February
2005 - Paying to find the ideal job
We read so much these days about
companies offering inducements or “golden
hellos” to attract someone they really want
to fill an important job. What about turning this
arrangement on its head. How much would you be
prepared to pay in order to find your ideal job?
Would it be worth £20,000? It is to some.
Wait a minute, it can’t
be done in the UK, you may say, quoting the provisions
of the Employment Agencies Act 1973. Up to a few
days ago I would have agreed with you because
the law makes it clear that, with few exceptions,
employment agencies and employment businesses
are prohibited from charging fees to workers for
finding or seeking to find them jobs.
But there is an exception –
and it claims to be unique in the UK executive
market. A company called InterExec offers something
it calls “inplacement” to paying clients.
These clients are working executives on annual
salaries of more than £100,000 a year who
are prepared to pay the company’s consultants
to market their talents among headhunters and
prospective employers. Typically someone on £200,000
a year would pay £20,000 for the service.
“In 1976 when we came
in to this business we had never heard of the
Employment Agencies Act,” says Kit Scott-Brown,
Chief Executive of InterExec. “We traded
for two years on a payment by results basis until
the Department of Employment came to see us and
told us we had to close down because what we were
doing was illegal.”
The outcome, he says, was an
agreement that they could charge for their services
at an hourly rate, in the same way as a professional
services firm such as a legal practice or accountant.
The problem with this arrangement is that it could
rack up big expenses for a client who might not
find a job at the end of it.
The company settled finally for
offering its services as an open-ended fixed price
contract after a preliminary period working for
an hourly rate. This still cannot guarantee an
employment contract at the end of the process.
In this case, says Mr Scott-Brown, “the
job is finding the right answer for the individual.”
For a few this may be that there isn’t going
to be another job. But this is not a typical outcome.
On average, says the company,
each client is offered 13 opportunities that lead
to 2.4 positions with average salary increase
of 23 per cent. So the potential return on the
investment appears promising. But it is still
a gamble and may appeal most to those who are
confident in their abilities and want to have
more control over their future options and retain
confidentiality around their job search.
Removing the contingency arrangement
was not sufficient, in itself, to comply with
the law, explained Mr Scott-Brown because the
restrictions prevented job-finding fees being
charged to individuals. But there was no restriction
against a charge levied on a company. The outcome
was that InterExec parcelled up its activities
that could be categorised as job finding and came
to an agreement that this constituted 25 per cent
of the service it was offering. The rest, such
as working on interview technique and CV presentation,
could be included for an individual client within
a discounted fee on what it might charge a company.
If this sounds complicated it
may help to explain why no other company has followed
InterExec in to the same business. Another clue
is that the company has gone in to liquidation
on two occasions since its founding because its
earlier business models were unprofitable.
There is no doubt that the business
is working in a niche market. But Mr Scott-Brown
says it’s a sizeable niche. “We estimate
that about 10,000 people earning more than £100,000
a year are changing jobs annually. Less than 5
per cent of these jobs are advertised and about
80 per cent go through headhunters. The rest are
found through word of mouth or recommendation.
We represent about 200 people annually so that’s
only about 2 per cent of the market. There has
to be some room for expansion.”
InterExec says it has a healthy
relationship with headhunters and the providers
of interim managers although Mr Scott-Brown says
there is not a big overlap with interim management.
“Most of our clients are looking for long
term senior employment,” he says.
Just occasionally an employer
– often a former client – will come
to the firm with a direct vacancy. The advantage
to the recruiter is that this can cut out headhunting
fees. Naturally this does not go down too well
with headhunting firms that are the prime target
of InterExec’s marketing efforts. But Mr
Scott-Brown says this is not a big part of the
business.
The point he makes is that, just
as headhunters are working on behalf of client
companies, InterExec, is working on behalf of
client individuals.
The business model looks very
much like outplacement - and some companies do
use it for departing executives in the same way
that they would buy an outplacement package. But
InterEexc says that, unlike outplacement, it does
not advise people how to find a job. Nor does
it undertake searches. “The headhunters
do the searching. What we do is make the relevant
recruiters aware of a client’s availability,”
says Mr Scott-Brown.
The more I look at it, the more
it seems to make sense to allow a service like
this. The 1973 act was introduced to outlaw cowboy
agencies that were exploiting job seekers in low
earning occupations, often making promises that
they could not fulfil. If InterExec is entering
in to a grown up relationship with high earning
individuals who are probably too busy to spend
much time working on job search why should that
be against the law? Apart from fee structures,
what is the substantive difference between this
kind of agent and a literary agent? If executive
talent is seen as a prized commodity, then executives
should be able to employ agents to look after
their interests.
It could be argued that, in some
cases, search firms do this work and there is
no doubt that individual headhunters do develop
close relationships with people they have placed
in top jobs. It is not unknown for an executive
to talk about “my headhunter” in the
same way that they would talk about their doctor
or solicitor. Ultimately, however, the headhunter
is working for a recruiting client. Recruitment
is a huge market in which employers are often
portrayed as choosy buyers. But the inplacement
service recognises that there are those who are
equally choosy about where they sell their talents.
That may be no bad thing.
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