Mark Hyman on January 15, 2013 at 1:44pm: Well done Ken. If you want to build your organization around top talent, you have to "hunt down" the talent. Why? Because in 90% of the cases, they aren't "hunting for you"! The best placements my firm has made over the years involved candidates that were "off the radar".