Publisher’s Corner

Aug 1, 2006

As most people in our business know, I wrote an article about why candidates should never accept a counteroffer. This was originally penned for a Dow-Jones publication and for almost two decades has been used by thousands of recruiters to save millions of dollars in potentially lost placements. For those who don’t already have this article in their quiver, it can be found at:

Because of this authorship, I am frequently asked by readers to talk to their crawdad candidates in an effort to try to save their placement fee from an enticing counteroffer. It is not something that I will do since I never know the true story behind these situations, but since my name is on the article as well as all over the Internet for having written it, I was surprised to hear from an actual candidate who had been given the article by his recruiter and was about to accept what he thought was an attractive counteroffer. He caught me in one of my better moods and initially sounded lucid so I let him ramble on about why he should stay with his current job and how they were so shocked when he tendered his resignation and promised to be best friends if only he would stay put.

After giving him all the logical reasons to dispel his stupidity and naivete, he seemed to be suspicious about my comments that he would no longer be considered a trusted team player, no matter what they promised. I become easily exasperated at room temperature IQs so before hanging up on this dolt, I told him that if I were the recruiter, I would have the client yank the offer. Instead I asked if he was married. He said he was – for 10 years.

“What if you found out that, for the past few months, when your wife was supposedly out with the girls, she was really spending those evenings at the Happy Endings Motel with the neighborhood lothario? Let’s suppose she told you it was because she wasn’t getting what she wanted or needed at home and, after promising to behave in a more monogamous manner, you decided to take her back? After all, there were the kids to think of – and she is a heck of a cook. No matter what she told you or how badly you wanted to believe her, you and I both know that the trust factor was in serious jeopardy and you’d probably want her to wear a tracking device around her ankle to keep her on the straight and narrow.

Now, think of yourself as the cheating spouse or, in this case, the philandering employee caught red-handed, sneaking around looking for greener grass. What happens the first time you tell them you have to take a kid to the doctor, or want to sneak off early for a long weekend? Long lunches? Late mornings? Yeah, right! They’ll absolutely think you’re at another interview. How will you feel when you are suddenly left out of meetings or are off the big boys’ Email distribution lists? You think about this and decide just how big a chump you really want to be. Goodbye!”

In retrospect, I felt bad about my blunt answer – for about thirty seconds. Don’t know what happened with this dope – and don’t really care but, if his wife has an occasional ‘girl’s night out,’ I’ll bet he waits up. Hoo boy!

I’m always a bit amused when I get requests for advice and counsel on “strategic planning” from practitioners in our business. “I need a one year plan, a five year plan and a ten year plan for my business,” they tell me. Normally these requests are made by a former corporate bigwig who is entering our industry who actually believes that spreadsheets, pro formas and the like will actually act as a blueprint for their future in permanent placement.

Or, as was recently trumpeted by one of the major franchises, strategic plans are often suspicious attempts to cover the fact that the higher-ups have no clue why their market share is not increasing and they think that relabeling peoples’ position descriptions and putting a clump of circular rhetoric on the plates of their franchisees about how ‘robust’ their newly minted strategy will rocket them all into superstardom. Yeh, right!

The best strategic plan is the one never dreamed up and, the larger the firm dreaming them up, the more it looks like another attempt at herding cats.

Perhaps I’ve become too cynical for some of you MBA strategists out there but my advice is to ‘get a grip’ on the fact that this is basically a ‘what-have-you-done-for-me-lately’ transactional business. Most of you can’t predict what’s going to happen tomorrow, much less a week, a month or a decade from now. My strategic counsel to hire winners, fire losers and make sure they stay off their butts and on the phone making sendouts – the only thing that matters in this business. Turn your strategic plans over, staple them together and use them for scratch pads.

A few years ago, we chronicled the experience of a well-known contingency consultant who, after making a placement with his normal fee agreement which offered no guarantee, was asked to sign an employer-generated PSA (Personnel Service Agreement) indicating a full refund for any falloff within the first 90 days, no matter what the reason for termination.

He was not pleased and he voiced his loud and clear philosophy. He said he was against giving any guarantee at all since he felt his job was done when the company made the offer (after checking references), and the candidate accepted. “I’ve done what I was paid to do. Now I’ve lost control of the situation but am still liable for anything which may cleave the new employee from the new employer. I don’t think any guarantee is necessary. What do you think?”

We hear a reprise of this almost every week.

Why should we offer guarantees? Our recent survey (March 2006) indicates that 3.5% of the firms in our survey offered no guarantees and the preponderance of firms (41.9%) only offered 30 days (with many of these offering replacement rather than money back).

Why do employers want them? Mainly because we’ve conditioned them to expect guarantees. Now that we’ve made them comfortable with the concept, naturally, they’ll try to push the envelope for longer periods and stiffer refunds. A guarantee is, after all, their best hedge against making a stupid hire.

Some states (especially those which license our business) mandate certain “guarantee” behavior. This is a holdover from the APF (applicant-paid fee) days when guarantees were considered to be righteous consumer protection for the individual fee-payers.

No one likes to think that, after a long, drawn-out mating dance culminating in a hire, the deal will fall through. When it does, it’s almost never the fault of the recruiter/placer. But, the offering of guarantees has become a marketing tool. Employers don’t think much about it unless you don’t offer them.

The industry textbook Placement Management says:

“There is no evidence that recruiters offering longer guarantees do more business than those who offer shorter ones – or none at all. There is also no evidence that money-back guarantees put the recruiter in a better position than those which offer replacements.

Companies, when asked by The Fordyce Letter, indicated that guarantees are just an accepted part of the deal . . . not something that they insist upon. And a number of hiring authorities indicated that recruiters who focus on the guarantee make them uncomfortable. Most felt that once the candidate was presented to them, it was their duty to make the decision to hire based upon independently verified data. Over 60% of them told TFL they never received a refund, even when one was obviously due. The main reason was that the recruiter didn’t have the money or was already out of business when the refund issue arose. But a close second was that the refund policy was so vaguely written that it was unenforceable and that it wasn’t worth the cost to pursue the refund.”

Many practitioners use a guarantee period to hasten the fee payment, requiring prompt remittance to activate whatever guarantee they may have. While this sometimes motivates a quicker fee payment, many judges take a dim view of the practice.

It appears to us that, aside from a guarantee’s obvious presumptions and inferences, they are used primarily as a sideline negotiating chip by both sides of the transaction.

One of our readers placed a bond salesman with an earnings record of over $200,000 with a major bank. The guaranteed draw against commissions was $120,000 per year. The $36,000 fee based upon the draw was O.K. with the bank’s hiring manager and the recruiter, but the HR guy raised hell because, for that kind of money, he stubbornly thought the guarantee should be for a full year rather than the 30 days specified in the fee agreement.

What does one do when an employer accepts one part of the fee agreement, then reneges on another after the deal is done?

Since the candidate would not have taken the job (nor would the bank have hired him) unless he thought he could at least match his previous year’s earnings, we suggested that the recruiter offer the full year guarantee if the human resourcer would agree to pay the fee based upon actual full year earnings rather than just the nominal (in this case) draw. The bank agreed and ended up paying the $36,000 fee when he started and an additional $36,000 at the end of his first year based upon his actual earnings of $240,000. Incidentally, the human resourcer who insisted upon this formula is no longer with the bank.

Another scenario which often gets employers off of the guarantee obsession is to point out that perhaps they should also ask the job boards, newspapers, college placement offices and other alternatives they use to pay them back when a hire doesn’t happen or when one goes sour.

Guarantees are generally viewed as an afterthought by both practitioners and hirers unless something happens to trigger their invocation. Like a pre-nuptial agreement, no one expects them to be activated and most in our business understand that unhappy hirers won’t be future fee-payers. It is, unfortunately, a concept we’re stuck with. Just don’t give away the ranch thinking you’ll never have to face the music. Odds are, you’ll be eating those guarantee words at some time during your career.

We’re seeing a number of (guarantee) suits by employers who find out at a later date (often after the guarantee has expired) that the candidate wasn’t exactly as touted by the search firm.

Let us remind you to put a caveat into your fee schedule or on resume submissions that states something like:

We conduct reference checks for our own purposes. In evaluating candidates, you agree to thoroughly check candidate references independently. Should we provide you with personal, educational or employment background information on candidates, you agree to independently verify such information. The furnishing of names, addresses and telephone numbers of candidate references does not imply that they have been checked by us.

A business like ours, peopled with eternal optimists, never likes to think that a placement can go sour. Lately, many are and practitioners are paying a dear price for offering ambiguous or overly-generous guarantees.

If your guarantee says you’ll replace or refund “for any reason.” get rid of it. Employer guarantees should only activate if your newly hired candidate screws up (steals, gets drunk, takes drugs, doesn’t show up, punches the boss, etc.). You should never have to act on your guarantee for something beyond your candidate’s control (they don’t like him, company-wide layoffs, changed corporate goals, etc.).

If you offer a money-back guarantee, make it a “tire tread” or “self-destruct” guarantee. If your Michelins require replacement, they’ll deduct the tread you’ve used and reimburse for the tread that’s left. You should do the same.

If you offer a 30-day guarantee, make sure the words say that the fee-back liability reduces by 1/30th with each day your candidate works. If it’s a 100-day guarantee, it will reduce the fee-back liability by 1% for every day worked. It’s that simple. Don’t offer what you’re unwilling (or unable) to pay back.

We’ve all seen the gobbledygook at the end of most Emails that add nothing to the dialogue regarding the submitted candidate. Very few utilize anything useful. Here’s a sample of the words and music used by Jeanine Drahota of Lost Dutchman Search:

Please Note:

1) Should this email introduce a candidate currently employed, please do not contact anyone at that company for reference information without permission from the candidate or your Lost Dutchman Search representative.

2) Should the attached material contain information regarding a candidate, that information is provided by the candidate, and while that information is accurate to the best of our knowledge, Lost Dutchman Search does not warrant the accuracy of the information.

3) Information regarding this candidate referral is made in the strictest confidence and is not to be shared in part or its entirety with anyone who is not part of your organization. To avoid a potential fee liability, please do not refer this candidate to anyone outside your company, especially to any other recruiter, without permission of your Lost Dutchman Search representative.

4) Should a candidate, presented by LDS, enter into your interview process and then, either during that process or through the following 60 days after hire, refer another prospective candidate for any position within your company or it’s affiliates and that referral is also hired, a fee will be due LDS in accordance to our fee schedule.

5) This candidate is submitted by Lost Dutchman Search for the agreed position or for any other position you determine to be appropriate. If this candidate is hired by your company or any of its affiliates within the period of one (1) year from the date of this referral, a fee, in accordance to our fee schedule, will be due Lost Dutchman Search.

6) If either party has to bring an action regarding the hiring or unauthorized referral of this candidate, the prevailing party will be entitled to its costs and attorney’s fees. Furthermore, venue for any action regarding the hiring of this candidate will be in Maricopa County, Arizona.

7) Although we try our best to identify candidates that your company has not seen before, sometimes our candidates do put their resumes on the Internet. If your company is one that traditionally pulls resumes from Internet job boards, that activity, in and of itself, does not formally make those individuals “applicants.” If your company made no contact with that individual for the position you have asked us to work, you recognize that it is possible that we may very well identify that same candidate through our efforts and actually recruit that person and then present them. If hired, a fee will be due Lost Dutchman Search. It is our legal position that had we not brought this person to your attention, your company would not/did not identify this individual on their own and, most importantly, make the first contact. If Lost Dutchman Search then made the first contact and identified the position that you have asked us to work to be a match with this individual’s background and requirements and this individual proceeds through the hiring process and is hired by your company, a fee will be due Lost Dutchman Search. This follows the “but if not for me” rule.

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