Running a great recruitment business is difficult. The competition, the compliance, the cash flow issues and most of all, the people complexity creates an ideal environment to screw up.

Here are 10 of my biggest blunders, some of which I have made several times. I offer them up as a guide on what NOT to do when running a recruitment company.

1. Focusing too heavily on consultant activity levels. Slavishly counting activities, measuring ratios, chastising shortfalls… at the expense of ensuring the quality of those activities was high and consistent. Lots of activity, done badly, will actually send your business backwards, and focusing on activity for activity sake can be tremendously demoralising for the team, and distracting for the leadership.
2. Focusing too little on activity levels of consultants.  This is the flip side of the same coin and it’s just as big a blunder.  Allowing consultants to “free wheel” appearing busy by doing lots of ‘stuff’ without ensuring clarity and focus about what their key activities must be. Letting consultants spend 90 minutes in an interview with a junior person because “they want to get it right” and agonising for hours over the wording on a resume are great examples. Quality is important, but you also have to churn through a lot of the key actions that drive making the match. It’s a management task to keep that on track.
3. Allowing consultants full autonomy over which clients and which jobs they choose to work on was a mistake. Most recruiters are somewhat “tarty” by inclination, trying to work with everyone on everything. Specialisation is key, working with clients who will partner with us is key, gaining exclusivity and working on fully qualified briefs is fundamental, as is working with people who pay our bills. Not prioritising our WIP has cost me plenty, time and time again.
4. Hiring potential consultants because they had a great academic background and fantastic careers in a previous job, which was not recruitment, but in a field we specialise in. I have learned that when hiring recruiters we need to focus more on intrinsic attributes that drive success in recruitment, such as competitiveness, empathy, resilience, listening skills, passion, integrity and work ethic.
5. Opening offices in remote places without strong, committed, proven, loyal local management. Everything depends on leadership and it gets more crucial with every kilometre the remote business is away from HQ.
6. Retaining mediocre people (who may be very nice people) in the hope they will miraculously become superstars despite mounting evidence that they will always be underperformers. This is a massive opportunity cost and I make this mistake even now.
7. Hiring managers and recruiters on massive base salaries on the back of “impressive” track records (which are often not what they seem) or promises of huge performance. I learned that you must always link high earning with high performance. The big money comes after the big delivery, not before.
8. Allowing managers of smallish teams (2 – 8 people) to evolve into non-billing managers. This is a massive mistake.  We need “player/managers,” people who bill, rain-make, business develop and also manage the team. I have allowed managers to become backroom crunchers of numbers and process managers, and that’s not where the value of a leader lies, nor can you secure any leverage out of that kind of role.
9. Assuming that a good recruiter will make a good manager. They are entirely different skill sets. Promoting your highest billing recruiter to Team Leader because she wants a “career” can destroy her progress, dismantle her billings, and disintegrate the team.
10. Listing my own company Recruitment Solutions in 1998. It was too small a business really to be floated. Profit of only $4M.  The IPO was a financial success, but it was not the right thing for the business. It cost a lot to be listed, we lost control to non-executive directors and you have to answer to shareholders and fund managers. Watching share price means you spend less time on the important things like customers and staff. I am immensity proud of Recruitment Solutions. It was stand out business and produced literally scores of people who now own their own successful business. But we should not have gone public.

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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.

Last week I blogged on how competing on speed and volume alone was not the way to be successful as a recruiter over the long term. Today I turn the attention to price.

The question of fees and margins in our industry is a sensitive and difficult one. The fact is that clients resent our percentage-based permanent fees structure, and it’s easy to see why. What is harder for both clients and recruiters to see is that it’s the very pricing system our industry operates on that inflates our fees.

Contingent, success-based fee structures drive costs up for clients because essentially clients who hire through our industry are actually paying for all the time recruiters spend on orders they don’t fill.

True story.

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But even so, our industry is largely clueless when it comes to justifying our fees. The conversation seems to gravitate quickly to ‘our fee’ vs. ‘the competitor’s fee’. There is nowhere to go when you are comparing 20% to 18%. It’s an empirical fact 20% is more than 18%. So typically those fee negotiations are short and result in a big ‘lose’ for the recruiter.

In fact the conversation needs to be steered on to value. We need to talk about differentiators and benefits we can bring to the client that are unique. And increasingly we should focus those value adds in the area of talent acquisition. Really, quality process should be a given. The real value in your fee resides in your ability to bring better qualified talent to the clients business.

Competing on price alone is the final competitive weapon of he or she who has nothing else to offer. And it also results in the very essence of what we do as an industry being devalued in the eyes of our clients.

Don’t drop your price. Up your offer.

Last week I blogged about how you need to move the focus away from dollars and percentages when clients negotiate fees, and on to your value and your differentiators.

One of the comments on my blog from Matthew Lancey raised the point that sometimes clients keep pushing, and they say something like “but your competitors charge less”.

And it’s this use of the “C” word that often scares recruiters.

The “C’ word? Competitors. I love it when clients use that word. If they do start to talk about competitor’s low fees, your response is to ask…

“Can you tell me about a situation, Ms Client, where you were charged less than the fee I am suggesting today, where you got the level of service and the calibre of talent you want – on a regular basis?”

True, this is a gamble, but the fact that you are there, in the client’s office, taking the order, or even on the phone taking the order, means that it is most unlikely the client is happy with their current supplier. In fact it amazes me when a client spends 20 minutes bagging another recruiter, and then when I quote my fee – he says, but the other recruiter only charges 15%!

That’s is the time to remind the client that a low fee, quoted by a supplier who does not deliver, is not a benchmark you will measure your fees against. And nor should the client.

Sometimes the client pushes hard for a reduced fee. When that happens, don’t feel pressurised. It’s a purely commercial decision – and it’s your decision to make. Is this client and this order so attractive it is worth taking a lower fee for?

Remember this before you discount next time. Don’t think of the fee only as dollars gained or lost – think of the fee as what your service is worth. A discounted fee means a discounted you – never forget that.

But sometimes you feel it is worth a compromise to secure a particular opportunity. In these cases I emphasise one golden rule.

Never reduce your originally quoted fee without extracting a concession from the client.

In other words if you say, “My fee is 20%”.  And the client asks for a discount. And you quickly respond with “OK how does 15% sound?”. You have just signaled to the client that you never believed in your value proposition and your service in the first place. You will struggle with getting his respect ever again – and you will never get your fees back up.

So if you reduce your fee, always ask for something in return – exclusivity maybe, client paid advertising maybe, client gives you multiple orders maybe, or maybe you waive the guarantee.

Make sure the negotiation involves both sides giving. This way the equal partnership is in tact.

So is your self-esteem by the way. And in our business, that’s crucial.

A great recruiter will be totally articulate in positioning why a client is doing themselves tremendous harm by getting recruiters to compete.

By all means, let recruiters compete for a client. No problems there. That’s capitalism at its finest. But we should not compete on the same job. That is just dumb business by all parties.

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Let’s examine what is happening when a client gives a brief to say, four recruiters.

The client thinks they get better commitment from each recruiter. In fact we know that quite the reverse is true. We might put a burst of energy into finding candidates for a job ‘in competition’. But if we don’t fill it fast, we lose interest, and put our energy into clients who treat us as partners and are committed to finding the best person through us. That is the reality. But for some reason we don’t tell our clients this.

Are you prepared to look a client in the eye and say “Mr Client, when you give an order to four recruiters, you are effectively giving each recruiter 25% of your commitment. What makes you think that any one of those recruiters will give you more than 25% of their commitment in return? In fact what you are doing Mr Client, is inviting us to approach your crucial hiring decision on the basis of speed — instead on the basis of who can do the best quality job”.

Then go on to ask the client for a “window of opportunity” to handle the role exclusively, so that you can give the role 100% of your commitment and bring all your resources to bear to ensure the best quality outcome.

“Give the job to me exclusively, Ms Client, so I can have the time to put appropriate strategies in place to find the right person – which will of course include researching my database, working my talent communities, advertising, using my networks and searching the passive talent pool.”

Working multi-listed, contingent perm orders is bad business. It is better to work on six exclusive job orders – of which you will fill five, than to work on 20 in competition, of which you may fill three.

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The savage truth is that most recruiters have no idea how to build relationships with their clients, nor how to develop business opportunities through their day-to-day interaction with customers.

It’s an ironic tragedy, but the more technology we have available, the less recruiters actually use that technology to connect with clients and candidates in a meaningful way.

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Walk into most recruitment consulting offices now days, and its like walking into a typing pool. Everyone bashing away at emails, texts, and social networking updates.

Now here is the point. About 70% of the e-mails we send are unnecessary, or at least the message could have been better delivered verbally. Sending email is a missed opportunity much of the time. It’s also supremely unproductive.

Recruiting is about relationships. Selling is about hunting, persuading, seducing and consummating. Email is bland, annoying and often not read by our clients.

Please do not misunderstand my message here. Email and the newer technologies and communications platforms have incredible application and I use them all the time. I am after all engaging with you via a blog and via a video too, right now.  But I keep asking myself “what outcome am I trying to achieve, and am I more likely to achieve it by phone or face-to-face?”

Our job as recruiters is about compelling people to action. What we do, or should do, is create outcomes and facilitate decisions. Email does not do that. Your job is about selling, understanding and building trust. Email does not do that.

Success in recruitment is about connecting. Technology is an enabler. If you want to compete, make sure you and your team talk to clients and candidates on every possible occasion. Ask questions, listen actively, and solve problems.

Challenge people in your office. Why send an email?  Why not pick up the phone or even go and see the person?

Less email, less typing, less laptop, less desktop. More talking, more listening, more asking, more necktop!

I am writing this on a plane on my way back from a week visiting the Firebrand offices in Japan. It was a great week, and the business is tracking well, but as I had not been to Japan for a while, I spent my time meeting with virtually every recruiter, looking at activities and shining the light on efficiency and productivity shortfalls.

People often ask me about staffing in Japan, and how “different “ it must be to the rest of the recruiting world. Well of course Japan can be a perplexing place to an outsider, but 10 years of running a staffing business there has taught me that, at the very core, success in staffing in Japan depends on exactly the same skills, metrics and activities that drive success anywhere else.

As you would expect, across a team of many recruiters we have a blend of exceptionally high performers, some solid fee generators, and a handful who are struggling to meet targets and objectives. Just before I left Tokyo, I debriefed with the local Regional Director, and it became clear that once again we had been reminded that a few very clear basics are what drive success in this business, and we agreed to refocus everyone back on to these priorities.

I have blogged previously on my core belief in what drives recruiting success

Activity X Quality X Target Market

And certainly that formula holds true in Japan as much as anywhere else. However I found that under-performers in Japan were falling short in one or more of three specific key areas. As I jotted up my notes from the weeks work, I reflected that these ‘Three Commandments’ could well serve as a blueprint for staffing success, anywhere, anytime

. • Specialisation

Recruiters are easily seduced. A client wants help with a hire that’s outside our area of expertise and we jump right in. And then we find we don’t have the skills, knowledge, or connections to do a good job. We waste time, we get frustrated and we actually risk damaging our client relationship when actually we were trying to go “above and beyond”. And think of the opportunity cost working in areas we are unlikely to ever revisit. Successful recruiters are specialists. They know a niche and they work that niche. Specialisation is critical because it creates a perception that the recruiter is a recognised industry expert. This status appeals to both prospective clients and candidates. Furthermore, it gives recruiters instant credibility with passive candidates, which will be increasingly crucial. Don’t dabble. Don’t allow distractions. Go deep.

• Order qualification

This is just so critical. Most of us work a contingent business model. We only get paid if we fill the job. Yet so many recruiters try to fill every order that hits their desk. This is patently a mistake because all orders are not equal and nor are all clients. The most successful recruiters in our Japan business, as everywhere else, are brutal order qualifiers. Is the client serious about hiring? Is the order fillable? Are the hiring criteria reasonable? Salary appropriate?  Working exclusively on an assignment with each client is a Firebrand goal. It is in the clients interests, the candidate interests, and of course our interest too. Our recruiters in Japan who do work more orders exclusively, bill exponentially more

• Talent selection

In financial markets they talk about canny investors being “stock-pickers” which refers to an ability to select ‘diamonds in rough’, investments that will outperform over time. Great recruiters are “talent-pickers”. We would love to place every person who approaches us or who we interview. But that’s not going to happen. In fact spreading your talent activity too thin will dilute your ability to find people work. Candidate selection is key. Selecting the best ones will be an art, developing relationship with them will be a skill that many of today’s transactional recruiters will find hard to adapt to. We have to be nimble enough to understand the trends in clients needs and adjust our candidate activities to meet that need

There are many, many things that make for a successful recruiter, but the “Three Commandments” (which may as be almost as old as the original ten!) still hold true, and I am finding it’s those recruiters who are applying age old, proven strategies to their work, who are flourishing most in the recovery

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Last week I blogged on why so many recruiters have a shallow understanding of what ‘competitive’ in our business actually means.

And so how do we thrive in a competitive world? What is the way to differentiate in 2010 and beyond?

Well it’s not cool to say it out loud, but as far as I am concerned it’s what technology cannot do that our clients will continue to pay for.

It’s a source of constant amazement to me how many of us in this industry have been completely seduced by the technology spin doctors. We are terrified that the Internet will wipe out our business. We agonise over social networking and how it will change the talent-sourcing model. We quake at the power of LinkedIn, and we are hypnotised by the thought our competitors will develop a piece of technology that somehow will make our service redundant.
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Don’t get me wrong. Technology is reshaping our business and having leading-edge technology is crucial, in as much as it allows your consultants to compete on an even playing field, and gives them the tools to give clients and talent what they really want.

But technology will not destroy our industry. At least not all of it – and definitely not the part we want!

And here is why.  Finding a job or recruiting a new staff member is not a commodity purchase. We are not dealing with the same psychology which drives i-Tunes, e-trade or amazon.com.

This is important because it means that the real value provided by quality recruiters will still have a market.  That is, screening, evaluating, persuading, assessing, negotiating, advising, consulting and acting, as an advocate for employers will still have tremendous value.

It is on these competencies that we need to compete.

But it’s also more than interpersonal recruiting skills (which by the way were largely lost during the decade-long hiring boom that preceded the GFC). Talent management is where the real battle for recruitment dominance will be fought. Building talent communities and managing effective communications channels with those communities is where the holy grail lies.

And we will need to compete in other ways too. Customers will increasingly call the tune. And by customers I mean talent as well as clients. The customer experience will build or tarnish your brand like never before. This is where social media will be able to destroy your business. Get it wrong and your brand will be brought down at viral speed. That’s where we have to compete. How we deal with customers and manage their expectations and experience with us.

Lack of personal interaction is doing our industry no favours. In fact I consider it one of our deepest flaws. Many recruiters use technology to avoid connecting personally with talent, when in fact the real advantage of technology is to get much closer to many more quality candidates.

So social media and technology generally is a threat to you only if you fail to recognise this fact…

… there will continue to be a market for tailored, personalised, high quality business solutions based on an advisory, consultative model, where access to talent is the differentiator.

Don’t be sucked in to competing on the basis of who can commoditise what we do the best. Don’t play the low margin, process game.

As your competitors claim, “we are bigger, have cooler technology and therefore we can do it faster and cheaper” or technology-driven platforms push to cut out recruiters altogether, your premise for doing business is…

“I can solve your problem because I understand your need and I know where the talent live”

I have nothing against bikers. I had a motorbike myself, until I drove it into a hedge at 60 mph on the way back from the rugby club.

Bikers are only an analogy in my tale today so Rev Heads… take no offense please.

But to the business at hand. Consider this and then run the figures for your own business if you need convincing. In most of the recruitment businesses I have run, 70% of your business will come from the top 20% of your clients. In fact, often over 50% of your Gross Profit (NDR) will be generated from less than 10 client companies. Even on an individual consultant desk you will find that a high proportion of fees will come from between 3 and 5 clients.

Maybe we know this already. Why then do we spread both our marketing dollars, and our personal business development efforts, across all our clients and prospects equally?

It’s crazy!

You will no longer survive by spreading yourself so thin. The superficial phone call and the multi-listed, non-exclusive job order – and then we move on, is not a strategy that will work any more.

It’s transactional. It’s superficial. It’s dangerous for your financial health. What we want to focus on now is “share of wallet” not market share.

What is important as the market recovers is targeting long-term clients with fee-generation growth potential. We want to work with companies that will use our services regularly. We want to partner with companies that themselves are growing. The best client is a client that has a need for all or most of your service offer.

But it’s much, much more than that.

We need to understand that the best business is often the hardest to win, but the most profitable once you have it. The future requires us to invest time, resources and brainpower on developing, nurturing and retaining these key clients.

But it’s much more than that too.

We need to build different relationships with our clients. Engage in fresh conversations. This means providing value-added activities for your clients (webinars, blogs, salary surveys, skills testing of candidates). The goal is ensuring a regular pattern of meaningful contact and it also means developing proactive recruitment strategies specifically for them.

But it’s more than that too. Do not try to be all things to all people. Very few recruiters I know, have managed to survive as generalists and it will not get easier.

And the bikers? Well bikers are those hairy, ugly, anti-social clients. Clients who jerk you around with sketchy job specs. Clients who demand the world from you and give nothing in return. Clients who pull jobs half way through assignments. Clients who fail to return your calls and who use three other agencies in competition with you. Clients who unfailingly try to negotiate fees – especially after you have gone to the ends of the earth to fill their job. Clients who show no respect for what you do or say, who abuse your guarantee and who in the end, refuse to pay the bill.

You are smiling as you read this! And yet we still work with these guys. Why? They absorb your time and they torpedo your self-esteem. They take your focus off where it should be – your targeted clients and prospects who can offer you long term, sustainable, profitable business.

Why do we keep on giving these pseudo-clients another chance? Why do we defend them within our companies? Why do we say “they are not so bad –they will get better – next time we will earn a fee”?

Frankly, trying to pretty up these bikers is a bit like putting lipstick on a pig. A pig is still a pig with or without makeup!

Kill off these bikers – fire these so called clients –these renegades and buccaneers – and put your effort into those key prospects and clients who you have identified as the sorts of employers you want to do business with.

Business is like dating – you do have choice who you go with.

Read the websites of any ten random recruitment companies. From any country. In the ‘About Us’ or ‘Our Services’ section, you will almost certainly find glowing and poetic prose about ‘customer service’ and the ‘customer comes first’ and ‘exceptional standards of service delivery’ and many other cliche-ridden phrases. But these claims were not written without sincerity. The companies professing to provide flawless service intended that to be the case I am sure. The desire to be excellent is real in most cases.

It is the delivery on the service promise that is the problem. All companies, in all industries, find it challenging to consistently deliver top service across a broad customer base. Indeed, it takes a very special business to do that.

But recruitment is in a class of its own when it comes to over-promising and under-delivering.

Recruitment and staffing is a special case because we ask our recruiters to deliver on the customer experience, but then we reward them largely for the dollars they individually generate, regardless of how many candidates and clients they burn along the way. So there is a mismatch of message and of motivation.

At Aquent, one of our key global objectives is to demonstrate the best customer service and loyalty in the staffing industry worldwide. But that lofty goal can’t be measured by self-acclimation! It has to be empirical and unbiased. So we have engaged Inavero, a specialist customer-satisfaction survey firm – focussing in the staffing and professional service arena – to survey our customer base, in every one of our 70 offices, every six months

We have introduced a customer service charter across our business, set up local task-forces to drive response times for talent and clients, and now we survey what our customers think of us on a regular basis. And trust me when I tell you it’s a scary thing to do! People don’t hold back, and some individual remarks via the survey can sting! And in some cases, where we have let our customers down, it’s well deserved. But the key thing is that we are able to quickly move into service-recovery mode. Even more telling, we get an overall customer satisfaction score for each business unit, and we can track quarterly improvement and change.

And that is super cool! But we have gone one step further

From January 2010 all Aquent Agents (consultants) in the International business now have a big chunk of their compensation linked to improvements in these customer service scores. So at Aquent we compensate people with a fair base salary, and exceptional results attract meaningful bonuses, as is true of most of our industry. But now our recruiters can earn a 25% “kicker” on top of their bonus, if their Inavero customer score meets the set benchmark of improvement and excellence.

Of course Aquent is a commercial enterprise. Revenue and profit is our lifeblood. But so is brand and reputation and self-esteem of our own staff. And frankly, providing exceptional customer service is directly linked to commercial success anyway. Great recruitment firms will differentiate their offering in two distinct ways, I believe. Firstly, by specialisation and depth of knowledge, and secondly through exceptional customer service.

But talking about customer service can become a stream of so many cliches. Meaningless spin without substance and without any grunt behind it to actually drive better customer experience.

At Aquent we will not be duped by our own PR. We measure what the customers think. We cop what they tell us on the chin. We work out ways to fix the problems.

And then we reward our staff when the customers are happy