6 Facts to Understand the Price of Headhunting
Why does headhunting cost this much?
I propose we unfold together what is really behind those ‘20 to 35% of the annual package’ success fees. (As a reference, internal corporate recruiting is estimated to cost anything between 6 to 12%)
Why are you paying this much? Can we do something to reduce this cost?
#6: Recruiters are made of rare materials
First of all, a competent headhunter with the ability to understand his or her clients and later actively hunt for the right candidate is not an easy thing to find.
It is a very smart and robotic job at the same time. There are plenty of hard and soft requirements to always keep in mind and prioritize in an ocean of people to reach out to. There will always be demands to connect, emails, cold calls, receptionist bypassing, etc. A headhunter faces countless frustrations and rejections on a daily basis. Combined this makes the job a particularly tough one for which not so many people can survive in the long run.
We do not always enforce the cape in our dress code
To compensate the above and to ensure that everybody is hungry for closing, there are commissions at many levels : recruiters, sales, managers, sometimes even accountants.
#5: Posting & job advertising
A recruiting company will try to maximize its subscription to as many job boards as applicable, as well as paying to create specific job postings. The company will endure those cost without any upfront money from its many clients. When you handle dozens of new jobs a month those seemingly small costs begin to pile up into something much more noticeable.
#4 Everybody craves attention
Regardless of whether a headhunting company has a strong customer base or not, with so many actors on the market every company needs to keep being active on sales and marketing. As with so many other industries, recruitment has almost entirely shifted to the internet. Recruiting firms have engaged in a digital war with its players on top of investments in IT to develop new recruitment solutions and platforms.
#3 Legacy pricing models and the death of glorified databases
The recruitment industry has inherited its pricing from an entirely different age when the internet and social media did not exist. You can easily imagine how having a database of thousands of qualified and verified CVs within an industry could provide an incredible service. During this time, a hiring manager would likely only have access to the several hundred business cards they collected along the years.
Meanwhile, the internet revolution happened, Linked In happened, global job boards happened and so did many other technologies which allowed recruiters to more easily connect with people.
With global information and access to a global network of people, there is no reason to pay an extravagant price anymore when almost everybody can connect to anybody given enough time and perseverance.
#2 Unreasonable expectations
Due to their investment in utilizing a professional recruitment company, some clients expect to hire (and I quote) true ‘saviors’. These customers seek flawless, educated, multi-job, multi-lingual experts who will literally turn their department around while proposing very modest wages.
It is not always easy to detect these demands before getting further in the process.
“Basically I want to hire someone who can do my job for half my salary”
Setting the bar so high makes recruiting and hiring much harder and hence pricey. Companies would be better investing in good training and a strong onboarding strategy to help bridge the gap.
#1 Risk aversion
Even if the client has reasonable expectations and favorable economic conjecture, the fact that most companies work with many different headhunters simultaneously and in addition to their internal HR is directly reflected in the price.
From the client point of view, it seems to make sense to put in competition as many headhunters as possible to maximize the result.
In reality this practice has many bad impacts.
- It is creating waste. A recruiter can do everything right and yet submit a successful CV just one hour later than the competition doing the same job and submitting the successful CV first. This double work wipes out all of the work done in other firms.
- Recruiting companies are tempted to play a nasty game of racing to be the first one to submit a CV. This results in very approximate recommendations and lowers the quality of the service or cripples the chances for firms who do not play the same game.
- It hurts the client’s image when candidates are contacted many times for the same job. It makes the company look desperate and unattractive.
When a recruiting firm considers it’s pricing for an aggressive hiring client, it has to take into account that not less than 60% of its investment in time and resources could go to waste.
Conclusion: A headhunter should be treated like other suppliers
When you think about it there aren’t many industries like this. 90% of the work is done prior to securing any sort of payment and with considerable chances that your work will entirely go to waste.
My advice is to treat recruiting companies as any other supplier. Take a manufacturing supplier for example. Companies do not make all of their suppliers manufacture the same part and then at the end of the production, pick and pay only one of them leaving others to throw away months of work.
Instead, develop a real partnership with your recruiting firm. Treat your recruiting partner as a critical component of your business and not just another vendor. Recruiting firms can take great value from a perceived partnership as this provides assurance of being paid and for obtaining future projects.
Prices will naturally go down and the service quality will increase as this industry will look less like a dog fight.
Any other day between 2 recruiting firms