Consultants don’t like to admit their fees are negotiable. But over half the ones referred to our offices for collection are below the amount on the fee schedule. This says two things: Reducing fees is a common way to do business and a common way to invite collection problems.
This shouldn’t surprise you. Compromising your fee is compromising yourself. It’s as though you’re telling a client “I really don’t believe my services are worth what I charge.†Oh, you don’t say it like that. You just agree to the client’s “standard fee.†Or you don’t clear the fee at all.
If you want to compromise yourself, that’s your business. It doesn’t end there, though. Employers are able to manipulate you. If you don’t agree, they simply work with your competitors. The result? Compromising your fee is compromising the placement industry.
Here are my opinions on the subject:
1. BELIEVE THE FEE IS FAIR
There is a perception among consultants that the fee is “too high.†This is frequently conveyed to the employer. It’s essential that you recognize this and deal with it before we go any further. If you need justification for the fee, check out Chapter 13 in The Placement Strategy Handbook. Or just look at your bills for a while. And keep a picture of your dependents on your desk. If none of these things work, maybe the answer is to lower the amount on your fee schedule so the exceptions become the rule.
Stephen Gillers advises in I’d Rather Do It Myself, a primer for lawyers:
The belief in the value of what you’re selling must be yours . . . If you know it so will the client. If you don’t, most of your clients will eventually know that too. If you lose the client because you want to get paid, you’re better off in the long run. This will be as true in your tenth year as it is in your first week… You sell time and, despite your willingness to work hard and sleep on your desk, there is a finite quantity of time available for sale… [This is] the only time… when your interests and the client’s interests will conflict.
2. EXPLAIN WHY THE FEE IS NOT NEGOTIABLE
The most persuasive reason is that it’s not even a fee unless you locate a candidate who is hired. You bear all the risk of fully performing and not getting paid.
There’s only one advantage to contingency-fee placement: Flexibility. In exchange for no commitment on the part of employers to hire, you can work with anyone you like.
Here’s how I recommend you reply to “We only pay a maximum of 20%.â€:
Our fee schedule is 1% per thousand dollars of annual starting salary to a maximum of 30%. We don’t negotiate the fee because we have no way of knowing how much time, effort and expertise will be required to locate and recruit qualified candidates for you. If we reduce our fee, you’ll be competing for our resources with other clients who pay the standard amount.
This is the same with all contingency-fee recruiters. The difference is that we tell you, because we want to devote the maximum resources to assisting clients. So unless you’re willing to pay a non-refundable retainer for exclusive assignments, reducing the fee of a competent recruiter is just reducing the scope and intensity of the search.
Since you won’t even pay a reduced fee for unqualified candidates, you’re just going to be wasting time interviewing them while critical openings remain unfilled.
We bear all the risk. If you don’t hire, you don’t owe anything. But we think you’ll feel differently about our fee when you see the quality of our candidates.
It’s a “value-for-value†relationship.
In How to Sell Your Ideas, Jesse Nirenberg explains why this approach works so well:
[Y]ou have to sell the fairness of all your offers… If you don’t justify them, it seems as though your guiding principle is to get the most for the least. Giving this impression hurts the relationship. For it means that you’re willing to deprive the other person of what he should have… If you finally accept much less than your initial request, the other person is likely to think that you’re trying to get much more than is reasonable.
Most employers don’t have the vaguest idea about the amount of time, effort and expertise that goes into earning a placement fee. That’s because they don’t care. But they care about filling that requisition. And if agreeing to your contingency fee will fill it, they’ll agree.
Starting out as a recruiter, I never realized this. Then I became a personnel manager.
3. REMEMBER YOUR ROLE
Unlike other hiring sources, a recruiter is an extension of the employer’s staff. So it’s natural that you want to develop a long-term relationship. You might even think reducing your fee is a way to do it. Just the opposite is true.
Your willingness to modify your terms should increase with the number of placements. That way, you’ll know whether you’ve got a client or merely an employer. You’ll know whether the hiring authority accepts your recommendations, or whether you’re just a glorified employment interviewer. Most importantly, you’ll know whether it pays your fees regularly.
The predictability of an ongoing relationship is worth money. So extending a guarantee, reducing a marginal fee, or going an extra step is something that will come naturally.
Just be sure you follow the advice of John Ilich in Power Negotiating:
[B]e certain that the concession [does] not transfer negotiating momentum to the opponent. The best way is to be certain the reason for making any large, initial concession is fully explained prior to making it, so that there is a realistic basis, and the opponent does not gain the impression that it was made because your position was weak.
In addition… concessions should be made on a “something-for-something†basis. You say, in essence, “Okay, I’ll concede on this if you will make a correspondingly large concession.â€
[T]hus, the danger of momentum shifting to the opponent is greatly minimized.
Reducing fees with an employer that hasn’t become a client is swinging on the fees trapeze without a net. We used to spend hours at monthly personnel management meetings talking about it. Those who paid full fees were regularly embarrassed by those who didn’t. And the credibility of the high-flyers who swung back and forth was lost forever. The lowest percentages became the only percentages. Everyone knows about circus people.
If your fees are too high, lower them. If they’re too low, raise them. But don’t compromise them: It compromises you. And it compromises the placement industry.