Determining a Recruiter's Value

by Frank Risalvato

Some years ago during the 2002 recession, a recruiting friend who wanted to get out of recruiting asked me to help her with a job search.

She had marketed herself as a “business to business sales executive” dealing with six to seven figure sales projects and applied for a job requiring “…seven figure business to business sales …”.

One of the national opinion/polling organizations had its interest piqued by her resume (which I helped rewrite to focus on her B2B sales value). So far so good. She succeeded in conveying her B2B experience enough to get an interview invitation.

They called and emailed her twice in two days to schedule a telephone interview after she aced the online psychometric test (something anyone would have had to be a complete idiot to not know how to answer).

Aside from the fact we proved how flawed online, multiple choice psychometric tests are, and how easily they can be rigged and hacked; we unwittingly wound up getting a lesson of our own.

Prepping for the Phone Interview
I knew the telephone interview portion would focus on:

• Business to Business Sales (B2B)
• Consultative, long-term sales cycles involving million dollar plus assignments/projects (the polling company charged a million or more for most of its national/regional polling projects)
• Ability to prove two years of selling products or services valued at multi-million dollars.

Since she was a good recruiter that often generated over $200k net annual revenue, I thought for sure she could convey how this experience would qualify someone for selling million dollar polling/opinion projects and services.

The Actual Interview

The interview itself was conducted from a spare room in our office so I could listen in. Not only as a friend, but for my own educational and research interest. Everything was going fine and smoothly until the interviewer … who was probably about 26 years old herself … began asking pointed questions that even I failed to properly take into consideration.

Since we recorded the entire session, we were able to rewind and see exactly the precise spot where the interview unraveled. The lesson I learned here is worth sharing with every recruiter since the result determines how you value your services.

Interview Breakdown

Following are the questions and replies that created the interview to fall apart for my friend:

Interviewer:
“Do you possess seven figure sales experience?”

Sales Candidate (former recruiter):
“Yes. I’ve been working at that level for many years dealing directly with CFO’s, CEO’s, CTO’s and the like.”

Interviewer:
“What was the net fees and revenue you generated last year?”

Sales Candidate (former recruiter):
“Well last year I generated $223,500 in net revenue to the firm.” [Trouble is this is her ‘commission’ and not the value of what she actually sold. The question itself was flawed.]

Interviewer (now noticeably perturbed that the amount was not one million or more as required by the job specs):
“And do you consider that the equivalent of million dollar plus worth of sales generation?”

Sales Candidate (former recruiter):
“Well … yes. That’s only the fees that our firm collected. You see … for each fee we earn which might be $25,000.00, we must actually …” At this point she was cut off and interrupted.

Interviewer (Now anxious and feeling this interview was a waste of time, starts getting curt):
“Yes I understand you are providing a service that is worth more than the fee itself. But we need someone for this job that actually produces one million dollar individual sales on a consistent basis.”

Conclusion

The interview pretty much ended here. The reason for the breakdown was the interviewer asked the wrong question. She asked about fees when the net value of what we sell as recruiters goes well beyond the fee alone.

What our candidate failed to impart is the value of the entire net transaction of each individual placement.

PLACING VALUE ON OUR RECRUITING

Do we value a placement based on the fee alone?
No.

Do we value the placement based on the combined fee and first year annual compensation?
No, again.

Then what is the value of what just got “sold”?

The actual value would have to take into consideration the following:

First year compensation x Total Employment Duration = Net Service Value

If we take a $100,000 hire and assume our average hire remains with the company ten years, we are now at ONE MILLION DOLLARS of transaction value!

Now if we add the fee back in it’s actually $1,025,000.00 average value transaction (the total amount we convinced the company to invest in our ‘product’).

We all know that “selling” the proposition of hiring an employee for a long term period … whether it be three years, five years, or ten years … is a far more difficult process than selling any other service that might be a one time transaction. Yet it remains so difficult for us to convey value with what we do.

Next time you talk to anyone about the “value” of your services don’t make the inadvertent mistake our recruiter/interviewer made by limiting value to only the first year’s fee.

The value of your services extend for as long as your placement continues to deliver results and remain employed. If the hire lasts twenty years, or thirty years, that becomes factored in the “value” of what you sold!

Chances are good that the value of your services are worth many millions if not tens of millions of dollars and you’ve never realized or discussed this value-of-your-expertise with candidates or clients.

If you were to take things a step further – and add up the revenue generated by each hired candidate (probably several times more than their compensation earned) it might easily surpass the hundreds of millions of dollars!

By using this simple formula I can now honestly tell my clients I:

1. Work on about $1 million in salaries monthly
2. Have tens of millions of dollars in successful hiring experience (all true)
3. Have contributed $1.75 billion dollars in additional annual revenue to our clients each year!

When you apply simple mathematics and extrapolate properly you suddenly can assign quantitative figures to your worth instead of saying “I’m great” or “we have ten years of experience”.