Talking Terms

Thursday February 25th, 2016 · by Murray Clarke

A common approach I see being taken by talent acquisition people new to international markets is to try to slam horrible blanket terms on the table. I want to take a look at that.

It often starts with HR folks asking for a 100% refund over six months if things don`t work out with a candidate they decided to hire. Even after they spent round after round interviewing and qualifying the candidate they selected.

100% Refunds

It sounds insane but putting this into perspective, I have never once worked with a client that actually stood by these terms. Ever. In reality refund clauses are only extremely rarely invoked but this is really a matter of principle and these terms stink.

If for real, such terms would be a declaration that they are a company unwilling to take ownership of their own hiring process, preferring to offload all risks to the provider of the service they themselves requested. As I said, if for real.

Surely if no-one ever actually stands by the “100% refund” clause then it is not even a real bargaining chip, and if this fact gets called out then no-one should be offended.

The Fee

So why do clients bother starting out with these terms?

Because it`s all about the fee. Negotiators starting out with refund clauses they won`t stand behind are seeking to “give” on them in order to “take” on the fee.

So what then is a fair fee to pay an agency for introducing a candidate that you want to hire?

Let`s start with market rates. 

With a global average of 38%, technically the three big APAC hiring markets qualify as “difficult” according to ManpowerGroup`s global survey in 2015, though it is clear which country lies in first place:

  1. Japan 83%
  2. Australia 42%
  3. Singapore 40%
  4. GLOBAL AVERAGE 38%
  5. United States 32%

With very real reasons why Japan ranks so high on “difficulty” it`s hard for anyone to claim that recruitment in Japan should be priced the same as other markets that are evaluated as being half as difficult, or twice as easy. Prices are not arbitrary.

Pipelining

To explain this further, talent acquisition professionals need to take into account the laws of “pipelining” candidates and understand that a talent “pipeline” is exactly the same as a sales forecast pipeline.

Sales-pipeline

For contingency search the client only gets to see the qualified candidates introduced at the end of a long process and can happily ignore all the “prospects” that were unearthed, contacted and qualified (out) over time. This really is a tip of the iceberg concept – hence the meme:

candidate meme

Incubation

I would estimate that out of 15 people we meet in any week, only one will ever be “placed” by my team at some point down the road. Next month maybe, next year perhaps, but in some cases it was 8-9 years between meeting someone for the first time and when I finally had the opportunity to place them.

Tokyo is up there among expensive markets to operate in

Coupled with the cost of doing business it is the “incubation period” of relationships that essentially drives higher pricing in Tokyo. During the incubation period rent, salaries, insurances, taxes all must be paid and Tokyo is right up there among expensive markets to operate in. All those false positives and all that staying in touch costs money in a candidate-poor (read “candidate-driven”) market like Tokyo.

I would like to know what the average “incubation” period is for such candidate relationships in other markets like the US or Singapore. I`d wager a large sum that it is significantly longer here in Japan, a country where 44% of people have not changed jobs for 10 years or more, and just 17.5% of people feel that it is “better to change jobs if unsatisfied” (compared to 54.5% of Americans).*

Save time and investment through outsourcing

In Japan there is an awful lot of activity behind the introduction of a winning candidate. There are so many false positives along the way that the client simply never sees, nor cares about, and this is exactly why they go to agency in the first place: to save time and investment through outsourcing.

Clients new to Japan: please take some of this into consideration when you come at Tokyo with blanket terms. You should be exhausting your other options before going to agency and when you do, you should be prepared to pay fairly for services provided.

Of course you might say, that does lead to a discussion on Quality of Service and you would be right as not all agents are equal. More about that here.

Happy hiring!

* Databook of International Labor Statistics, 2014

Murray Clarke

Murray is the Founder and President of Experis Executive. As a recruiter he has recruited exclusively for global technology companies building their businesses in Japan…

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