Namaste Recruitment – (Article # 3 of the series)
The most ridiculous question someone can ever ask about his own profession is why I get paid? Or more correctly, what is it for which I am paid?...While the confusion looms large over Consulting as a profession and for the Recruitment Industry in particular. In fact, it is interesting that if the same question is asked to a Client and also to the Recruitment Agency, the answer differs! While consultant would say that, it is for my expertise and the other may say, for a successful hire or the few CV’s or for the referral.
Life would have been much easier if every time, the worth of anything was understood in real terms whether it is to do with price of a service or the value of an asset. In the consulting profession, I have observed that there are multiple methods with which the cost of service / fees is calculated. I mean, as per the consulting specialization you are in and what the Industry practices. It could be a Man-hour/Man-day based fees, Result based fees or a Percentage fees on the value of an outcome or a flat fees and so on. When I checked with some of my Industry friends from the Consulting domain, it was interesting to note that most of them based their fees on what the Industry practices are. I asked “Isn’t the differentiator in Consulting, the quality of solutions or the advise, the knowledge, the time factor, the experience, etc and accordingly the fees…..Sadly some of my fellow consultants and the Clients who pay them do not believe the same way. Not surprising, that many of the consulting firms today is termed as a “VENDOR”…a name and category most unsuited for a consulting solution or service that is offered! Never mind….Supply chain, its terminologies and differentiators in itself is a subject to deal with and I shall at some time later will make an effort ….Why is a consultant different from a Vendor…and the nomenclature should not just be made to suit the ERP package but in essence as well!!!
To my mind, Cost of any service or product is understood with what is in offer or delivered. Which means there is a price for a product A, there is a fees / price for service B. While a product is tangible and evaluated with its features and dimensions, how do you price a service? Most easy method is to define the service with the expected result or we call it – SCOPE of service. SCOPE of service is many a time the funniest part of the agreement or contract to service. SCOPE is defined with a few good words and in essence the expectation of methodology of delivery and result of service is far from the way scope is defined. Even when a scope is defined, which may run into paragraphs or multiple, the degree of difficulty is on the increase, for comprehending it….far from it is, the right pricing!!!
Case in Point: Let me deal with this question which I would love to ask many of my friends from the Recruitment Consulting Industry….
- How do you normally charge a Client for the recruitment services that is provided? Answer normally is simple----“as practiced in the Industry across India”….Firstly, we charge a Success fee (this would mean, when a candidate is hired through the agency is only when it gets paid). Very well understood, I say.
- What is the basis on which you charge the fees? Here comes the answer phut…..a fixed percentage based on the annual CTC offered to the candidate. (CTC stands for Cost to Company). He continued….most of the times CTC is after deduction of retrials and some benefits…..here comes the arrow that pierces my understanding and I start my preliminary argument…..Why are these deductions, When CTC means Cost to company which should ideally include every element paid to an employee by the company as a part of the remuneration!!! Better, the terms can be that the fixed percentage in such cases is based on the Net/Gross pay as the case may be rather than the CTC and the contract must mention it accordingly. Saves the Pain of arguments!!!
- What are these fees paid for? The answer is quite simple and straight as understood…It’s for a successful hiring. Okay, but what happens when a Consultant has put in let’s say 10 man-days over a period of a month and suddenly when the client declares that the position is internally filled or through other sources or on hold or cancelled? There is a definite pain point at the Recruitment consultants end in such cases. His manpower and their time are engaged for a certain period and the efforts go in waste, some time for no fault of his. Worldwide, fees based on time spent, is an accepted norm as far as other areas of consulting is concerned irrespective of outcomes but here it is different. There are various permutations and combinations of events that can happen in the recruitment process and hence high amount of complexity in its evaluation.
However, we see that most of the clients and consultants subscribe to Job portalsand the cost involved is not based on outcome of success but the usage of the data. Why are two tools for Recruitment priced differently or the pricing model different ??? While an interactive service from a consultant which also encompass a broader scope is paid based only on a successful outcome, a digitized non interactive format of source is paid for, based on the usage that one has subscribed. Guess it’s time to think on these lines and position & price your service accordingly. Again all of these will largely depend on the dependability a consultant can create with a Client. Why is the dependability created by a Job portal much higher than that of an experienced consultant???
To my mind, it isn’t a bad idea to split the fees into two
a) Sourcing the CV/Candidate which is accepted for further process by the client
b) Coordinating and managing the process into a successful hire!!!
This model of engagement pays for both
- The consultants Experience & knowledge lease
- Quality of service with a successful outcome
It’s definitely time that the Service benchmarks are created to ensure a new consulting regime in recruitment which accounts for the “Engagement time and the knowledge & experience sharing or leasing”. Then the future looks that of expertise and Value…..
For more on Namaste Recruitment…(Keep reading this space and comment or write to me on email@example.com)