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The flat fee debate starts #truManchester

September 3, 2010

Lis Wilson of #HRConnexions contacted me recently, asking to lead a track on flat fee recruitment. It’s a good debate. Typical with any #tru event, anyone can host a track on anything they want too. I’m glad we could oblige, and Lis will be leading her track day 1. Please join her.

To prepare for the track, I sent out a tweet asking for views on flat fee recruitment. One of my follows, Jack Barton of Oyster and Ocean partnership, and JobshopHQ felt so moved he blogged a reply to start the debate.

Recruitment Will Eat Itself (R.W.E.I)

When will we ever learn to work together as recruiters in this country?  Not in a Hays / Randstad / CDI AndersElite et al price fixing cartel type way though, certainly. Time and time again I see recruitment businesses undercut one another and subsequently devalue and undermine the quality of service it is then possible to provide.  When did that become the UK mentality?  In America for example, competitors see one another charging 25% for recruitment services.  Their mentality is to approach the same client and to offer the same service AT THE SAME PRICE.  In the UK our first thought is to undercut, over and over again.  Why?

For the most part, clients now look at pricing above everything else – they have cottoned on to the fact that many recruitment companies are so desperate for work they’ll agree to almost anything to work on a job or for a prized place on a PSL where they’re probably working at 8% and getting paid in 90 days.  Of course we have all seen this before – in a boom market these clients are the first to receive poor service as recruiters leave them in their droves for the 25-30%ers.  The main issue is that those recruiters that started the undercutting have most likely left the market because you know what, low margins don’t pay the bills.  If they did, we’d all have an office in Inverness employing untrained phone monkeys on 12k basics.

What’s the point of employing talented individuals, spending 18 months developing them professionally, basing yourself in a good working environment and striving to provide quality service if all you’re going to do is work at eye-stabbingly poor margins?  I turned down another revised VMS rate agreement today for The London Borough of Bromley.  Sorry Comensura, you’re usually pretty reasonable to be fair.  I know your earnings are based on annual savings splits, but we’re not going to work at 10%.  Don’t even get me started on Matrix.  Anyone with an ounce of sense will be able to work out that this business model doesn’t work, and until companies have the guts to start saying “No”, the same elements of our industry that outsiders frown upon will continue to exist because that is all we will be able to sustain.  The Oyster Partnership is a specialist provider of Public Sector recruitment services and client after client are now being denied our services.  It turns out that there are plenty that are available to replace them.  After this shift in strategy our GP is up by over 20% on the same period last year with the same number of consultants.

Don’t give away your hard earned skills for nothing.  Back each other up.  Value what you do.  Don’t panic. Support each other and swap skills where you can.  Run sustainable businesses.  It will be better for everyone in the industry and we will all be able to give our clients the levels of service they deserve and demand.

So what do I think of flat fee recruitment?  If you give me £299 I’ll have the answer for you within a month.

Jack Barton

Director

The Oyster Partnership

Over to Lis. Have your say.

Links In This Post

Oyster Partnership

Ocean Partnership

JobShopHQ

HRConnexions



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5 Comments leave one →
  1. September 6, 2010 1:43 pm

    Cheers Jack for such a passionate start to the Flat Fee debate at the #trumanchester event. I will try and keep this response succinct, to allow a more in-depth discussion on the track.

    You are quite right in what you say; what is the point of employing and training talented individuals to provide a full recruitment service at rock bottom rates? This would not make good business sense at all. I think here-in lies the point: Understanding the difference between “cheep fee recruitment” and what is now, a recognised industry termed “Flat Fee Recruitment”. The two are very different, and I think what you are describing, is the former.

    Fees in traditional, contingency style recruitment will consistently fall under scrutiny. Many of the big high street agencies who have national or global contracts and the Outsourced / Vendor management specialists, can justify low margins because of the sheer volume it returns. How can a boutique or niche agency offer this when their USP is to understand the client and the market, they can advise and assist in areas that these volume providers can not and why should they reduce their rates when this is the expertise that the customer is paying for? This would be “cheep fee recruitment”

    But what about the customer who has an in-house recruitment team (becoming ever popular)? Or the client who just needs candidates through the door and doesn’t have the buying power or internal resource to cope with the volume of applications from job boards? What about the customer who probably knows more than a recruiter in how to recruit for their company, but doesn’t know how to attract them in the modern world? Should these employers be limited to a single option of a % of salary from a traditional recruitment consultant? Or, should they have the option to choose a viable solution, with a limited service, that suits their needs and budgets?

    The Flat Fee Recruitment model, as I describe, is a relatively new concept. As innovative creators of this model, my concern is that; what could be a happy medium between full a service recruitment agency and DIY, is getting tarnished before it has had chance to mature. Is it a lack of understanding of what services are on offer in the market, or an increase in providers offering the “cheep fee” recruitment model?

    Finally, for every good recruitment consultant, there are 100 bad ones who have all contributed to creating a very poor image of the recruitment industry over the last 30 years. So, it is hardly surprising that employers are looking at alternative ways to attract and recruit talent in their businesses. With the developments in software, job board & internet advertising, careers pages & social media etc this is only going to encourage creative thinking for companies as they lean away from the traditional methods. And, let’s not forget that applicants are also fed up with traditional recruitment agencies – demonstrated in the huge increase of “direct apply” to organisations.

    Where does that leave the traditional, contingency recruitment model? Should we all continue to do what we have been doing for generations, or look to supply the client with what they need?

  2. September 6, 2010 9:22 pm

    Hi Lis

    Succinct response that I think outlines the parameters for your business, and it’s hard to argue against.

    The question I have for you, is do you think flat fee recruitment is a scaleable business or is it a good, solid lifestyle way or working?

    Also, you keep mentioning and distancing yourself from “cheep fee recruitment”. I guess that you don’t employ many birds?

    Best regards

    Jack Barton

  3. September 7, 2010 12:52 pm

    Ha Ha Jack – Brilliant!

    I suppose the model is scaleable if you look at companies like Webrecruit & Easyweb et al. But the very nature of the model I described is ideally suited for the SME employer. This has its limitations in the current climate & subsequent limited recruitment requirements from this market. It is also these companies who see the greatest value from a good, traditional recruiter.

    Personally, I see the market evolving to a more sophisticated approach as employers get more brand conscious, want to retain talent pools, get more E-Recruitment savvy and the social sphere continues to grow momentum.

    Shame you won’t be there tomorrow to continue the discussion in person.

    Tweet tweet! (the cheep fee recruiter, not the cheap fee recruiter) 😉

  4. September 7, 2010 6:50 pm

    Lis I’m just picking this up as I’m getting ready to pop out for pre-#truManchester beers!

    Look, I do not blame businesses like yourself doing, what you do. Simplifying aspects of the recruitment process, I can see. Taking away bits of expertise, and replacing them with “what the client wants”, i.e. something good, for less money. Not cheap recruitment, sure – but cheap-ER, right? – and let’s be fair, I’m imagining you need to jump through less hoops for the client…?

    Sounds blissful.

    But IS it what the client wants? – do they want the recruitment service on a slimfast diet? – or do they want to feast on a Tasty Steak with a juicy sauce? I believe they WANT the latter – but as you correctly mention – it is not being given by the increasingly shoddy incumbent of the recruitment agency desk.
    Does that mean we should abandon more traditional recruitment expertise, to offer a tidier and cheaper solution? I think not. I say we educate recruiters to do better. Get big corporates to cut their bulging headcount and 30% retention rates, and stick with GREAT recruiters who deliver results, not sales calls.

    The discussion will be a good one for sure at #truManchester – and good on you for pushing it to the agenda. It’s relevant. I’m just not sure its the way recruitment should be heading…

    But like I say, I’m an entrepreneur – I don’t blame you for doing it.

    Steve

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