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How I Learned About Value

"You charge $20,000.00 to get someone a job?" (in 1990's dollars!)

How I Learned About Value

By In Blog On January 19, 2017


Excerpted from Modern Job Search / Chapter 1: 

Value is the beginning. It’s objective, measurable, communicable and transferable. Our society and economy operate on the exchange of value.

The first time I really thought about value was during a job interview at an executive search firm. I was 25 years old, a couple years out of college with a degree in English Literature and floundering in a job market and economy that I largely didn’t understand. I was making a living selling insurance to small businesses but I was unhappy. I felt that there were other things out there for me and that I could do more. The interview was for a position as an executive recruiter, a type of business that I had never even heard of at the time. I had just been told that the average fee collected by this firm for getting someone hired with one of their client companies was almost $20,000.00. I was shocked! How in the world could they get away with charging so much just to get someone a job?

Clark, the interviewer, co-owner and founder of the firm, had my attention. These people were making good money in a slow economy. They looked relaxed and sounded smart. The office was nice, well appointed, organized, and professional. I could see myself there.

Clark had a vision and I had fortunate timing. I never applied for this job and it was never advertised. Instead, I wanted to test my English degree in the world of finance and was looking for a job selling securities. The opportunity to meet with Clark came as a result of an earlier interview with a partner in a small brokerage firm. The original interview was more of a favor to my parents than something I earned. The partner at the brokerage firm, Steve, was a nice guy and I must have done well enough in our conversation to spark some interest. I can’t recall what we talked about. He said he would like to be able to give me a chance but he couldn’t just then. Instead he told me he would give my name to a friend of his who was considering bringing in some help. I had no idea what business Steve’s friend was in and he didn’t say.

Clark called me a week later and after a long telephone conversation, he invited me to come in to speak with him in person and meet some of the other people at the firm. It was an interview. Even after talking with Clark on the phone I was still unclear about what his firm actually did to produce revenue. I understood his idea though. Clark wanted to see if he could take one or two people right out of college with no measurable experience and develop them as corporate headhunters. For him, this was something new, an experiment. The other people on the staff at his firm were industry veterans from companies like General Electric, Coca-Cola and International Paper. Clark came from GE. In his last position he was a Vice President of Materials Management for GE Medical in Milwaukee. A few years before our meeting, Clark and his wife, Carol, a psychologist, decided to leave GE to move to Savannah and open an executive search business. They were doing very well and it was time to grow.

“You charge $20,000.00 for getting someone a job?”

That was my level of understanding when he first said it. He showed me the white board where each recruiter listed their work-in-progress. At the top were the placements for that month with the fees charged written beside the names of the companies and candidates placed. Below the placements were lists of interviews and potential placements that might close this month. The total production for the month was summed up at the bottom. This very small group of people was producing over $100,000.00 a month, every month.

Why were companies paying so much for this? Or rather, the question that I would not be able to answer correctly for some time yet: What was the value these headhunters exchanged for that $20,000.00 fee?
It took a couple more interviews for me to finally work up the nerve to ask Clark for the job. I got it. It would take me another year and more to figure out how to make a living at it.

The answer to the question about the value a recruiting firm brings goes something like this: In a typical hiring scenario, particularly in cases where the position requires very specific expertise, the normal hiring process might consist of placing advertisements in a variety of media, having the human resources staff review resumes, schedule interviews, both telephone and in-person, and ultimately, hopefully, identify a well-qualified candidate then blindly make them an offer.

In terms of time and resources, the interviews alone can be very expensive. Conducting a lot of interviews to find just the right candidate can be prohibitive. For example, on-site interviews for most of my projects require flying candidates and sometimes even managers into a central location to meet. From a total cost standpoint, it is easy to see how simply interviewing; including candidate selection, staff setup time, short notice plane tickets, hotel rooms for both candidates and managers imported from other divisions, and everyone’s time, can be pricey. Therefore, reducing the number of interviews required to fill a position is one way to create value.

In many cases, the fee paid by a company to a corporate headhunter is really a cost savings when compared to the amount of time and money that might otherwise be spent on advertising, logistics, travel and other expenses, including on-site interviews. Even fees far exceeding $20,000.00 can become efficient for large companies that need special people.

Instead of creating, placing and paying for advertisements, reviewing hundreds of resumes, scheduling series of telephone screens, inviting multiple candidates in for on-site interviews, and finally taking chances on offers; my clients save money by only having to look at two or three resumes, schedule two or three telephone interviews and maybe only fly one candidate in for an on-site interview. Since I help negotiate their offers, we are also able to greatly reduce the risk of turn-downs and failure. Add to that the potential for getting the whole thing done a lot faster and there’s a pretty good case for going to an outside expert.

This is the value I deliver as a headhunter. I save my clients money by reducing the time and effort required to fill critical positions. My compensation, the fee I charge, is derived from both the value the market places on the service provided and as a reflection of the costs avoided. This is how I suggest that job seekers define their roles. One way of doing this is to take a step back and look at the big picture.

(Photo:  Los Lances Beach, Tarifa, Spain 2012)

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