Why this “no foal, no fee” business model doesn’t work for anyone!
Sandra Lawler Marketing
The recruitment business typically operates on a “no foal, no fee” basis. Simply put, it means that the client doesn’t pay until and unless the recruiter finds someone who joins their company.
The model sounds like it’s almost free, yet the final fee is always considered expensive. When you look at this model in-depth, it’s simply one that I think doesn’t work for anyone. So perhaps it’s time to change the model for better results?
The big issue is there’s no upfront cost or joint commitment. It seems easy and without consequence, to bang out the brief to say 4 agencies. The client thinks they now have 4 agencies doing in-depth work, trawling the market for the very best talent and that on top of their own efforts, they’re sure to find someone.
But what’s really happening?
Firstly, to be clear, finding great talent takes time and skill. If it’s easy to find talent, companies will do it themselves.
So identifying great talent involves the agency (us) putting in years of building knowledge of who’s reallywho, then days of deep searches, of talking to people, judging their skills and importantly, their culture fit and career aspirations and then managing an often long and complex interview and feedback process. A robust process can take several weeks end to end. It’s not, as many think, the result of a quick “database” check. It’s not plucking a rabbit by the ears from a hat.
Putting in the effort needed requires your role to be prioritised by the agency. From an agency perspective, when just one agency is briefed, ie when we get to work on a role exclusively, we have in theory a 100% chance-still not a guarantee- of being potentially able to close the role and get paid a fee at all.
If however 3 agencies are briefed this reduces to a 33% chance. If 4 are briefed it reduces further to only a 25% chance from the outset of closing the role- and of getting paid anything at all for weeks of work. Meanwhile the agency owners are paying their staff good salaries and so the unsuccessful 3 out of 4 are financially out of pocket for working on the role that didn’t close for them.
People accept this as the norm for recruitment but would be shocked if anyone suggested that they provide their consulting/ telco/ financial services or products for free for any period of time.
If you’re in hiring mode you might say the model isn’t a problem for you. But I beg to differ…
What can happen? The agency is by necessity likely to spend a more limited amount of time on the brief when it’s been briefed to other agencies too. They’ll also have to prioritise the roles they have been given by other clients on an exclusive basis. They’ll identify the more obvious talent, and once that’s done, they may have to move off the role. So you might not get the deep search that’s required to fill those hard to find roles.
(To be clear one of the reasons Alternatives has been successful and are go to people for hard to find marketing, digital and customer talent, is that we do prioritise roles and stick with them-to the very end. But I also know that we sometimes do that at a cost.)
Continuing on, you’ll also get those 4 agencies potentially contacting the same, quicker to find, “obvious” talent. The candidate, particularly those at mid to senior level, feels like the role is out in the market with everyone, does not feel especially and confidentially selected for the role. They feel they could be up against loads of other people. The best people are often very happy where they are and this multi-agency approach will simply just not work. It’s a terrible corporate brand experience at a time when hiring great talent is critical.
In addition, the client’s HR team are driven crazy. They have 4 times the amount of agencies contacting them about the same role. Each needing to be properly briefed, each looking for feedback. All of which are essential. And this is likely multiplied across the many roles HR have to manage. It wastes their time, causes delays and all without really producing any better results.
- Agencies that are out of pocket and frustrated, who would have preferred to commit upfront to the search for difficult to find talent.
- Great candidates who are put off.
- HR teams who are frazzled.
Not great! And it could be so much better.
How? Here’s my top tips for a smooth and effective recruitment process to get great talent:
- Pick a specialist agency that really knows their stuff, has deep connections with their community and astrong track record. An agency you know you can trust to deliver.
- Develop a partner like relationship from the outset, with good peer to peer contacts and invest in building knowledge of the company, strategy, culture and talent needs from the outset.
- Give the brief to the agency, for at least 2-3 weeks, on a completely exclusive basis. You can always review at the end of this period of exclusivity the progress that has been made, and if you have to, to brief one more agency. Many agencies are also open to more competitive fees or fixed fees for truly exclusive work.
- Brief them in person, onsite in your company, and include both HR and the hiring manager in the briefing process.
- Agree interview processes and timelines up front to set deadlines and to speed up the process for all.
- Let them present their shortlist in person, or at least by phone. CV’s never tell the full stories and certainly don’t showcase the personality and cultural fit.
- Provide continuous information, feedback and work in partnership, culminating in that great moment when your new talent starts.
At Alternatives this is how we work with clients and it simply produces great results. Great customer centric talent delivered with precision and skill. The trick now is sort the model!
So to finish, my biggest tip is to bear in mind that “no foal, no fee” doesn’t mean without consequence. It doesn’t mean free. And a rubbish foal isn’t worth any fee!