American Headhunter: Charging a Fee Percentage is a Dated Model


I received a letter from another recruiter. I thought I would share the letter and my response.

The original note

I recently received feedback from a client regarding our service. More broadly he made a comment about the industry and I wanted to share with you and seek your opinion. I am keen to know you feel the same way or if you are seeing anything new emerging.

…. the industry need to move away from the current % fee arrangement which is now a dated model. A number of firms provides now propose a fixed price model irrespective of the outcome with varying payment timings. the % model = excessive margin arrangements that are excessive compared to the margins that their clients make.

In terms of assessing a candidate’s suitability, I feel that more effort could be invested to understand a candidate’s commercial acumen/capability as well as organizational fit. We are increasingly seeing candidates who are not commercial, don’t know their businesses performance, their functions performance and the commercial benefit or impact of decisions and outcomes. Recruitment service provides need to be more rigorous in assessing this area and accept that this may mean tighter/smaller short lists and possibly more upset candidates. The other area is culture fit. this can only be assessed through more rigorous questions to understand the whole candidate. The “tell me a time when” approach needs to be expanded as candidates now know what to expect and have well-prepared answers…..

For the record, the feedback was following a successful outcome. I do agree with some aspects (we do also offer fixed fee – have done since 2002, however no clines every want to use it?)

Anyway – keen to hear your opinion if you have one?

My Reply:

who said charging a percentage is a dated model? Don’t they charge a percentage over the cost for what they sell?

At a time when everyone’s costs are increasing, firms look to us to cut what we charge for what is actually higher levels of service. It tells me that the individual firm views you/us as a commodity provider and fails to differentiate between one firm and another.

If you are able to do less work for a lower fee (no screening, for example), then, by all means, charge less for your work.

However, I don’t believe they would accept that from you, would they? They want higher levels of service from lower amounts of money and that is not sustainable.

If they raise their prices, would you call them up and say, “Gee, you are charging are a lot more than you should. You are using a dated model for pricing! This is what we are willing to pay; you should lower your price to that.”

But firms do that with recruiters all the time and we are afraid to say something along the lines of, “when you go to the store to purchase a steak and the price on the package says $15 and you go to the register and say, ‘I’ll pay you $10 for that,’ what do they tell you to do?”

“Put it back.”

Here, I am the store and this is what I charge for my service. You can pay it or put it back. I make the choice of what I charge; you make the decision about whether you will pay it.”

This is not a client; this is a firm that you can source. I encourage you to find a real client and use this firm as a source.