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The High Price of Low Executive Search Fees

Right now, there are more jobs than there are people out of work. But while most talent is already employed, an astounding 90% are open to new job opportunities. And while it might not seem like it at face value, executive-level job candidates are among them. You just need to know where and how to look. Undermine the process, and you’ll reduce the quality of your results. Instead, consider these questions:

Do I need to outsource my search?

Not all job searches require outside help from a search firm. You may have the internal bandwidth to perform an executive search on your own. To determine whether that’s the case, remember that time is money and consider:

  • The tight job market. You may find it more difficult to find and attract talent than usual. Some of the channels and strategies you’ve used in the past may lead to nowhere because so many executives right now are passive candidates (not actively looking). Ignoring those signs may waste time and diminish your candidate pool.

 

  • The cost of not hiring. Whether you need a director of marketing or a senior software engineer, consider what it will cost your organization for every week or month that position isn’t filled. Maybe you’ll lose revenue because your sales team won’t have a focused direction, your project timeline will shift off course, or you’ll be spending time and money on temporary resources. Once that cost is calculated, you may find it far surpasses the cost to outsource your executive job search, which might be completed in three months as opposed to the six to eight months (or more) it might take you.

What search structure should I use?

Contingency fees—only paying a recruiter once a candidate is hired—can work well for certain non-managerial positions or large-volume hiring, but it’s not appropriate for executive search. That’s because this “no win, no pay” structure rewards speed and volume over due diligence.

It can take not days, not even weeks, but months to find and hire the right executive to lead an organization. It’s an exacting and exhaustive process and you—the employer—are only presented with the best of the best. That level of work understandably requires a steady investment. Contained search, which includes a small starting fee, is a better option. But it, again, is best for quick-turnaround engagements.

The best option for executive search is usually a retained search, which spreads payment throughout the recruiting process—one-third at the beginning, one-third at the interview stage, and one-third when a candidate is hired. This allows the recruiter to dedicate the time, attention and resources necessary to recruit ideal executive candidates. It allows the entire process to be conducted in a way that is centered on attracting top talent and retaining them for the long run. And it’s ideal for senior-level positions that require confidentiality (which most do).

Is negotiating OK?

Executive recruiters are always on the hunt. You want them to be hunting with you in mind. It might feel good at first to negotiate and win a shockingly low fee but, when a recruiter’s top talent goes to someone else first (essentially, the highest bidder), that feeling of victory will disappear.

If negotiating is necessary, don’t panic. Reputable executive search firms may agree to negotiate a lower fee for those who respect and understand the process.

First, you may be able to negotiate a lower fee if you offer to pay an upfront engagement fee that can be deducted from the final negotiated fee. This shows commitment to the process on your part. Second, great two-way communication is highly valued. If you offer to interview, give feedback and hire quickly according to a schedule, recruiters may value filling your position above others at the same or lower fee. Direct contact with the hiring manager is always a plus. An offer to pay quickly (as in, due on receipt of invoice or net 10) after the placement is made will garner the attention of and motivate the recruiter to fill your position before others with longer payment terms. Lastly, you may be able to negotiate the guarantee terms to receive a lower fee.

The bottom line

There are different search structures for a reason. What worked to fill your entry-level positions fast will not work for executive search. It’s easy to focus on a recruiter’s price tag, but do your legwork to find out how a retained search compares to the cost of the position staying open longer than necessary. Sometimes the highest price is hidden beneath the surface.

There is an old saying in recruiting, “There are no discounted fees, just discounted candidates.”  If you are paying the lowest fees in your recruiting firms stable of clients, it is likely that you are receiving the bottom-of-the-barrel candidates also. If a firm can place a top-tier candidate at a competitor for more money, why would they want to place that person at your firm?

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