Wednesday Wisdom: To cut, or not to cut?

[Claudia Faust]

Dear Claudia,

I am the host of the world's only on-line call in radio talk show for recruiting based out of Toronto, Canada. Though my show is wildly successful I am considering "dabbling" back in the Staffing Arts. It is my opinion that drastically cutting my fees will give me a competitive edge and help me drag in a little Starbucks Coffee money. (I love that stuff.)

A few leaders in the industry have recently given me the "Oh no! Don't do it!" talk and so I'm wondering: is it good to cut your fees in this economy?

Signed,

Anonymous Recruiting Figure (in Toronto)

Dear Anonymous,

First, thanks so much for sending me your question - it takes a lot of gumption to open up in front of your peers, and I know that other brilliant minds here on RBC have recently offered their own advice on this subject. I'm a big fan of discussion, so be sure to check out their recent radio discussion when considering my recommendations below. Hey, you might even know the radio host since you're in the same city? Recruiting is such a small world, I find.

Before we begin, let’s set a boundary or two for my response: we’ll assume that you are clearly the client’s recruiter of choice for the project, and are simply down to negotiating price for the deal. This means that you’ve established perceived value for your services in the mind of the client (we can take the quality of that perception to a separate discussion if you like), and are ready to close the deal.

That said, here are a series of questions I would ask when deciding whether or not to reduce my fee in any economy:

1. Do I need the money today?
This is a “Maslow’s Hierarchy of Needs” question; if the money runs out before the month does, and if my rich benefactor is on vacation that week, it's highly probable that I need to generate some cash. What’s really important is to understand what’s motivating the decision to generate a fee: is it more basic needs like keeping the roof over my head and food on the table, or is it higher needs like building self-confidence in the negotiation process? If basic needs are driving the bus and no other work is in sight I might consider reducing my fee to bridge the gap until work becomes more abundant. Otherwise, you could learn a lot from more experienced recruiters like Jerry about not using price as the primary bargaining chip with clients.

2. Is the difficulty of the search acceptable for the price?
We all know that there’s no easy money in recruiting, but it’s also true that some searches are just easier to work than others. The most time consuming part of any search is finding and qualifying candidates; do you already have an established pipeline to work from? Do you have inside connections to leverage in targeted companies? Can you pull a favor from a friend for sourcing? These options could position you to complete a search in significantly less time, and make it more reasonable (or at least palatable) to charge less.

3. Can I provide partial services for the reduced fee?
Perhaps a budget-conscious client is willing to do more of the project themselves? If so, consider negotiating a smaller scope of responsibility for the price; for example, you might commit to presenting 3-5 qualified candidates within a specific timeframe, and let the client take it from there.

4. Am I willing to establish this price point with the client for future work?
I don’t know any recruiters who think of clients as one-time cash machines, but it’s important to take into consideration the precedent you’re setting for future search work when you cut your fee. If you’re uncomfortable with the price in this context, I suggest that you return to the first question and reconcile the differences.

At the end of the day my advice is to simply be honest with yourself about your urgency and need for the money, and to make the decision in the context of both short and long term goals. Anyone who tells you differently should be willing to at least buy you a Starbucks when you're a little short on cash.

**
In my day job, I’m the Head of Products for Improved Experience, where we help employers use feedback to measure and manage competitive advantage in hiring and retention. Learn more about us here.

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[Maureen Sharib]

Half Loaf or Full Loaf? Howard Adamsky has a take on this here.

[David Perry]

Repackage the fees instead. Call me if you want to know how to do this. We actually just increased our fees so we could separate the tire kickers form the ass kickers. I want ass kickers. those rare clients who understand that people make a difference and are willing to invest in their companies - through new people acquisitions - when the market is in flux. Most CEOs are clueless in this regard and will prefer to follow the pack. Especially in Canada where I live. Mediocre is the norm. that's why there are "average" players in every industry.

I saw the recession a ways off and diversified my portfolio to include a product service mix to include potential candidates. for example I have a new book coming out shortly which will - I hope - solidify my name in their minds in anticipation of the up tick in 2010. I also spent a lot of money refining a group fo products that are available on a "retail" basis to candidates which again will generate cash flow and make my name more of a known commodity in the future.

IMHO you would be best to do 2 things:
- repackage your offering to clients to allow then to chose items from your "recruiting menu" instead of forcing them to take it a la carte. Of course those items need tl net out individually at a40% premium should they do the math to require you to do the whole search; and
- offer to help job hunters position themselves as well by charging an hourly or engagement fee to fix their resume etc. Too many recruiters IMHO offer their advice for free to job hunters who promise to reward them sometime in the future. In my experience this rarely happens. And the last time I offered a contra deal to a job hunter they laughed {they're still looking}. so it's importnat to tvalue yoiur own skills.

David Perry