Ok, this set of topics may make me somewhat unpopular among headhunters and probably limit myself of some career opportunities due to retaliation 
But a man’s gotta do what a man’s gotta do, so there are three points to watch out and manage when you are dealing with them:
1 – incentives
The majority of headhunters ask for a flat fee – let’s say, 33% of the total comp. It’s a lot of money, that has to do as a prox of the complexity of the role. But there are some problems with that:
- They don’t have incentives to look for “cheaper professionals” (or to negotiate harshly the compensation package)
- Sometimes the complexity of the role doesn’t change much, but the comp range may be variable (so the job is the same, but incentives lead to the more expensive folks)
- You are not sure if you are hiring a talent or a mediocre professional (you wish it is a talent, but who knows?)
How to cope with that? A couple of options:
- Offer a “regressive deal”: the lower the compensation of the professional, the higher the fee (once compensation is a fixed and recurrent cost, it is worth to pay more for a “cheaper” candidate – win win situation!)
- Differ payment based on the future performance of the professional: pay part of the fees now, part when you figure out if the person is a top performer (or don’t pay if he/she doesn’t turn out good
- Negotiate a fee based on the average compensation of the position
2 – the “women’s purse” effect
When charge for a fee, headhunters use a “women’s purse” approach – you can find about everything (and generally, expensive things!) inside! Here is a list of things that I suggest to take out:
- Starting with the basics: cut every fixed (or “administrative”) fee that they charge (it may hide strange costs). If they insist on lunch and phone calls etc, don’t pay upfront, only after presenting expenses reports (watch out for wine!)
- Hiring bonuses: those are generally deal breakers. It’s not related to complexity. Shouldn’t be considered
- Stocks or other deferred payments: well, when you give someone stocks, you don’t know in advance the value of it when it become vested. So why do you have to pay upfront for that as well? Imagine if the value of the share drops, are you going to take your money back? And what if you clawback some deferred payments? If you have to pay based on compensation, pay only what relates to the total comp in cash!
3 – the cartel
How come everybody charges the same flat 33% total comp price? As my negotiations professor would ask “where does this number came from???”. No clue at all, why 33% and not 31% or 27%. Guess it sounds cool. But the thing is: they charge that because no one questions that!
- When they state their fee, start with the golden question: “where does this number come from?” (ask and keep asking!)
- Several companies had very interesting experience with “reverse auctioning” (who charge less?)
- If you’re a shy negotiator, remember: in a cartel, the higher the number of players, the higher the chances of defection
I know several great headhunters but hey; as High Impact HR Professionals, our role is to increase profits, reduce costs and creating the culture for that, right?! Of course, most headhunters are hyper professionals and are looking for the best for you. But you don’t want incentives to play against you, do you?
If you have some more ideas or spot other problems with headhunters, pls share: it would be great to have other views!
Best,
What are you looking for?
Better interview techniques? Take a look at this killer method!
Best performance and reward strategy? Stop with Goal Setting!
Setting your company mission? There is an easier way for getting better results!
Setting a meritocratic culture? Here is an easy-to-implement plan!
Can’t find time to work? Kill meetings! (or make it more productive)
A new breed of HR? Goodbye aunties!
photo credit: JD Hancock via photopin cc
