Why Niche Recruiters Charge More
In a world where the recruiting function is becoming a commodity, why would any executive agree to pay for an expensive recruiting agency?
Imagine for a moment you are scheduling an appointment with a new doctor. You are reasonably healthy. The first question you may ask is, who is on my insurance plan, or who is affordable? Who does my inner circle recommend? You might prefer a doctor with good bedside manner.
Now imagine you have pancreatic cancer and require surgery. Your chances of success are below average. Does your decision making process change?
The stakes are higher. If you choose the wrong doctor, it could cost you your life. You could care less if your doctor is pleasant or unpleasant. Cost and insurance may play a role, but some things are just more important than money. Friends and family? Online reviews? Please. Time to start networking with people who run cancer treatment hospitals.
As it turns out, you will be willing to pay and sacrifice whatever it takes to get the surgical oncologist with the strongest track record of success with pancreaticoduodenectomy, and it will cost you.
Apply this analogy to your own hiring process. Most talent acquisition leaders start with cost as their initial pass/fail criteria when selecting search firms. This is appropriate when the need isn’t critical. However, as the stakes rise and the need is more acute, specialization is critical.
Your need to specialize is in direct relation to your pain.
Apples and Oranges
So how can you separate the specialists from the generalists? Retained search? Not so fast, just because a firm charges fees on a retained-basis does not mean that firm is specialized! Retainers are just a different way to collect a fee.
I have worked as both a specialist and a generalist, so I think it’s important to differentiate the two.
Generalist firms focus geographically and will always be located in the area where they recruit. All generalist firms claim a niche, but the niche is very broad (like Finance and Accounting). The problem is that there are thousands of specializations within the broad F&A umbrella. A generalist firm will have lower fees, and since most of them are just thinly veiled temp agencies, they sell themselves as a “one stop shop.” A good example is Robert Half which derives only 8% of revenue from its traditional direct hire practice. The remainder comes from divisions dominated by contract and consulting revenue.
By comparison, specialists usually work on a national or global-basis and do not exclusively recruit where they live. So if being a specialist pays better, why is almost every recruiter a generalist?
It’s Expensive To Be a Specialist
Recruiting elite talent is time consuming. Technological advancements in recruiting have made it easier to recruit average talent. However, there is only one path to elite talent and that is through time-intensive relationship building. A generalist firm spends most of its money investing in job boards and recruiting software. The problem is that these are the same recruiting resources that their clients are investing in, so they are essentially duplicating efforts and duplicating candidates.
A specialist firm must pay most of its money toward the salaries of top recruiters and researchers. Trust me when I say that it is easier to be a generalist.
The Fruit Basket
My experience has been that generalists only recruit on 10% of the jobs they take. A generalist will work on “low-hanging fruit”, usually the easiest search available. This can be a lucrative strategy when you have ten times as many jobs as you can work. Another dirty secret is that if a direct hire job is referred from the firm's temp division, turning down the search is a political disaster.
If you happen to be the client with the "hard-to-fill" job, you can expect to see very little traction from a generalist.
Any recruiter who charges low fees specializes in easy-to-fill positions.
Specialists Will Be Brutally Honest
Specialists have more reasons to turn down business than generalists. The specialist, by definition, works in a tough niche and is more critical when it comes to fee, candidate availability, interview process and accessibility to decision makers.
A specialist will be blunt regarding the challenges surrounding your search. When you deal with a specialist, you can expect to know where you stand with them, because if they aren’t working your job, they will tell you why.
So When Should I Pay More?
In the final analysis, you get what you pay for, but you don’t always need to pay more.
The next time you find yourself complaining about the service and quality you receive from your recruiter, you may want to consider if you have employed the wrong type of firm.
You should use a specialist when performance is critical. You should use a specialist when time is more valuable than money. You should use a specialist when you need an elite player in a specific niche.
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Jeremy Bennett has been interviewed by Crain's and the Houston Chronicle. He is the CEO of J Bennett Recruiting, a boutique Retained Executive Search Firm that specializes in Healthcare. He is a father of two and connoisseur of West Coast IPA’s.