BEWARE CLIENTS WHO DON’T HAGGLE!
December 15, 2011 10:42 AM written by Stephen O'Donnell 
2 Comments
So you’re in the process of taking on an assignment from a new client. The lead came via a candidate, and you responded quickly, so this is all being done over the phone. The client is receptive, happy to take the call, and frankly has an urgent need for a qualified design engineer that fits their needs. The HR Manager is happy to discuss the role, and even passes you over to the Engineering Director, to give more specific details on the vacancy. What could be better? An enthusiastic new client with an urgent need, who is happy to engage your services.
As with every assignment, the conversation must turn to the subject of fees, and billing for your services. As they have been so enthusiastic so far, you propose a retained assignment, with one-third of the projected fee billed up front. “I’m afraid we can’t do that” the HR Manager replies, “we have another agency working the vacancy too, and we’ve never dealt with you before”. OK then, so you quote your standard percentage fee for a contingency assignment. “That’s fine” he replies, with not a hint of the haggling you normally expect. Excellent: new client, new vacancy, full fees. This is a job you can commit to, and even prioritise ahead of other vacancies for smaller fees.
Something is wrong with this picture though, isn’t there? Why didn’t he seek to negotiate the fee? Maybe he was really impressed with my professional manner, is used to paying full fees, is really desperate to fill the job, or knows full well there is no fee payable at all, until you produce the perfect candidate – and of course that candidate will have to justify the fee. As a recruiter you can easily persuade yourself of this (because you want to), but a blasé acceptance of your fee should ring alarm bells!
Frankly, it’s not natural to accept the first price offered. These days, everybody haggles over everything. Negotiation is the process by which we test the perception of value of a product or service to the consumer or buyer. Conversely, we are also testing the value placed on the service by the provider. An agreement quickly made, is not an agreement at all.
In this scenario, the HR Manager didn’t feel able to negotiate the fee, because he was under pressure to fill the job. He would never normally pay any more than 15%, but has agreed to pay 25% in this case. The truth is, he hasn’t agreed to pay anything at all. At the point at which your candidate has been interviewed, and identified as a likely employee, he now has a huge price tag on his head, which will be considered along with his qualifications for the job.
Consider this. I am buying a car, and would really like a top of the range BMW. It’ll cost £45k, and will have expensive running costs too. I can afford the running costs, but that big up-front payment makes me consider lesser models, or even a second hand car. It’ll do the same job, look almost as nice, but maybe will need replacing sooner. The very same can be said of your candidate. Before you know it, they’ve offered the job to someone else’s candidate because the fee was less. They didn’t call you to negotiate, because they had agreed your fat contingency fee at the beginning.
I’m not for a moment suggesting you should always drop your fees; quite the reverse actually. I’m saying you should always test the perception of value with the client. Always sell the value of your service, and make sure they agree. If they don’t, then negotiate. If not the fee itself, then perhaps the rebate period, or future fee levels. Wouldn’t it be terrible to have delivered the very best candidate, and not made the placement? Always be wary of clients who don’t haggle.
Interesting post Stephen, a good read. Do you think that the consultant should have submitted lesser candidates quicker or developed an understanding with the client to explain more about his situation? How should the consultant have played this situation do you think?
I assume, in many cases people offer fees in line with other recruiters so client’s won’t haggle, what can they assume from that, all is well or all is not well?
Thanks for replying Simon.
As we all know, contingency recruitment is fraught with dangers which can frustrate even the best of recruiters. The biggest danger is that an inexperienced competitor gets lucky and chances upon the perfect candidate, despite your best efforts and exhaustive professional searching. This means zero reward for this assignment, other than brownie points for trying hard.
My point is really this; do not skate over the discussion of fees, even when the client agrees very quickly to your full rate card percentage. Always ask what other channels they have employed, other agencies used, and what they felt about the level of service they had received from elsewhere. A recruiter may wish to avoid the topic, but I believe you should ask what fees those other channels may incur. This will give you a fuller idea of what the client percieves as value, and is likely to elicit a more candid response to your own fee level.
Good recruiters should always resist reducing fees, but it’s more important to go into an assignment with a firm value on the potential reward for success, and the knowledge that the fee itself will not be an impediment to the success of your candidates.
The history of the seemingly arbitrary nature of contingency fees, is one I’ll write about another time.