I received the following question from an HR Director in the midwest:
Contingency Fees: What’s the value? It seems that the fee percentage in permanent placement ranges from sometimes less than 20% to 30%+ of the candidate’s first years salary.
So, what’s the diff??
Where’s the value change between the 20% firms and the 30% firms?
Though I do not conduct contingency searches today, I spent many years in the Director/VP desk wondering much the same thing…
The answer, however, isn’t mysterious.
The difference is frequently just timing. If a recruiter or firm’s current production is down, volume low, or revenue a bit off for the week/month/quarter, a firm may take closer to 20% for that particular search, instead of their customary 25-30%.
Perhaps they already have a couple of ringer candidates in the hopper, and they low-ball just to close a quick sale.
Maybe, they’re new at the business, and right now they just need to pay the bills (surely I don’t have to make all the obvious cautions here…).
Maybe, they’re just stupid. I doubt that, but let’s include all possible answers.
Now, having said that…Here’s the part that really gets me:
I spent a good many years in senior-most HR roles. A manager/company that will quibble over 5-10% on a $100K search for a valuable contributor to their organization, is so colossally short-sided and pound-foolish that it takes my breath away.
A hiring company’s bigger concern should not be whether the fee is 20%, 25%, or 30%; or whether the fee includes just base comp, base plus bonus, etc… The hiring company’s sole concern — SOLE concern — should be “Can this firm deliver one or more solid, successful candidates to fill my serious need?”
If not, then 15-20% is certainly no bargain; if yes, then we’re spending way too much time quibbling over a few thousand dollars.
Just my thoughts…