The time may come sometime in the near future for you to make a very important hire. That effort could best be left up to professionals who specialize in the specific duty of sourcing and placing candidates well qualified for the role you’re seeking to fill. Here are just a few things to expect when working with a recruiter.
Working with a supply chain recruiter brings along with it some very unique duties and expectations which may not be familiar with people who haven’t engaged in this type of work before. Here’s a bit of a primer on what to expect when it comes to things like fee structures, search models, candidate guarantees, and refunds (or lack thereof).
What Type of Search Model?
The two most common types of search models are contingency and retained. There’s also a hybrid of the two that is fairly common to see, and other variations between the two.
Contingency searches involve a single fee based structure where earning the fee is literally contingent upon the recruiter making a successful hire. The fee is usually an agreed-upon percentage that is applied to the new hire’s starting base salary. The higher the base salary, the higher the fee. An alternative fee structure is a flat fee that is agreed upon between the recruiter and client prior to kicking off the search engagement.
Retained searches are more of a performance-based model that involve multiple fee installments. Unlike contingency fees that are tied to the starting base salary of the placed candidate, retained search fees are typically tied to the first year targeted cash compensation package for the position. This is often the midpoint of the position’s base salary range multiplied by the annual bonus target percentage. This can sometimes include other first-year cash incentives such as a sign-on bonus.
The most common fee structure involves splitting up an agreed-upon fee into 3 installments that are either billable based on time increments or billable upon achieving key milestones. The following are examples of these milestones:
- The first ⅓ of the search fee is due up front to initiate work against the search engagement.
- The second ⅓ of the search fee is due upon either the hiring team approving the final candidate slate for interviews, or the first official candidate interview.
- The final ⅓ is typically due upon the start date of the placed candidate. Note that when the final fee installment is tied to the recruiter actually making a hire, it’s technically not a “full” or “true” retained search. A fully retained search pays out the total agreed-upon fee, even if a hire is not made.
Lastly, there are many ways to “skin the cat” in terms of negotiating alternate terms and conditions, especially for retained searches. There’s even a hybrid between contingency and retained, referred to in the recruiting industry as a “container”, where one fee installment is paid on the front end and the remaining balance, if a hire is made, is paid on the back end upon hire. Bottom line, have an open mind and understand what you’re willing to negotiate, and never forget the old saying in the business world, which always rings true: “you get what you pay for!.”
What am I paying for when working with a recruiter?
Regardless of the type of search being conducted, whether it’s contingency or retained or even a hybrid of the two (“container” or “retingency”), the client is always paying for the service, professional acumen, experience, market insights, and consultative prowess of the recruiter. A bad hire, especially in a senior leadership position, can derail a company’s success for years. That’s why over relying on job postings and generalist job boards (the “post and pray” strategy) is not recommended.
Sourcing and placing top notch talent can be a full time job, or at a minimum, very time consuming for both hiring managers and their human resources partners. It’s rare these days that a supply chain hiring department or any executive has the bandwidth to do what needs to be done to source the best talent, without falling behind on other work and objectives for their employers. Most people don’t even know where to look for or how to source talent, which is why recruiters like us are often called upon to fulfill their job openings.
When you engage with a recruiter, the fees you pay are for compensating these professionals for their time, their work, the tools and systems they use, as well as the indirect costs associated with operating this type of business. There are no guarantees with recruitment services and the outcome. You’ve engaged a subject matter expert to share their insights and talents to help you land the best candidate for your job. So make no mistake, you are not paying for “the hire.” In contrast, you are paying for “the service.” The end result and deliverable of most searches is a successful hire or placement
No Refund if a Candidate is Terminated or Abruptly Resigns? The difference between a service and a product.
The reason that most recruiting firms don’t offer refunds in their agreements is because they are offering a service. Think of it as the difference between paying for a product or a service. If you order a widget or a product and it arrives in a defective condition, doesn’t fit e.g. apparel, or it doesn’t arrive at all, the vendor will refund your money or offer you a credit. You were entering into a transactional relationship in which your money was in exchange for a product.
Now, let’s talk about services. If you retain an attorney to represent you in a trial and the jury decides against you, you are still on the hook for those attorney fees. The same holds true for accountants, who cannot guarantee you won’t get audited on the tax return they recently prepared and submitted to the IRS for you. The same can be said for all types of professional services. The transactional relationship is based on the professional services offered, and not necessarily the “outcome.” The outcome is not guaranteed. The service is. In this case, you’re paying for a recruiter to engage full-time in a service that you have neither the time or resources to fulfill yourself. Recruiters will source a slate of highly qualified candidates to present to the client for hiring evaluation. That’s the service.
It’s also important to point out that there are plenty of recruiters that will agree to take on a search engagement that has “refund strings” attached. These written search agreements agree to reimburse the FULL fee paid, should a placed candidate not survive the agreed-upon candidate guarantee period (typically 60 – 90 days for most non-executive searches). This equates to working for free. In many cases weeks or months of hard work and many dozens of phone conversations with candidates will go uncompensated. All for nothing. Would you work for free or be willing to fully reimburse someone for the time you invested into a project? I didn’t think so!
Most importantly, you are absolutely not getting the best recruiter or search firm, if you are working with someone that agrees to provide a full refund should their placed candidate not survive the agreed-upon candidate guarantee period. Most reputable firms refuse to accept searches with refund clauses attached to them, especially full refunds, as most reputable firms simply refuse to work “for free.” So if you want to level up and open the doors to top-tier recruiters and search firms, simply stop asking for refunds for services rendered, and you’ll have a chance to work with the best, versus those that don’t value their time or their work.
How do I know if I’m getting my money’s worth? Why choose a niche recruiter over a larger more generalized one?
While there may be some advantages to working with the larger, more generalist recruiting firms, it would not be recommended in today’s supply chain talent landscape. The talent pool is shallow and the end-to-end supply chain is quite fluid and ever-changing. This dynamic set of functions and industries requires a talent professional who is not only highly skilled at recruiting and sourcing, but also has a firm grasp on the nuances and thick ambiguity that exists in supply chain. A specialized supply chain recruiter can tell you the differences between direct versus indirect procurement, strategic sourcing versus procurement, distribution centers versus fulfillment centers, and more, which would be unlikely for a more generalized firm. Your supply chain recruiter should operate as an advisor as well, helping to navigate the sometimes murky waters of the global supply chain and who understands the latest trends and insights of the industries, functions and market intelligence that matter to you.
You’re paying for a thorough understanding of the field in which you want to hire as well as highly professional recruiting services. The individual attention you receive with a boutique, specialized executive search firm will provide a more thorough and complete experience for your firm.
What is Guaranteed and What Isn’t When Working with a Recruiter?
It is guaranteed that a recruiter will perform the work for the search that is agreed upon, as long as you conducted proper research and due diligence as it relates to vetting and selecting the right recruiting firm. Said recruiter and search firm will work hard to provide an employer with a slate of well sourced and qualified candidates. But the recruiter does not make any hiring decisions. They do not onboard the candidate once hired nor do they establish and measure performance goals and objectives assigned to the new hire. Recruiters are not responsible for the work environment in which the new hire operates, or any changes to the employee’s boss, which could contribute to the new hire leaving after only a short period of time. What then, you might ask?
Well, the recruiting firm likely has included a contingency for a placed candidate that is terminated or abruptly resigns shortly after starting, wherein they work to replace the candidate without charging any additional fees. However, what has been paid to the recruiter is for a suite of services that have already been rendered. It’s quite generous that recruiting firms offer a “limited warranty” aka “candidate replacement guarantee”, especially when they have zero control over what happens after their placed candidate begins work. But they do offer these replacement guarantees, even though they often lead to doing twice the work, as it’s simply the right thing to do in the spirit of adding value for their clients, solving their clients problems, and ultimately maintaining a positive, win-win relationship.
Working with a recruiting firm can be challenging, especially if you don’t know what to expect or if you don’t conduct proper due diligence when evaluating and selecting a search firm. However, if you work with the right firm, your worries can be mitigated by transparency, collaboration and partnering closely throughout each step of the hiring process. But remember, the recruiter does not make any hiring decisions, onboarding or properly leading your new hire. Once the slate of qualified candidates is presented, which again is the “service” that you truly pay for, and the offer is extended and accepted, it is up to the employer to ensure a smooth and positive onboarding experience for their newly hired employee. Understand that hiring mistakes happen to the very best of leaders and HR partners in the business world, but when they do, we just ask that you not place the full blame on your recruiter. Instead, re-engage in a healthy conversation that focuses on lessons learned and the best path forward to rectify the situation.