Most people who become recruiters do not last. There are many reasons for that. Poor hiring decisions and inadequate training being high on the list.

But there is another key reason why so few people actually last in the hurly-burly world of agency recruiting.

It’s a frigging hard job!

So I know that sometimes you question why you do it. There are times you hate what you do. There are days you go home feeling deflated, worn-out and frankly, useless.

The world is littered with ‘ex-recruiters’, burnt out, scarred and resentful about their all-too-short recruiting career.

Seriously, the guy who cut my hair last week told me he had ‘been a recruiter once’.

It’s true too that being a recruiter can be the greatest job of all, but even so, to survive you have to know the pitfalls, prepare for them, minimise their impact where you can, and push through the inevitable challenges this job will throw you.

• Recruiting is uniquely tough because it’s the only job that I know where what you are selling can turn around and say ‘no’. Think about it. I sell you my car. You agree to buy the car. I agree to sell the car. We agree a price. The car does not then jump up and say “Hey you know what, I am not going to go with this new guy”. Don’t laugh. That happens to recruiters every day. We do everything right. Take a great job spec. Impress our client. Recruit great talent. Make the match. Manage the process. Architect a fitting deal for all parties. Secure a great offer. Get everything agreed and at the last minute – our product – the candidate – says, “ Nah, I changed my mind, I will stay where I am”. And that is it. All over red rover!

• Recruiting is a killer because for us, it is all or nothing. Sure, a tiny percentage of our work is retained, but mostly recruiting is first prize or nothing. Our business is not like the Olympics where you can pick up a respectable silver or bronze for competing well. For us it’s gold…or its donut! We do all the work, spend huge amounts of time and expertise, and manage the process with skill and diligence. But if our 5 great candidates get pipped by a late runner from another recruiter, or an internal candidate, then it is big fat zero for us. That’s tough. Hard to take. Especially when it happens often. And it does.

• Recruiting grinds you down because you do so much work you don’t get paid for. When you hear the words “I am feeling burnt out” from a recruiter, what that actually means is “I just can’t stand doing so much work for so little return”. Contingent recruiters are lucky to fill one job out of 5 they take, and place one candidate out of 10 they meet. And combined with the ‘all or nothing’ fee model most work on, it means lots and lots of hours for which we don’t get paid, and equally importantly see no tangible success. And success, in the form of happy clients and happy talent, is the bedrock upon which our self-esteem is built. And once that crumbles, it is the beginning of the end.

So what to do?

• Firstly recognise that if you are going to be a recruiter, these challenges come with the job. In the memorable words of my Under 16 rugby coach, ‘Toughen the f*** up’ and prepare yourself for plenty of disappointment.

• Secondly, work hard to mitigate the risk of these things happening to you. Hone your recruitment skills, your talent management skills, and your job qualification ability. Build trusted advisor relationships and work to get exclusivity on orders to increase your job-fill ratios. Great recruiters, who move from transacting to consulting, start to win more than they lose.

• Finally,  never forget that if you choose to be a recruiter, you have made a Faustian bargain. You have chosen a career fraught with pitfalls and sometimes it feels like a living hell, But do it right, and the fun and money we need for a great job is within our grasp, because being a recruiter can really rock too!

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The “big secret” when it comes to negotiating with clients about temp Bill rates is to shift the clients focus from the RATE, to the COST!

If you allow all the focus to remain only on the $ value of the hourly rate, then you have very little negotiating leverage. The client quotes another agency that will “charge less, for the same job”. If you argue about the hourly rate only, you have nowhere to go, because less $ is less $!

View video on YouTube

But if you focus on the other part of what the client said, then you have plenty to discuss. I am referring of course to where the client says another agency will charge less “for the same job”. That’s the weak spot to tackle in a client’s argument. Will the client indeed get “the same job” done by the cheaper option?

NO is our argument, and it could cost the client plenty.

So for example, let’s say you are suggesting to a client that a mid-weight freelance graphic designer is going to cost her $50 per hour. The client says “That’s expensive – I can get a graphic designer from your competitor for $45”. You see, the client focuses on the rate only.

Most temp consultants cave in at this point. They reduce the Bill rate to win the assignment. That teaches the client that our rate is negotiable, and it immediately reduces our margin, and that’s bad!

A more appropriate strategy is to focus the client on the comparative COST of the entire project. Get the focus off the hourly rate. How? Well, like this usually works…….

“Ms Client, all our graphic designers have been interviewed, screened and tested for both their skills and their attitudinal fit to do freelance work. In the case of the person I propose to provide you for this role, she has worked for us many times before, and I have many glowing testimonials on the calibre of her output and her initiative and accuracy. Ms Client, the person I will provide you will come in, sit down, and start being productive from the first hour. She will make minimal mistakes and the quality of the outcome will make you very happy indeed. What’s more, she will do this project within the two-week time frame you need. To get someone of this calibre we need to pay $50 per hour.”

But $50 x 8 hours x 10 days = a total cost to you of $4000.

“If you take the cheaper option Ms Client, you may well pay $45 per hour, but it is most unlikely you will get the calibre of individual and the quality of work I am promising you here today.”

“Indeed, your $45 an hour person is likely to take longer to do the job, absorb more of your time, and quite possibly make more mistakes.”

So $45 x 8 hours x 15 days = a total cost to you of $5,400.

“The so-called ‘cheaper’ option Ms Client, will cost you far more!”

“It’s the quality work done at the best cost that I am offering you, and that’s why I am suggesting my talent at $50 is in your best interests.”

What day can she start?

That’s the way to sell quality temps!

If your client wants a great freelance experience, and the client wants their problems solved quickly and accurately, the price may be a little higher, but the value will be measurably better!

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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.

View video via YouTube

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.

It’s a fact of recruiting life that clients will push you to negotiate your fees. And with so many recruiters quick to drop fee percentages to secure briefs, that can be a hard discussion to deal with.

The starting point for successful fee negotiations is, strangely enough, to get the conversation off the fee percentage, and on to the question of what it is your fee is actually for.

And of course, bundled up in that conversation, is your ability to sell your differentiator. What have you got and what do you do that gives your client special value? That’s where you want to focus. At Firebrand Talent Search we emphasize our niche focus, our unmatched access to creative, marketing and digital talent, our multiple branches in Asia Pacific and Europe, our specialist knowledge and understanding of clients needs, our proprietary testing software which means we know candidates have the design skills we say they do, and then we wrap all this up in 110% money back guarantee.

But all recruiters will have differentiators, and it’s important you know how to articulate them.

So when a client does ask you to drop your fee, go through your entire recruitment process explaining all the things you do to secure the right person. Take your time. Start at the beginning and don’t miss anything out. Talk about your screening, your interviewing, your talent generation strategies such as social media and networking. Talk about your database and the fact you have several offices tapping into talent. Explain how you act as an advocate for the client, and how you will qualify each candidate in terms of fit, salary and skills. When you drill down on this, you find we do a lot!

That’s the point. Tell your client.

Then, and only then, ask the client why she feels a reduced fee is appropriate. This is important. Get the ball firmly into the client’s court. The client is asking for a discount. She should be squirming – not you. When it comes to fee discounts you don’t have to justify why not – she has to justify why!  It’s a shift in the dynamic and it’s very powerful indeed.

Its not as simple as this of course, many clients will continue to push for a fee discount regardless, and then you have to make a commercial decision. But the starting point is not to haggle over a number. Get the attention of the service you provide.

Talk about what you do, explain your process and your insights and your connections and your value adds.

That’s a far better place to start a discussion on discounts!

Let’s not fool ourselves. We are not a loved profession. Clients often use us begrudgingly, some even with open hostility. I have sat in client board-level meetings and heard with my own ears, the resentment felt towards our industry. I have listened, squirming, while clients plan to avoid using recruiters and any third party staff providers.

Even before the downturn, the evidence was all around us. The rise of internal recruitment teams, the clear strategy to reduce use of outside agencies, the development of employer branding strategies, the money spent on corporate recruiting websites and on developing internal recruiting software. And of course, the increased use of referral programmes and rewards for internal hires.

Increasingly, clients do not see value in what we do. Research tells us they think we are too expensive, they don’t like our pricing and they are pushing back on it like they never have done before. Clients think we are too slow and they also believe all recruiters have access to the same talent pool as each other, and also as they do. In some cases they are right.

And then the recession came along and just added fuel to the fire. Now employers talk openly and aggressively about cutting recruiters out of their hiring strategies altogether. In a recent Tele-Seminar I did, hosted by Mark Whitby , we had 500 people on the call, and a big percentage of those wanted an answer to this question…

“How can we convince clients to use our services instead of doing it themselves?”

Well, the first thing to understand is that this move to eliminate the use of recruiters gains momentum during every downturn. The market softens, clients see more talent availability, the CEO demands spending cuts, and suddenly every employer is confident they can save a bundle by doing all their hiring themselves.

It’s a well-worn pattern. And it is a threat to recruiters. Well, it is if we allow it to be. Our challenge is to make sure we offer something different. Something clients can’t do themselves at all, or can’t do themselves at a reasonable cost to their business.

But its also important we are articulate enough and confident enough to communicate to clients the three primary reasons why doing the recruitment internally is a costly and self-defeating exercise.

• Getting the client to understand their true cost of trying to hire themselves
• Explaining to clients the true significance of our value-adds
• Explaining to clients about passive candidates and how we access them

Most employers have never really analysed how much it costs them to take on recruitment themselves. They look at our fee, recoil in shock, and say it must be cheaper doing it internally. We have to be skilled in communicating to clients the full range of both direct and indirect costs that make up the real cost of hiring. Direct costs include many of the obvious things, such as advertising, the cost of executive and support staff time on screening, interviewing debriefing and reference checking, These add up fast and can way exceed the cost of any agency fee on their own. But you also need to factor in indirect costs such the opportunity cost of the senior executive spending time reviewing 50 resumes instead doing the job they are really employed to do. During the last recession I had a chart, ready to present to clients, outlining all the cost of “going it alone”. I had dollar figures against each activity, and very soon the cost of recruiting by the company far exceeded that of an agency fee. And what if the chosen candidate turns the job down or leaves after a few weeks? What is cost to the company of doing the whole exercise again?

The second theme that a skilled recruiter needs to communicate to a client who may want to avoid using our services, is the ability to showcase the many value adds that good recruiters offer their clients. This may include salary surveys, compensation advice, and market insights, but it will extend further to helping to define the role being recruited, acting as an advocate for the client with hard to hire candidates who are spoiled for choice, and playing the role of third party mediator to ensure an offer will actually result in an acceptance. These are invaluable components of our service, which are built into our fee – we don’t charge more for them – but many clients do not have these benefits explained and highlighted by the recruiting firms themselves.

Finally, passive candidates. And this is the clincher because when all is said and done, it’s access to great candidates that drives clients to use recruiters in the first place. Employers can naively believe that by placing an ad on a job board they have “done what any recruiter would do”. Not so. Job boards, by definition, only tap into the active job market. Nothing wrong with that, but it’s the cream of the entire available market that every client really wants to choose from. And only great recruiters are using all channels all the time to farm the talent pool. A good recruiter is always sourcing, 365 days a year. And while job boards may be part of the talent sourcing mix, there will be a huge range of other tactics, including social media, networking, database search, research and head hunting, and many more mechanisms designed to ensure the very best talent are unearthed.

When you think about it, it really is no contest.

A good recruiter saves a client time and money, provides a raft of benefits and value-adds that go way beyond actually providing resumes. And on top of this we ensure access to a talent pool that is increasing difficult for employers to reach.

Your job? Believe in our value and communicate it hard!

Here is a prediction. As the market recovers the first impact on our industry will be a revival of the temp and contract market.

Employers will see increased work volumes as the economy recovers, but will “dip their toes” into the labour market at first, hiring flexible solutions initially. But then, as momentum is gained and confidence returns, they will start to hire permanently. But the first place they will go for their permanent hires will be to transition tried and tested contractors onto their permanent payrolls.

And then it will happen! The dreaded “temp to perm” fee debate.

And this is one thing our industry has all wrong. We give away our temps at discount rates. Why, I have never understood. A temp on your payroll is a precious asset. In talent-short times (and they will return, trust me on that) I simply cannot fathom why anyone in our industry would give a substantial discount on the fee when a temporary employee goes permanent.

It’s just so illogical. A perm fee is a once-off hit which is nice when it happens, but we seem to forget that we have lost a tried, tested, and hard to replace revenue earning asset - our temp worker.

I have heard all the arguments on this from clients and they don’t wash. Let’s start with the classic “But you really should discount the permanent conversion fee because you have already earned so much margin on the temp”. What hogwash. The temp margin is for the temporary service rendered. The perm fee is for the acquisition of the permanent staff member. There is no leveraging one against the other. We need to be confident with the client, that far from a celebration for us when a temp goes perm, in fact the perm fee is scant compensation for the lost revenue that temp could have earned on future assignments.

Some clients will even try and use the ‘hire purchase’ argument. “But can’t you see” they say “ It’s like me renting a TV and then buying it. It’s always cheaper to buy a previously rented TV”.

Sounds neat, but its fallacious. A TV is a depreciating asset. A human being, in a contract assignment where they are getting trained, absorbing the company culture and learning the systems, is an appreciating asset.

The perm fee should be more, not less.

And one more thing…

Don’t pro-rata perm fees for long-term contact assignments. That’s dumb. We lose. Keep the distinction between temp and perm crisp and clear. (I know in some countries our hands are legally tied on this, but in many it’s just about negotiation.)

If it is a fixed-term assignment, it’s a contract role and therefore it’s a timesheet hourly rate with our margins on top, or it’s a fixed weekly or monthly rate. Don’t for a minute think “well it’s a six month role so we will take our perm fee and divide it by two because it’s half a year”.

Do the arithmetic!

A perm fee at 20% for 75,000 placement is $15,000

If a client wants to pay half the perm fee because it’s a six-month gig then you get $7,500

But the margin you will earn on a $75k level person on a temp basis for six months at a 55% markup is approximately $19,000

$7,500 vs $19,000

You can see why the client likes the idea!

Sure, if the client wants to pay a perm fee instead of margin for a six-month gig for example, that’s cool. But it’s the full perm fee. The client will still be paying less than the equivalent margin i.e. $15,000 vs. $19,000.

But you get a full fee and that’s fair and proper.

If you are not convinced, think about this. If you owned an investment property, and rented it for five years to a nice young couple, and then they wanted to buy it from you, would you give them a 25% discount off the sale price because of the rent they had previously paid? I don’t think so. So why do you give your temps away cheap?

Believe me on this. We have NOTHING else to sell, apart from our service and our talent skills.

Don’t give away the farm.

In a recent “Savage Truth” blog posting, I wrote about negotiating perm placement fees. Let’s turn our attention now to the question of negotiating temp Bill rates, and the challenge of maintaining our margins.

In this recessed environment, your clients are going to be screwing you for all they are worth on Bill rates. Sadly, many suppliers in our industry will, out of desperation, roll over and drop their rates at the first sign of client push-back.

Some mark-ups I am seeing staffing companies offer in Australia, the UK, and elsewhere, are shocking, and suggest a desperation bordering on hysteria. Even in a downturn we must provide our services at a profit. And it can be done. While it’s true that some Aquent margins around the world have been squeezed during this slowdown, in Australia we have actually pushed our margins UP in the past 12 months, some of that achieved by dropping PAY rates to temps-which, just quietly, is something you must do.

The “big secret” when it comes to negotiating with clients about temp Bill rates is to shift the clients focus from the RATE – to the COST!

If you allow all the focus to remain only on the $ value of the hourly rate, then you have very little negotiating leverage. The client quotes another agency who will “charge less, for the same job.” If you argue about the hourly rate only, you have nowhere to go, because less $ is less $!

But if you focus on the other part of what the client said, then you have plenty to discuss. I am referring of course to where the client says another agency will charge less “for the same job”. That’s the weak spot to tackle in clients’ argument. Will the client indeed get “the same job” done by the cheaper option?

NO is our argument, and it could cost the client plenty.

So for example, let’s say you are suggesting to client that a mid-weight freelance graphic designer is going to cost her $50 per hour. The Clients says “That’s expensive – I can get a graphic designer from your competitor for $45.” You see, the client focuses on the rate only.

Most temp consultants cave in at this point. They reduce the Bill rate to win the assignment. That teaches the client that our rate is negotiable, and it immediately reduces our margin, and that’s bad!

A more appropriate strategy is to focus the client on the comparative COST of the entire project. Get the focus off the hourly rate. How? Well, like this usually works…….

“Ms Client, all our graphic designers have been interviewed, screened and tested for both their skills and their attitudinal fit to do freelance work. In the case of the person I propose to provide you for this role, she has worked for us many times before, and I have many glowing testimonials on the calibre of her output and her initiative and accuracy. Ms Client, the person I will provide you will come in, sit down and start being productive from the first hour. She will make minimal mistakes and the quality of the outcome will make you very happy indeed. What’s more she will do this project within the two-week time frame you need. To get someone of this calibre we need to pay $50 per hour.”

But $50 x 8 hours x 10 days = a total cost to you of $4000.

“If you take the cheaper option Ms Client, you may well pay $45 per hour, but it is most unlikely you will get the calibre of individual and the quality of work I am promising you here today”

“Indeed, your $45 an hour person is likely to take longer to do the job, absorb more of your time, and quite possibly make more mistakes.”

So $45x 8 hours x 15 days = a total cost to you of $5,400

“The so-called ”cheaper” option Ms Client, will cost you far more!”

It’s the quality work done at the best cost that I am offering you, and that’s why I am suggesting my talent at $50 is in your best interests.”

What day can she start?

That’s the way to sell quality temps! At Aquent we work with the cream of creative and marketing talent. Our screening process ensures that. Porsche does not compete on price with Hyundai. They are both cars with engines, seats and CD players. But people pay far more for Porsche, because the value is there

Same with our temps. If your client wants a great freelance experience, and the client wants their problems solved quickly and accurately, the price may be a little higher, but the value will be measurably better!

Market slowdowns can be really scary. Suddenly the boot is on the other foot. Candidate supply frees up and clients have choice. And how they love to leverage that power! And of course the first place we feel the pressure is on fees and margins. And it’s true too that many of todays recruiters, brought up in the boom years, have never really had to deal with industry-wide price cutting, where every job order turns into a fee negotiation.

There is no “magic bullet” when it comes to fee negotiations. It is true that when the market softens the power shifts more to the buyer. But recession or not, you need to do everything you can to push back against margin degradation. And the way to tackle that head on, is talk about your value… not about your price.

The secret is to sell your differentiator. What have you got, and what do you do that gives your client special value. At Aquent we emphasise our niche focus, our unmatched access to creative, marketing and advertising talent, our multiple branches, our specialist knowledge and understanding of clients needs, our proprietary testing software, and then we should wrap all this up in 110% money-back guarantee. Explaining differentiators gets the focus off price, and gives you something meaningful to respond with when the client quotes competitors crazy fee levels

But you need to do more. When a client forces the issue on fee, go through your entire recruitment process explaining all the things you do to secure the right person. And I mean everything. The searching, the adverting, the screening, the collaborating with colleagues, the interviewing, the reference checking, the testing, the “selling” of the clients company to the best talent, and on and on. The biggest reason clients want to push down fees, is that they don’t perceive the value in what we do. And they don’t perceive the value because they don’t actually know what we do to earn our fee. And they don’t know what we do, because we, stupidly, don’t tell them!

It’s like looking at an iceberg. 10% of an iceberg is visible above the waterline. The rest, 90%, is out of sight. So it is with what the clients see of our work. 90% is out of sight, so the client does not factor it into his perception of “value”. So tell the client everything you are going to do to solve his staffing problem, chapter and verse! Then, ask the client why he feels a reduced fee is appropriate. This is important. Get the ball firmly into the clients’ court. The client is asking for a discount. He should be squirming — not you. When it comes to fee discounts you don’t have to justify “why not” — he has to justify “why”! Often the client will stumble a bit at this, but usually they say something like “your competitors charge less”

This often scares recruiters. But there is no need for fear. Ask, “ Can you tell me about a situation 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”

This is a gamble, sure, but the fact that you are there means that it is most unlikely the client is happy with their current supplier.

Sometimes the client pushes hard for a reduced fee. It’s going to happen in this market all the time. 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 will feel it is worth a compromise to secure a particular opportunity. In these cases remember 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 25%”. The client asks for a discount. You say “OK, 20%. 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 her respect ever again — and you will never get your fees back up.

So if you reduce your fee, always ask for something in return – a retainer perhaps, 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. Important considerations in a tough market.

Greg Savage
14 June 2009

Coming soon to “The Savage Truth” : “NegotiatingTemp Rates”