Will clients pay 60% permanent placement fees? Well, yes actually.

Regular readers of my blog will know that I have predicted for some time that clients will expect more from recruiters as the market recovers. I have said that we can expect pressure on our fees, particularly as employers invest in other ways to access talent.

But it’s also true that market forces will prevail. At Firebrand Talent Search we have seen a marked easing in pressure on our fees and in fact in some countries, fee levels are on the rise.

In Singapore for example, where Firebrand has a strong business in the marketing, media, advertising and creative sectors, we are finding that many clients have taken the focus off fee percentages, and are now concerned entirely with accessing the best talent. In 2009 our fees dropped to between 20% and 25% in Singapore, while now 25% and beyond is routine, and in many cases we secure retainers too, which makes for a much better business partnership.

In Australia we have not seen fees rise in our Firebrand offices, but we have seen the downward pressure on fees ease significantly and we now secure all our work at our term sheet rates. Clients are aware the fight for talent is hotting up.

Japan too has seen fees rising back to 30% and beyond. In one particular case, a client of Firebrand is offering “bounty” fee levels to ensure they capture the best talent. This gaming software business routinely offers Firebrand 40% and 45% fees for specific roles, for a defined time period – usually three months.

This month this client offered us a 60% fee (on a USD $60,000 job!) and our Tokyo team promptly filled the order, securing a fee in the vicinity of $40,000.

This trend is fascinating to me. I have never really seen a situation where the client is driving fees upwards. We would NEVER suggest a 60% fee. Yet this clients’ rationale is “Top talent is hard to find. We want the best. We are competing with other employers. We want the recruiter to be motivated to find us the best.”

And it’s working. The candidate we placed into this role had very rare user interface skills and the Firebrand team found him, a Japanese speaker, in Melbourne!

Once again the true value of our business is laid bare.

Access to talent.

That’s where it’s at.

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For all my blogs and Vlogs please see The Savage Truth

Comment by C. B. Stalling!! on December 7, 2010 at 9:49am: Ever heard of supply & demand. Same thing. The client will pay what ever it cost if they realy need the person

Comment by Greg Savage on December 8, 2010 at 2:45am: Yes, CB, I have heard of supply and demand.

And this situation has nothing to do with it whatsoever. That was kind of the whole point of my post actually

'Supply and demand' would mean general uplift in price across an entire market. That is not happening. This is a particular strategy of a particular client who believe that selected recruiters, if incentivised, will deliver candidates they need, when they need them. Its a tactical recruitment choice - which I found fascinating because in it is so different and not driven by pure economics.

There are MUCH tighter labour markets than Japan around the world (huge demand and short supply - China for example) and recruitment fees are not even a third of what we see here. Nor did we see fees of this magnitude prior to the recession, in the tech boom for example, or at any other "supply short" period that I can think of.

Clients will not generally "pay whatever it costs if they really need the person".

Comment by James Todd on December 8, 2010 at 10:12am: Greg, The logic of a 60% fee on a 60K US position is hard to grasp. I can understand a company paying a premium for top talent, I just have trouble understanding how someone demanding a salary of only 60K could be considered top talent in any field. I usually love your blogs and videos, but you have lost me on this one.

Comment by Greg Savage on December 8, 2010 at 5:50pm: James, I agree, its an unusual move by this client. Nothing I have seen in decades in this business. That is why I am telling the tale. Not sure why I have "lost" you on the story though? Seems like an easily understood narrative. Maybe I wrote the piece badly. (Understanding the client rationale is another matter). This is not my opinion, or a push for higher fees, or an attempt to "teach a lesson". This is a recent anecdote. Something that happened in the last few weeks. It is not a trend I don't believe. But its a fascinating little episode in the wonderful world of recruiting. That is why I blogged it.

Meantime we were delighted to satisfy the client and the talent and take the fee as offered by the client. USD 40,000 (approx) for a $60,000 placement. Certainly a piece of minor history in our company!

Comment by Sean O'Donoghue on December 9, 2010 at 7:51am: Just a side thought here... is it possible for a Director of a recruitment agency (as many of us on here are) to speak about market conditions without sounding like a blatant "advertisement" of their own business and the apparent success they are having right now? You rarely hear Directors speaking about how tough the climate is for them, as we all want to seem as though we're rising above the challenges – maybe it’s just an ego thing?

No offence to you Greg... I'm sure your company is doing very well right now, and congratulations for staying above the "norm" at the moment! However... do you think you could have written this post without referring so much to your own business and how well you all in particular are doing right now? Why not mention several other agencies at the same time if you want to talk about market conditions, or is it all just about you?

I see this so much across many recruitment discussion forums, so I’m sorry Greg if this seems like an attack on your personally, it really isn’t! I’ve lost count of how many times I see people saying in a roundabout way... “We at “xxx recruitment” are doing this and that, and our clients + candidates love us so much, but not as much as we really love ourselves!”. It’s great to have a lot of self pride for your business... but have you ever thought about being modest? Your results will speak for themselves, and I find that the ones who need to shout about how well they are doing; in reality are the ones who are fighting just to make a name for themselves.

Comment by James Todd on December 9, 2010 at 8:01am: Greg, the mistake was mine, I just assumed your post was instructional as so much of what you have done in the past has been. On a couple of occasions I have had my team watch your videos for training, they are that good. Keep up the good work. Thanks, Jim

Comment by C. B. Stalling!! on December 9, 2010 at 12:31pm: Greg, why are you spending time here writing then, go place another 60% fee person....

Comment by Scott on December 9, 2010 at 2:32pm: Greg, very interesting case study. Thanks for sharing, and providing some additional analysis about this particular company's strategy. It's always fascinating to see different approaches in our industry.

I can't for the life of me understand why C.B. took enough exception to your post that he felt a need to be rude. But I for one appreciated the insights. Thanks for sharing.

Comment by Greg Savage on December 9, 2010 at 3:33pm: Thanks Sean. Actually, our business is not doing particularly well, in Japan or anywhere else. We find the market still to be very tough indeed with clients being extremely cautious about every hiring decision and often roles being postponed or canceled. The marketing and creative sector has been particularly hard hit right across the world and our revenues have declined accordingly. We are many respects a start up and we are a very small fish competing with giant multinationals in most markets.

This piece was not written to "advertise" my own business. After all we did nothing clever here at all. We didn't even negotiate the high fee level. It was simply offered. The blog was written because the Japan client story was so unusual and I thought it might be of interest and also becuase it is "upbeat" and I think a positive anecdote,. Indeed the whole theme of rising fees is an interesting trend, maybe surprising at this time, and one which once again has nothing to do with my company's success - but rather a trend which I thought (naively it seems) is exactly the type of discussion point a recruiting forum would value

On a side note it bemuses me to see that a harmless, interesting, unusual story should provoke some of the acidic and very personal remarks found here.

Comment by Greg Savage on December 10, 2010 at 12:11am: Thank you Jim, many thanks Scott, I greatly appreciate the positive feedback. I really only blog to share experience and provoke discussion that might assist us all in what is a tough business, so your comments are heartening.

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