Why do hiring companies pay fees?
The reasons why a specific executive, personnel manager, or company chooses to pay a third-party recruiter are as varied as there are types and sizes of companies. Since the typical fee per hire can vary from a few thousand dollars to 50% of the hired candidate's first year's income, most employers will have a specific reason for considering any candidate from a fee-paid source. Some hiring managers and third-party recruiters may not agree with the attributes and information given below. However, in my analysis of candidates hired with a fee (not just the ones interviewed), over 85% of the candidates will fit with the information below.
In general employers justify interviewing candidates from fee-paid sources when they believe it is the fastest or only way they can interview "hard-to-find" candidates. Additionally, an employer may value the opinion (e.g., knowledge of the market, knowledge of available candidates, knowledge of salary trends, ability to get hard-to-convince candidates to say yes to offers, etc.) of the third-party recruiter to such an extent that the fee paid is of minimal consequence. Opinions from recruiters are usually most valued for make-or-break-it type positions (manager, lead technologist, high level individual producer and other similar situations).
The wish list of most employers includes good verbal and written communication skills, good work ethic, ability to be flexible and adaptive, intelligence, ability to learn new tasks and information quickly, and a positive attitude. Before hiring a candidate, responsible employers will try to ensure that the candidate fits personality and values-wise with the company, the manager to whom he/she will report, as well as the group in which the new employee will work.
However the one factor that will qualify candidates for interviews fastest (but not necessarily getting one hired) and make all the other qualitative factors assumed positive until proven otherwise, is "successfully accomplishing results in a similar position for a direct competitor or in a setting with similar problems and issues." In other words, the employer's wish list will melt away once they find out the candidate is working for a competitor in the same level and type of position, AND/OR the prospective candidate has faced the same problems, issues, or tasks and has formulated and implemented solutions to the identified problems which made money. That is why employers hire in the first place; they have a problem that is not getting solved and the problem is costing them money.~
What Are Some Common Attributes of Fee Worthy Candidates?
1. Most hiring managers will only justify a fee when they believe the candidate under consideration is in the top ten percent (10%) of all candidates with similar skills and experiences. While what constitutes a top ten percent candidate will vary depending upon the level and type of position, usually measurable outcomes/results that can be tied directly to the bottom-line are mostly heavily weighted. Some examples of measurable outcomes: for sales reps and sales managers, increases in sales volume and higher profit sales; for general management, increasing overall operating profits; for engineers, new products that increase or create market share which are completed on-time and on-budget; for the customer service function, repeat business induced by high customer satisfaction which reduces costs of sales; for manufacturing management, reduction in process time or raw materials/scrap; for human resources/staffing, function reduced hiring costs and/or turnover; and for maintenance/technical functions, reduced down time for equipment (computers, manufacturing equipment, office systems, etc.).
2. A good track record with regards to length of time with past employer. While the amount of time that constitutes a good track will vary depending upon the hiring company's and hiring manager's values, in general most employers want to see three years or more with each former employer. Exceptions may be allowed but usually for only one or two in a person's career. Some of the reasons accepted for such a short employment in a prospective candidate's work history could include: (a) Being part of a company merger that resulted in duplicate positions and the candidate was employed by the less dominate merger partner. (b) The company the candidate worked for has gone out of business, and of course the candidate should not have contributed to the reasons for the closing. (c) A bad decision by the candidate or hiring manager resulting in an unsuitable situation (probably both should share blamed but if repeated it becomes the candidate's problem). (d) Personal reasons like the need to move for family or health reasons may result in short-term employment (balancing personal and professional lives is a challenge). Repeated short-term employment with or without mitigating circumstances reflects negatively on the candidate's decision-making ability, and therefore, his or her suitability for "high profile, hard to fill" job positions. Job history is used as a predictor for the future. Basically most recruiters and hiring managers tire quickly of hearing short-term employment excuses more than twice.
3. A successful candidate needs good academic preparation. That usually means a bachelor's degree from a university that is considered in the top 20% for the curricula studied. Typically one's GPA will only be considered for about 5 years after graduating. If a hiring company is GPA sensitive, typically they require a 3.2/4.0 or better.
4. As mentioned above verifiable experience identifying and solving problems is a critical attribute and bears repeating. Basically this means acceptable candidates must be able to demonstrate prior successful experience with duties and responsibilities similar to those of the position for which they are being recruited. Working for a competitor or quasi-competitor in a similar position will usually provide the hiring manager proof that a candidate has this attribute. ~
Employer-Paid Fees Are Not the ONLY Way to Go.
Any candidate in search of a job does have options besides sending a resume to a third-party recruiter. The actual percentage of positions filled by third-party recruiters (AKA headhunters, executive search consultants, personnel agents or consultants, executive recruiters, etc.) is debated. I have seen quotes varying from less than 1% to as much as 90%, depending upon the type and level of position and the industry. When everything is taken into account, ALL positions filled from ALL sources, the percentage of hires attributed to third party recruiters is probably about the same as advertising (online and print sources), about 10% to 15%. Most employers and recruiters would peg the percentage for the two categories combined at under 40%. Therefore, the majority (60% or better) of positions are filled by word-of-mouth campaigns, internal referrals, promotions, transfers, reorganizations, and/or non-skilled hires.
Profile on the Author: James O. Cox has been a Certified Personnel Consultant (CPC is a certification of the National Association Personnel Services) since 1985, in the third- party search and placement industry since 1983, and been running his own firm since January 1998. For more information call 770-437-8222, e-mail to email@example.com, or visit www.messearch.com.
The short answer to this question is that it depends on your perceived value! If the hiring manager perceives that you will create enough value in the first 12-18 months to provide a reasonable return on the investment made in your salary, bonuses, and overhead costs -- AND -- the hiring fee, then you are fee worthy!