When does an Interview become a consulting gig?

I have this client, see.  He is a first time CEO.  NIce company, good product- early stage, angel funded (so cash is king) but profitable.  Going out for VC funding soon.

The issue is he's not hiring anyone.  Well he is for one role but we are sending candidates opportunistically.   He's offering them consulting gigs (which is fine as these are exploso candidates) but when the subject of money comes up, he says something to the effect of "well, i'm letting them peek under the kimono and play around, see if they like the product before we talk about a hire.  

My response to this is:

  1. if there is an expectation of a deliverable, you probably should pay time and material
  2. Failing 1, you should offer a stock option grant
  3. you need set an expected date of employment because the candidate is on the market

We've run into this before.  Some companies ( I won't mention any names but the most used recruiting database is notorious for it) regularly obtains free consulting with the carrot of job consideration.

This is not the case here, but have you run into this before?  And if so, how did you find solution?

Thanks.

Views: 462

Comment by Christopher Perez on January 13, 2012 at 10:54am

<hoping that Sandra takes a Texas-sized crack at this one...popping some popcorn in anticipation!>

Your responses make logical sense to me, Bill, but the client sounds like a weasel. My prediction is that if the product and business take off, he will only get worse as he will see justification for his treatment of people and service providers. I can only assume that he is potentially valuable enough that you are seeking ways of managing your risk with him vs moving on. I'll be interested to see how this plays out, thanks for posting about it.

Comment by Maren Hogan on January 13, 2012 at 11:32am

I don't want to take an overly simplistic crack at this and please do correct me if I am wrong, but if:

1) These are "exploso candidates" won't they realize pretty quickly when they are giving away consulting for free and either guard against that or walk away?

2) If you are sending candidates their way and they're getting what generally looks (again from the outset based on what you've said) to be the runaround, won't that make your candidates trust your next opportunity less?

3) If neither the CEO or the potential candidates understand the market value of whatever is under that kimono (waiting for Sandra to come in and say something about the size of their cajones for even suggesting this one-sided arrangement) then how can value and in turn compensation and in turn equity even be assessed?

If it were me, I'd point out that he's going to get a fuzzy reputation really quickly and should probably make sure there is some detail behind the "consulting gig". First off, this is sound business advice and you will help him if he'll take it. Secondly, if he won't take it, at least you're rid of what sounds like a high-maintenance, low dollar client. Finally, you'll be able to send your great candidates to someone who actually has something substantial for them, whether it's this guy when he gets his stuff together or another client who has actual jobs.

Comment by Suzanne Levison on January 13, 2012 at 11:44am

My first thought would be for you to discuss with your client his actual need. Either he isn't ready to hire or hasn't given enough thought to the day to day responsibilities for the open position. No way would I advise a candidate to give away his/her consulting expertise just to "peek under the kimono." My candidate presentation would come to a halt until the client and I decided upon his need.

Comment by Bill Schultz on January 13, 2012 at 1:02pm

Thanks for the advice everyone.  These kind of arrangements are common place in Venture Recruiting in Silicon Valley.  I will get the client to at least offer stock options for this.   My fee is taken care of in a retainer and the candidates go in eyes wide open.  

However, there are mature companies that regularly do this and I'm wondering if anyone has run into  it before.

 I can handle Sandra just fine ;0)

Comment by Christopher Perez on January 13, 2012 at 1:19pm

In that case I just learned something about another recruiting niche, thanks. My reference to Sandra was more about my morbid curiosity re how she'd handle a client like this!

Comment by Sandra McCartt on January 13, 2012 at 2:32pm
This is probably going to surprise everybody but Bill. :). Some of the most fun I've ever had in recruiting was signing on to help build an accounting practice, several of those in fact. Rebuild an old line company from the ground up after the president walked and took every screaming employee with him but the owners wife and son and god knows how many small businesses starting up who needed administrative help and sales people and didn't have a lot of money to pay the kind of help they needed. And I'm jealous that Bill got a retainer. I just rolled the dice and hoped for the future. It's called "skin in the game".

Now these were not vc funded start ups but here's some things we did to get employees on board who were interested in a "ground floor" deal. Accountants, we made a deal with two schools to give them college credit for four hours a day doing write up work and simple 1040's. They actually worked under the kimono for no cash money unless you don't put any value on the cost of college credit or ay least some practical experience on a resume and many went full time a year or two later.

In Texas it's called the barter system. One guy who was a top sales manager not working signed on to build a new sales team for our client for no money for the first six months in exchange for an agreement of a bonus down the line if he could build the team and keep the customers. Additionally, it was a large paper company with an inventory of a lot of office products a lot of it obsolete. Several of the sales reps came on board commish only and paid after three months with the agreement that they could haul off the obsolete inventory and garage sale it ,keeping anything they could make. Office staff worked at night to learn how to keep a set of books when their day job was waiting tables somewhere or making min wage. When money started coming in they knew how and got full time better jobs.

Point of all that is if Bill's candidates are willing to roll the dice, trade some knowledge, skill and time for an opportunity to prove they can rock and roll there has to be something to "trade". Maybe it is stock or delayed roll the dice bonus.

I would ask this CEO what he was willing to trade in lieu of cash money to make the look under the kimono something more for everybody other than just puppies sniffing around the private parts of another puppy. And that's "Texas Talking'" folks. I have several really cool park lights, enough Christmas paper to wrap the Titanic, a lifetime supply of legal pads and envelopes the services of an it geek for perpituity, free tax work and god knows what all else I've traded my time and expertise for over the years. There is always something to trade for just figure what makes it work for everybody.
Comment by Sandra McCartt on January 13, 2012 at 2:50pm
Oh, and a whole bunch of those struggling or new deals turned out to be good long term clients who refer and hire from us for real money. I love it when I get a call from somebody who says, "John at xyz told me to call you. I am starting a new business, need people and don't have a lot of money. The last one I asked, "do you know anybody who grows hay?". When he said yes I knew there was a deal to be made that would make everybody happy. When he told me he had two big teenagers who could pick up the hay from his farmer friend, deliver it and stack it, we became "partners" in his new biz.

See I have horses, I know an accountant who has horses and a sales guy who has horses and there wasn't much hay available this year that was not the same cost of gold. All of us are willing to work nights to feed those critters. Somebody always wants or needs something besides just a check.
Comment by Bill Schultz on January 13, 2012 at 2:55pm

Thank you, Sandy.  Yes it's true that venture business leads to real business and you shouldn't be afraid to plant seeds.  I think people are a little married to their 20% or die mentalities.  

However, I'd like you to comment also on companies who do these things on the guise of a hiring process.  I think it's a real dilemma for a candidate who needs to show good work product to keep the process going but feels s/he is being taken advantage of.  

Comment by Maren Hogan on January 13, 2012 at 3:05pm

Clarification: No issue with working for equity, but if you are pretending to hire someone full time or to consult, there should be a rock solid agreement in place, period. I submitted my portfolio to an agency once and they asked for more to see if I was "serious". I sent them a campaign I had mocked up because I was just that excited about the gig. Shame on me. I wasn't hired and the "campaign" ended being very similar to their web design a few months later. The job posting was likely a small price to pay for a campaign mockup.

Comment by Sandra McCartt on January 13, 2012 at 3:28pm
I don't run into many of those but when I have a client who seems to keep asking for examples of code or want somebody to come in and code for a while I suggest to them that if they want to do it on a trial basis that they ask for a signed proprietary agreement indicating their ownership of work product, which if incorporated by the client binds the client to pay them at least copywriter fees of some set amount. If the client is really just wanting to be sure the person can code up to what they want to see they will sign it. If they are trying to get something for nothing they will run backwards. Candidates usually take a run backwards as a big red flag and don't give away the only thing theybarevwilling to trade.

In Maren's case it's pretty tuff to take back an idea after somebody hears it but the same thing will work. The good guys will sign something the users will not. And don't ever leave a portfolio. Present it and take it home with you.

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