As a headhunter, I get this question a lot.
In candidate-scarce markets, companies can’t recruit the candidates they want on their own. They don’t choose to pay headhunters; they must in order to find the best talent. Headhunters cost companies anywhere from $10,000-$14,000 PER (DENTAL ASSOCIATE) HIRE, depending on level of hire needed. Companies hate paying our fees.
Here are a few reasons why companies have to pay headhunters to hire for them:
#1. In candidate-scarce markets, there are not enough candidates to go around. A massive labor market shortage ensues. This is common in STEM fields (science, tech, engineering, math). Because companies don’t see any applicants to their job postings, they have no choice but to invest in other means to find staff.
#2. Candidates are scared to apply directly because the market is so niche and small. Due to market forces being disproportionately beneficial to candidates, the majority of candidates prefer to use headhunters to represent them to protect confidentiality.
When candidates apply directly to job portals, they fear that the word will get out that they’re looking for a new job, thus they refrain from applying at all. This “fear to apply” further exacerbates the labor shortage.
#3. Companies can’t directly call and poach candidates from their competitors. They must, for legal and proprietary reasons, have the business tact of hiring a hitman to do the dirty work. Hence, the career of the headhunter was born. Now, someone else can do the snooping, stealing, and poaching!
HR and internal recruiters have their hands tied. Their only recourse and resource to find candidates are job portals. If no candidates apply, they just don’t have anything to work with! As I said in point #1, as internal employees of their company, they can’t be caught poaching competitors’ candidates.
#4. Headhunters can recruit without limits, with NO regulation. Headhunting as a business and industry is entirely unregulated. That’s right. There’s no SEC, ethics board, or ANYTHING. Headhunters can beg, borrow, and steal from clients at will.
Sure, there are legal contracts on paper. However, in reality, headhunters will do whatever they need to do to get their way. They’re rarely caught doing anything legally prosecutable because confidentiality reigns supreme. This allows them to get anywhere they want to find candidates, unearthing candidates previously hidden.
#5. Great headhunters provide protection against bad hires. When you choose a great headhunter to work with, you trust in their ability to separate fact from fiction. They find, interview, and vet harder than your internal teams would because they have a professional reputation to uphold. That’s why it’s important to have a great relationship with a headhunter you know is a trusted professional in the field you need to hire in.
Headhunters will know which companies are doing well, intimate details of the market, and most importantly, who is full of crap or not. Businesses can save headache from bad hires if they have a good relationship with the best headhunters.
#6. Hiring managers’ networks are limited. Hiring managers (the end client of any placement), although they may have some connections in their fields, their reach is limited.
Many hiring managers are at their company for so many years that they simply don’t have the bandwidth to network with external professionals. They’re usually so dedicated to their existing jobs, they neglect their networking obligations. As much as internal employees want to earn referral bonuses, they just don’t have anyone they can introduce!
#7. HR and Internal Recruitment have too much on their plate to hire effectively. HR and Internal recruitment are managing a whole slew of jobs and roles. Their focus is quantity not quality. Roles that are hard to fill (the type of jobs headhunters cover) will languish on the open market with zero applicants that fit the bill coming through.
HR and internal recruitment will be busy filling the easier jobs. Since they go wide rather than deep into each market, they’ll only be able to complete recruitment for roles where candidates are more plentiful than roles available.
Furthermore, recruitment is a small part of their job. They need to monitor internal initiatives, benefits, payroll, and people operations at their company. How in the world would they have time to recruit effectively?
#8. Headhunters make too much money to work internally for a company to save them fees. The question arises, then why can’t companies just pay someone a fee to work internally as a headhunter? Headhunters enjoy their freedom! They work with too many clients and make too much money. They don’t want to limit themselves to work at a salaried role in-house under one employer*.
*UNLESS they’re ready to take a step back from their career or are burned out or experience some life-altering event where they have to for personal reasons.
#9. Headhunting and recruitment is extremely hard work. Very few people can do it well. Thus, due to the forces of supply and demand, headhunters are paid extremely well because so few of them actually succeed at it. The Pareto rule applies - the top 20% of headhunters have 80% of the market in their hands.
Companies’ internal staff, whether it’s HR, internal recruitment or the hiring manager, are not well-versed in persuading people to make life altering decisions every minute of the day.
Contrary to internal staff, professional headhunters have finesse in complicated sales negotiations and persuasion every minute of their day! The volume of career discussions a career headhunter has vastly outstrips any other job. Thus, when companies engage a competent and successful headhunter, they massively increase the probability and speed at which they can fill the role.
Otherwise, the industry of recruitment wouldn’t exist. Market forces dictate an arbitrage opportunity at a high margin for the ability to connect crucial staff with employers.
Originally posted by Dandan Zhu on May 24, 2017 on the following URL:
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