3 Reasons to Sell Engaged Searches
04/02/08
In my experience, I have always advocated engaged
search assignments versus contingency. Now don’t get
me wrong, contingency has its place, but I have
always felt that if I’m going to spend time working
on a project I should get paid something for the
time. Would your clients still show up for work if
their company decided not to pay them? I doubt it, so
why do most Search Consultants have trouble asking
for an engaged search assignment? Is your time not as
valuable as your clients? Is it that Clients won’t
pay it? Is it that there is too much other
competition? Or is it any number of other reasons
that we can dream up? From my experience, the primary
reasons for not asking for an engaged relationship
boils down to two things: 1) Management not
supporting or advocating the arrangement and 2)
Managers and AE’s not clear on how to position the
idea as a better arrangement for both parties. In
twenty plus years of running a search firm, one of
the things I have learned is that the more engaged
searches you have the more stable your business will
be. Below are 3 good reasons for emphasizing engaged
searches with your business:
1) Financial advantage for both parties – A long-standing complaint of clients has been the perceived notion of high fees for searches. This ridiculous complaint is only compounded during tough economic times when budgets are cut and scrutinized. Therefore making an engaged deal where your fees are reduced from 30% to 27% (or any other number you feel comfortable with) paid in three installments with the first installment being non-refundable fee for engagement of your time and services, provides the client with a savings and you with a guaranteed revenue of 1/3 the placement fee. Sure you are giving up some commission if you make the placement, but considering that history indicates most offices place one person for every five to seven orders it writes, the guaranteed income from the engagement fee more than makes up for it.
2) Greater level of commitment for both parties – How many times have you or your staff called into a company and walked away with what appears to be a great job order in hand. Then after 3 weeks of work to create a short list of candidates, you suddenly cannot get the hiring authority to pick up the phone or call you back? If they paid you a third up front, I bet you would never happen. On the same front, research has shown that one of the biggest complaints clients have is that they give an assignment to a search consultant, only to never hear from that search consultant again. Now we all know that is true, because on a contingency basis I am going to go where the money is. However, if I had an engaged assignment, where I was paid for my time, I am now motivated to have a robust conversation with the client about their search. Greater commitment by both parties to participate actively should be enough for everyone to prefer an engaged search.
3) Improve your cash-flow: One thing that has always irked me about the way the search business is conducted, is how we get paid. Isn’t it ludicrous that when working on a contingency basis we have to wait until we conduct the search, find someone, present them, secure the offer, ensure the transition, the person to start, then invoice, and finally, if we are lucky, get our money in 30 days. How insane is that? By constructing an engaged search on the parameters of the OPS fee arrangement, you ensure more timely payments and greater cash-flow for your operation. The OPS arrangement is based on spreading placement fees of equal amounts over three installments, the first on “Origination of the order”, the second at “Presentation of candidates”, and the third when the candidate “starts their position”. By doing this, you receive payment for time progressively in response to your efforts, as well as more timely. In addition, since the three installments are significantly lower than one lump-sum payment, most of your hiring authorities can get your payment processes a lot easier. It also eliminates your AR report from becoming to bloated with past due payments.
In uncertain economic times the most important metric for any firm is cash-flow. By increasing your efforts around obtaining engaged searches you will find that your client satisfaction will go up, your placement ratios will increase, and most importantly your bank account will stay out of the red.
1) Financial advantage for both parties – A long-standing complaint of clients has been the perceived notion of high fees for searches. This ridiculous complaint is only compounded during tough economic times when budgets are cut and scrutinized. Therefore making an engaged deal where your fees are reduced from 30% to 27% (or any other number you feel comfortable with) paid in three installments with the first installment being non-refundable fee for engagement of your time and services, provides the client with a savings and you with a guaranteed revenue of 1/3 the placement fee. Sure you are giving up some commission if you make the placement, but considering that history indicates most offices place one person for every five to seven orders it writes, the guaranteed income from the engagement fee more than makes up for it.
2) Greater level of commitment for both parties – How many times have you or your staff called into a company and walked away with what appears to be a great job order in hand. Then after 3 weeks of work to create a short list of candidates, you suddenly cannot get the hiring authority to pick up the phone or call you back? If they paid you a third up front, I bet you would never happen. On the same front, research has shown that one of the biggest complaints clients have is that they give an assignment to a search consultant, only to never hear from that search consultant again. Now we all know that is true, because on a contingency basis I am going to go where the money is. However, if I had an engaged assignment, where I was paid for my time, I am now motivated to have a robust conversation with the client about their search. Greater commitment by both parties to participate actively should be enough for everyone to prefer an engaged search.
3) Improve your cash-flow: One thing that has always irked me about the way the search business is conducted, is how we get paid. Isn’t it ludicrous that when working on a contingency basis we have to wait until we conduct the search, find someone, present them, secure the offer, ensure the transition, the person to start, then invoice, and finally, if we are lucky, get our money in 30 days. How insane is that? By constructing an engaged search on the parameters of the OPS fee arrangement, you ensure more timely payments and greater cash-flow for your operation. The OPS arrangement is based on spreading placement fees of equal amounts over three installments, the first on “Origination of the order”, the second at “Presentation of candidates”, and the third when the candidate “starts their position”. By doing this, you receive payment for time progressively in response to your efforts, as well as more timely. In addition, since the three installments are significantly lower than one lump-sum payment, most of your hiring authorities can get your payment processes a lot easier. It also eliminates your AR report from becoming to bloated with past due payments.
In uncertain economic times the most important metric for any firm is cash-flow. By increasing your efforts around obtaining engaged searches you will find that your client satisfaction will go up, your placement ratios will increase, and most importantly your bank account will stay out of the red.