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How to Choose a Headhunter - What's the Right Fee?

This is part of a series of articles called "How to Choose a Headhunter" that's been running since 2008 - But the market is changing so quickly, at least here in the UK, that much of that has been left behind in the sands of time.....

If you're looking for a headhunter to help you fill a senior or niche role, you'll be spoiled for choice in terms of the number of potential suppliers and the fees they charge. The fact that you're spoiled for choice won't mean the choice is obvious, but it does mean you can get great value if you understand what to look for and your options.

And don't just look at the price....

EXCLUSIVITY

Most head hunters will seek exclusivity - That means they'll want to work for you and you won't engage another headhunter and strike a 'winner-takes-all' sort of deal. While it might appeal initially to have two people working on the same search, you can be sure that neither may not represent you in that way you'd want to be represented, and also, if the target is narrow, they may bump into the same candidates - and that comes with all sorts of risk of all sorts of prat-falls and a messy end.

If you want to deal with me, I will insist on exclusivity - and hush - I may even be prepared to negotiate some other terms in your favour to get it.

FEE STRUCTURE

This really is "how long is a piece of string"....

Most 'real' headhunters (let's not have a debate about what that means!) will break their fees into three equal stages. The first comes at the start of the search, the second on the delivery of the shortlist, and the third on a successful conclusion. Let's be honest, in recent years that's been an area in which there's scope to negotiate. Some headhunters may be happy to take all the fee at the back end (By the way, I won't) but you have to ask yourself if you'd want to deal with somebody willing to take that risk - are they really as good as they say they are?...

OK. I admit it. I have done deals here. I have sacrificed on the fee level to have three equal fee stages, but equally, I've agreed to more on the success element, but the price to the client will be a higher overall fee.

If you build a relationship with a headhunter you trust to get the job done, you may save on the overall fee by paying in stages - 'Trusting" a headhunter will be covered in my next blog....it's a delicate issue... (remember, I've used headhunters in a past life, so have a foot in both camps)

EXTRAS

BUYER BEWARE! Some recruiters may have worked more McDonalds: "Would you like a large fries with that?"...

This has some scope if you're not careful. You may get charged for advertising (not sure why as it's rarely needed). There may be a mark up. It's worth digging through the T's and C's to make sure you don't get any surprises on the final bill.

FEES - Percentages versus Fixed

Search fees can be expressed a number of ways. Most common is the percentage fee, usually expressed as a percentage of OTE (but you need to be sure what "OTE" includes and excludes) or a percentage of basic salary, or a percentage of basic plus commission or bonus. If you're going the percentage route (not how I approach it), be aware that the higher the salary the higher the fee - as if that had anything to do with the value the headhunter brings.

I'm unusual in that I quote a 'Fixed" fee. I might express it as a percentage so you can benchmark it against other quotes, but I'm likely to say something like: "My fees are normally in the middle-to-low 20 percentage range, but I'll convert that to a fixed fee before we start so that you know I don't have an interest in paying a higher salary, and so you can be sure about your budget" - or words to that effect.

IN CONCLUSION

The fee issue is a minefield - don't just concentrate on the size of the fee, but how it's billed and what's included in and out. My competitors may not like me telling you that prices are under pressure in the present market, but it would be an idiot who'd deny it, so let's deal with things as they are - and not how we'd like them to be!

 

(Image courtesy of http://www.freedigitalphotos.net/)

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Tags: Agency Recruiting, Executive Search fees, Headhunter fees

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