Competing on price in recruitment is a slippery slope to oblivion

Last week I blogged on how competing on speed and volume alone was not the way .... Today I turn the attention to price.

The question of fees and margins in our industry is a sensitive and difficult one. The fact is that clients resent our percentage-based permanent fees structure, and it’s easy to see why. What is harder for both clients and recruiters to see is that it’s the very pricing system our industry operates on that inflates our fees.

Contingent, success-based fee structures drive costs up for clients because essentially clients who hire through our industry are actually paying for all the time recruiters spend on orders they don’t fill.

True story.

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But even so, our industry is largely clueless when it comes to justifying our fees. The conversation seems to gravitate quickly to ‘our fee’ vs. ‘the competitor’s fee’. There is nowhere to go when you are comparing 20% to 18%. It’s an empirical fact 20% is more than 18%. So typically those fee negotiations are short and result in a big ‘lose’ for the recruiter.

In fact the conversation needs to be steered on to value. We need to talk about differentiators and benefits we can bring to the client that are unique. And increasingly we should focus those value adds in the area of talent acquisition. Really, quality process should be a given. The real value in your fee resides in your ability to bring better qualified talent to the clients business.

Competing on price alone is the final competitive weapon of he or she who has nothing else to offer. And it also results in the very essence of what we do as an industry being devalued in the eyes of our clients.

Don’t drop your price. Up your offer.