BY: Ron Proul, CEO
Stellar recruiting strategies are key to company growth, but some tactics designed to save on recruitment costs end up undermining your goal of attracting the very best talent.
According to LinkedIn’s Global Recruiting Trends report, 35% of businesses cite “limited budget” as one of the biggest talent acquisition challenges they face. But in implementing cost-saving strategies, many companies are losing sight of what provides the most long-term value and ROI when it comes to talent acquisition. In the last installment of CG Recruitment Trends, we looked at how engaging recruitment firms yields a greater ROI than investing solely in internal talent acquisition. This week, we examine the three ways companies undermine their ROI in recruitment by negotiating reduced fees and markups.
Losing Out on Talent
Let’s talk fees. Because what we do as recruitment professionals is incentive-driven and we work on a contingency basis, negotiating deep discounts is a less-than-effective strategy and counterproductive during a talent shortage. In a highly candidate-driven marketplace, a company deciding to reduce the amount they are paying for talent defies the most basic economic law of supply and demand.
The most talented professionals work on assignments that pay at market rate for services. Lawyers do it, accountants do it and the best recruiters do it. When a company negotiates a deep discount, they move down the food chain, and come out short when it comes to acquiring top-tier talent. In a competitive market, the best candidates are going to go to the highest bidder. Period. Paying less than market value for a candidate takes a toll on the quality of your candidates, as well as your employee retention in the long-run.
The Value of Time
Negotiating lower fees also limits the amount of time that recruiters are able to dedicate to a search, ultimately prolonging the process for the client.
When you work on a contingency basis, you get rewarded based on the hours you put into a job. Put yourself in the recruiter’s shoes for a moment: a work year is 2,080 hours. If a recruiter gives a 20% discount, they have to work 460 more hours to make up that time. And if you find a recruiter that is looking for an extra 460 hours of work at a discounted price, what kind of professional are you hiring?
The only way the discounting argument could logically pass muster is if the client said, “We are going to streamline the hiring process and let you and your firm make our final hiring decisions.” Sound ridiculous? Well, of course it does. So why does a discount seem like an effective way to motivate a recruiter with a fixed amount of time to produce the same volume of work? The math just doesn’t add up.
Recruiters are going to prioritize and invest their time in the searches that will bring the greatest value. When companies negotiate reduced fees, they are inadvertently reducing the amount of time a recruiter can dedicate to a search, undermining the ROI of engaging a recruiting firm.
Discounting Your Search’s Reach
Over-negotiating reduced recruitment fees also diminishes your search’s reach. At recruitment firms like Century Group, recruiters are encouraged to work on placements together, which ultimately magnifies the scope of your search as well as results for the client. When companies try to negotiate deep discounts, it makes it difficult for recruiters to get the whole team to work on an assignment. There isn’t an incentive for other team members to provide candidates — unintentionally shrinking your search’s reach, and making it more difficult to reach passive candidates.
In sum, when companies try to negotiate deep discounts, the return on their investment in recruitment suffers when it comes to talent, time and the reach of a job search. Fee-reducing strategies employed by the client are often the result of a phenomenon we’ll explore in the next installment of CG Recruitment Trends: recruiters not adequately presenting their value proposition.