A Solution to Search Firm Guarantee Periods that MAKES MORE SENSE!
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A Solution to Search Firm Guarantee Periods that MAKES MORE SENSE!

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. 

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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