A Solution to Search Firm Guarantee Periods that MAKES MORE SENSE!
Search Firm guarantee periods have been a hotly debated discussion for years! Arguments made by both sides include:
- Client Company: We are paying a lot of money to fill this position. We want to guarantee this person is productive, a valuable member of our team, and stays a long period of time to validate the expense.
- Search Firm Vendor: I can’t control the new hires’ onboarding experience and/or their experience once they’ve started the position. If they leave voluntarily or for just cause, why would I be penalized for it?
I think both parties have valid points to this argument.
- Client Company: I am paying a premium to hire this individual. At some point, regardless of why they left . . . why do I still owe all the money?
- Search Firm Vendor: If I found, engaged, and hired a top performer, I did my job. It is up to you to provide a retention strategy that will keep them on your team!
A solution to this dilemma?
Have a separate guarantee period for involuntary and voluntary Turnover that meets/exceeds your current internal retention performance.
- Set the guarantee period: Base it on the average length of tenure of those individuals whose retention is less than one year. To calculate, take all candidates within a certain job family who leave within the first year. Then figure out the average length of tenure within that first year. If that is 8 months, then set the 100% replacement guarantee period at 8 months.
- Calculate this for both voluntary and involuntary turnover.
- Pros of this solution:
- Your external vendor must exceed your internal recruitment team’s performance for both involuntary and voluntary terminations to earn their fee.
- While you can’t blame all turnover on the recruitment/hiring process, the fact of the matter is the person didn’t work out. Both parties need to take accountability and secure a talented replacement for the position.
- Cons of this solution:
- It takes a bit of effort to establish the voluntary/involuntary first year turnover tenure rate. And you need to establish for different job families where there is significant variation (IE – entry level first year VERSUS executive first year TO).
- It doesn’t solve the issue of a person leaving after a relatively short period of time. I firmly believe both parties hope every new hire will be a superstar and stay for the rest of their career. Unfortunately, that is not always the case.
- Pros of this solution:
We think the Pro’s outweigh the Con’s with this solution. If you have an innovative approach to this dilemma, please let us know. We would love to learn about it!
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