This is FALSE and a MYTH.

What matters is NOT the rate, but whether your were FAIRLY COMPENSATED for you're the time and effort of your search! Sticking too rigidly to a full 30% fee might get you the initial transaction, but may cost you tens of thousands in repeat business later that same year. This article will explain how a 10% fee will net the equivalent of a 28% fee without working any harder!

Once again, I hold a contrarian view than that which is promulgated by those that call themselves recruiting gurus. The gurus don't pay my payroll, expenses and mortgage bills … I do. I take the approach that results in the best "win-win" scenario for our recruiting firm and the client's individual needs.

Consider this: A recent article widely distributed across the Internet by a recruiter training guru went on for three or four pages discussing how "he'd rather wait a year or two" for his full fee than settle "for half a loaf" now.

Apparently this recruiter did not pass Economics 101 in college or basic Finance 101 which stipulates "Present value of any fixed dollar amount is worth more NOW than at any date in the future" … due to the eroding power of inflation on that same dollar amount. Not to mention the potential value of interest/dividends that could have been earned on that dollar amount if immediately invested elsewhere.

While waiting two years for your full fee may massage your ego … it does nothing for your bank account. The laws of money dictate currency in hand is always worth more than the same amount of currency one or two years from now.

But there's more this flawed principal overlooks:

• Establishing a rapport with a client sooner is always better than later. The longer I wait the more chances other competing search firms will get their claws into that same client.
  
  
• This ideology also overlooks the enormous value of REPEAT business. Fighting hard for a full 33 1/3% fee may get you the most desperate search the company has … but you will most likely never hear back on easier searches they would like to have used your services for had you been be a bit more flexible on fees.

I have a client today that hires at least 4-6 professionals from us throughout the country every single year. They have been hiring at that rate for 15 plus years. I provide them with an incrementally descending fee schedule that REWARDS the client for returning to us rather than going to the 33 1/3% guy referenced above.

The fee starts at 30%, then declines to 27.5%, then 25%, 22.5%, and finally 20%.

The truth is we rarely have more than one or two each year at the 20% rate because of how many hires it takes to get there … but the perceived effort we are taking to be flexible along with the actual discounts provided locks in our client to what has been a loyal 20-year relationship.

We have another account with a small entrepreneurial firm with the president once brow beat me to death down to 15% (I can sense the strained shock and horror of such a low fee!). But I considered the following factors in agreeing:

• Immediate interviews would always be set within 24 hours of submitting the resume (Try getting that cooperation from a Fortune 500 client!)
• There was NO Human Resources to circumvent or derail our efforts.
• Hires were often within 2 weeks of second interview with the entire process taking no longer than 14 days start to finish.
• The time spent from first interview to offer would often require less time (about 2-3 weeks) than just finding our first candidate for more difficult Fortune clients that took 3-4 months to hire the same level professional.
• Our contract under OUR TERMS

Keep in mind there is a BIG difference between NEGOTIATING a low fee or incrementally reducing fee … in exchange for provisions such as exclusivity, instant interviews, etc. …. As opposed to giving such away freely without the proper negotiation process. I would never mention in any literature, web site etc. that we may have a client or two at 15-20% … but if the conditions were right … I would agree to it only after proper and diligent discussions and negotiations convinced me to do so.

By the way that client hired the following from us in one single year: CFO, Director of IT, and Product/Marketing Manager. These three placements combined prove easier than one $50,000.00 routine staff search at a Fortune 500 client that does everything it can to actually kill the hire during a process that takes 4-6 times more effort.

So next time someone tells you that you are doing your industry a disservice for being flexible and accommodating with a client tell him/her the same thing they tried to tell me: HOGWASH!

We're in a service based business. And if you can clean up all the company's hiring problems and convert your relationship as that company's exclusive provider, the fee rate does not matter, regardless of whether its 30, 25, 15 percent. What matters is the billings you've earned and deposited in the bank.

My college accounting courses told me that $10,000 measured as 10% of $100,000 = the same $10,000 produced by multiplying 25% by $40,000. So this equation would look like: 10% x $100,000.00 = 25% x $40,000.00

If my Director level search with a tiny 20 person company will net the same billings for the same or even less time invested in the form of research, staff time etc. than a corporate search at a much lower level requiring even MORE time … why would we walk away from the former for the latter? Ahhh … but there's more!

In this real life example I succeeded in placing a CFO or executive that would have required the same amount of time as a corporate staff hire. That director or executive will now most likely return to us for additional hires as the company grows…AND small companies grow FASTER than large companies!

So here's the LOSSES you would have incurred for not negotiating with that small company:

1. Repeat loyalty for years down the road for additional staff hires
2. Higher likelihood of staff hiring due to small company's rapid double digit growth rate versus stagnant growth at Fortune clients that have plateaued
3. Locked-In exclusivity to all future hires (as long as you keep producing results)

Each lost placement at a reduced rate … especially when executive in nature, is actually a loss of what is most likely 2-3 more placements! I receive calls from recruiting firm owners all over the United States due to my writings, articles, and such who privately they all tell me the same thing: "No one has the guts to admit it Frank, but you have to be flexible on fees or you will never see the repeat business come through"

The only ones NOT professing flexibility as a prudent means of locking in clients are the recruiting gurus. After all … they don't have to earn a living on recruiting any more … they now make a living by providing entertaining forms of training exclusively. At the end of their seminar they've been paid regardless whether their advice costs your thousands.

If we look at the LONG TERM RELATIONSHIP VALUE of the equation above the formula changes to this: 10% x $100,000 = $22,000.00

By magic I have arrived at 22%. How did I arrive at twenty-two thousand dollars based on a $100,000 hire? SIMPLE! I factored in what everyone else is overlooking! By adding in the next two placements that CFO or director is likely to come back to me with, for hiring supervisors or managers at $60,000. I get to forecast an additional $6,000 @ 10% for the next two hires! That's $12,000 more in fees for just two hires at $60,000 added back to the original $10,000 which equals $22,000.

By the way, this is e-x-a-c-t-l-y what happened with a real life client just last year! What if you're able to convince the COO you placed to up that fee to 15% on the next two? Now the formula changes to: 10%x $100,000 = $28,000.00 Since fifteen percent of the next two $60,000 hires = $18,000, added to the original $10,000 --- We have arrived at the equivalent of what would have been 28% of the first $100,000.00 hire.

And don't tell me I'm working harder! The next two searches were such a joy to recruit for, encompassing merely adding one more search into what already is a desk load rate of about 10-20 searches at any week in the month for me anyway. I hardly noticed the few minutes additional time each day dedicated to the additional search which moved faster than any other project.

I'm not advocating giving everyone a 10% rate … just using that as a simple means of demonstrating my point easily. If 10% equals the same result as 28% would achieve for the same effort who cares? Be CAREFUL WHAT YOU WALK AWAY FROM! And always consider FUTURE VALUE. And if a Recruiting Trainer tells you "always work at 30%" tell him "Frank says your crazy!".

Frank G. Risalvato, CPC is president of IRES, Inc. His newly redesigned recruiter training site is updated weekly with loads of original content and is found at www.searchwizardry.com. He has been speaking and providing recruiting training materials to the search profession's trade groups since 1987. His Recruiter Training Guide is available online for electronic download. Contact Frank by phone (973) 300-1010 or email him: frank@searchwizardry.com. Be sure to sign up and be the first for his soon-to-be-released book The Kentucky Fried Secret Recipe to Recruiting Millions®.

Click here to read more articles by Frank Risalvato.