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 Mark Hyman on January 16, 2013 at 11:53am: Mitch,

The ability to assess the talent is something you should discuss with the next recruiter you engage with. I like the question! My short answer would be that the Recruiter should "first" find out what the perfect candidate would look like to the client. That is the beginning of your template. After that the Recruiter's experience will impact things like interviewing skills, industry knowledge, interpersonal skills, etc.

For the purpose of this discussion, it's important to understand that an experienced Recruiter brings industry relationships and individual contacts to the table that can't be matched by an HR dept. I would be that for every resume or individual reviewed in HR, the Recruiter has probably handled 100 + or more. We're talking to hundreds of professionals in the industry weekly and in contact with hundreds more by other means.

Really, the short answer (ha! so much for short answers!) is that we just have so many more opportunities to identify "top talent". The scales are tipped in our favor when it comes to talent acquisition.

Comment by Ken Forrester on January 16, 2013 at 11:55am: I had to think about talent for a minute and I came up with this: It is a skill that is perfected through practice and someone is willing to pay a premium to acquire that perfected skill. That said, when an employer engages a headhunter, it means that the headhunter referred applicant must outshine all other applicants from other sources to justify the paying a salary plus a headhunter fee to hire that applicant.

Comment by Lisa Zee on January 16, 2013 at 1:01pm: Very well stated Ken!

Regarding the agency fee (aka the recruiter's worth); here is how I look at it. The fee obviously covers what the recruiter/agency (headhunter) will do on behalf of their client once hired for the assignment; such as making calls (cold, warm, hot leads), in-person meetings/interviews, attend various venues to network, internet sourcing, presenting the opportunity to potential candidates, chasing down candidates, offer negotiations, etc…

But more importantly, the fee 'buys' access to what I call, “Candidate Intelligence” (CI). CI is what a recruiter knows about the desired/target candidate pool and their own candidates. In many cases, it takes years to develop CI. We know that companies without question value market intelligence – which are relevant data and information companies gather to help them make sound strategic product or service development decisions. Market intelligence is difficult to acquire. Candidate intelligence is also very difficult to obtain.

If you have the right recruiters/agencies, you can win today’s talent war by increasing your talent acquisition success rate. People are the most important assets of a company. With the right recruiters (and access to their CI), companies can gain an edge over their competition. The question is how much is winning in business worth to you?

Comment by Angela R. Furbee on January 16, 2013 at 3:45pm: Excellent and well said! Our clients really don't have anything to lose, yet much they could gain. After all, our biggest competitor is our client.

Comment by Patricia Morrison on January 16, 2013 at 4:47pm: Great article! You hit all the key points in educating clients as to why to use a head hunter. If none of these points hit home for my potential client then I will know that this may not be the client for me either. Thanks for your insight.

Comment by Paul Wall on January 16, 2013 at 8:35pm: Good work Ken, this is awesome! I am printing this now to reference for my next panel. This is next level consulting at its best. Thanks Man!!!

P Wall

Comment by Bill Fitzgerald on January 17, 2013 at 5:52am: So basically, if there were a better way to attract exceptional talent to a job without using a traditional third party recruiter and achieve the same hiring outcome, that might shake things up a bit. Very cool!

Comment by Ken Forrester on January 17, 2013 at 7:51am: @Paul Wall,

Hey Paul,

Thanks for jumping over to this thread. I like the way you stood up to the @animal. I understand that you made 147 placements last year? How would you respond to this statement: “for the amount of money we paid to one headhunter, we could have hired 6 internal recruiters and filled 3 times as many jobs”

Comment by Paul S. Gumbinner on January 17, 2013 at 7:59am: Either the headhunter you paid so much to made a ton of placements with your company, so he was worth the money, or the person he place was so senior that he deserved the huge fee. In any case, it sounds like he earned his keep. By the way, you exaggerate - last year it was only 142.

Comment by Jonathan on January 17, 2013 at 10:06am: Impressive article. I appreciate the way you overcome the placement fee objection. That plus top talent vs top available talent simplified and brilliantly articulated.

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