Split Placements

Split Placements Add Value to Recruitment Businesses

by Dave Nerz

Independent recruiters are risk takers. Recruiters typically strike out and leave the comforts of the corporate life behind. Many of these entrepreneurial ventures grow and prosper. One of the things I am seeing more frequently is the desire to create an “exit strategy” from the recruiting franchise that produces value in return for the risks taken and the successes achieved. In some cases the founding entrepreneur has been better at creating and growing the business than they have been at making the business saleable. Those buying a business want to see what value has been added to the business. They are not buying the entrepreneur; they want to buy what is left after the founder is gone.

So what can be done to add value to a recruiting business?

Add Process: The buyer wants to know that the success of the business is not dependent on any one individual. There needs to be a process for recruiting, doing the books, hiring and retaining, marketing the recruiting franchise, and even keeping the place clean and stocked with pens and toilet paper. A rule of thumb: if it is not written down, it is not yet a process.

Add Quality People: What people stay behind when the entrepreneur leaves? They don’t all need to be employees but they should be part of the process and the relationships might be better if captured in writing. This one is a little trickier as some buyers may want to use their own bookkeepers and cleaning services, so don’t get locked into irreversible contracts.

Add Connections: Develop and document the relationships that separate your business from others in the same niche or market. Trading partners that work cooperatively with your business can be the difference between a good year and a great year. They can add the revenue that represents the total profit for any year. These connections add value, but need to be documented in order to produce value at the time of sale.

Add Sources of Revenue: The number one value added source of revenue for any recruiting business is contract placement. These contracts smooth the peaks and valleys associated with contingent recruiting. The ongoing revenue adds to the basic value of the business and increases the likelihood of a sale for a recruiting business.

A second way to smooth the ups and downs is the inclusion of split placements. Split placement revenue is not guaranteed, nor is there a guarantee of continuation on the departure of the founding entrepreneur. But if properly documented as part of the recruiting process, split placements can be demonstrated to add value and reduce the risk of long dry spells for incoming revenue. The ability to work others’ jobs when you have none—or to seek the help of others (without adding staff) when the business is overwhelmed—is a great value that needs to be documented and sold as part of the business.

Add a Formal Split Fee Network: Showing a potential buyer that you have formalized the process to the point of being an active member of a split fee network is a bonus for any potential buyer.

Make your years of risk-taking pay off. Plan ahead and add value that a future owner would potentially pay for.

Image courtesy of Sujin Jetkasettakorn / FreeDigitalPhotos.net

5 Ways Split Placements Can Benefit Your Recruiting Firm

by Veronica Blatt

NPA has been in the business of fostering split placement opportunities since 1956. Obviously we are big believers in splits, since that’s the very reason for our existence. If you haven’t considered integrating split placements into your business model, here are some reasons you should:

Split placements can help level out cash flow fluctuations. Splits are good for business in all kinds of economic conditions because they provide incremental revenue that stabilizes seasonal or cyclical revenue fluctuations.
Split placements can allow to you work on more projects simultaneously. A split fee recruiter can complete more projects. More completed placements means more satisfied clients and more profitability.
Split placements help you serve your clients faster and more efficiently. The most successful recruiters I know are those whose sole desire is to get the best candidate in front of their client faster than anyone else. By building a reputation as the “most reliable provider” they are guaranteeing future business.
Split placements can help you expand your scope of service in terms of both geography and occupational or industrial markets. Participating in split placements means you can help your clients with a wider variety of assignments, whether that means branching out geographically or different types of roles.
Split placements offer an affordable alternative to hiring additional recruiters in your recruiting firm. Instead of hiring a new recruiter or investing resources in developing a new niche, you can reach out to trading partners who are already established experts. Best of all, there is no ongoing overhead – you simply pay for their services when you need them.

If you’re interested in adding split placements to your business model (or increasing the number of splits you currently make), there are two primary ways of doing so. One way is to relentlessly build your own network of like-minded recruiters that you can trust and who work the same way as you. You’ll need to spend time creating a split fee agreement, upfront, each time, to ensure your client and candidate relationships are protected. The other way is to join an established recruitment network. Split placement networks bring you a ready-made cadre of trading partners, infrastructure and ground rules governing how splits will be made, and dispute resolution if needed.

NPA offers a free tool to help you determine if joining a split fee network could benefit your recruiting firm. The NPA self-evaluation tool is anonymous. NPA does not capture any of the data you submit so you won’t get any phone calls or emails as a result of filling out the questionnaire.

A Split Fee Network Organizes the Playing Field

by Dave Nerz

I’ve been reading some interesting blogs lately on how recruiting compares to sports. Barb Bruno had an interesting one just a few days ago comparing recruiting to golf.

It got me thinking about where a split fee network might fit into the comparison of recruiting and sport. My conclusion is that networks function much like sporting leagues. They group like-minded recruiters together and organize the playing field for participants with various levels of tools and rules. Read the rest of this entry »

Membership in a Global Recruiting Network Is One Way to Reduce Cost

by Veronica Blatt

I recently saw a “pin” on Pinterest about everyday ways to save money. The list included things like hang your laundry to dry, use coupons, re-evaluate your car insurance, try DIY projects, make your coffee at home each morning and bike and walk more and drive less. The article got me thinking about ways recruiting firms can reduce their costs. I did an Internet search about ways to reduce or save on recruiting costs and came across a post by SilkRoad. I’ve included a few tips below that are both practical and relatively easy to implement.

Improve retention – You don’t have to spend money hiring new people if your existing good employees stick around. Study retention, track it, and continuously work to improve it.
Stay on top of new sourcing technology – Let’s face it, sourcing is your mainstay. A continual investment and investigation of the latest tools and techniques will pay off.
Use social recruiting – Twitter, Facebook and LinkedIn are all free ways of building a brand and seeking candidates.
Assess value, not cost – One of the biggest recruiting costs is hiring poor performers. Assess the quality of the hire and go the extra step of asking managers to put a dollar amount on the difference between top, average and poor performers.
Join a global recruiting network – This tip wasn’t included on SilkRoad’s list but I think it’s a good one. Instead of hiring additional employees with no guarantee of performance, consider joining a global recruiting network. Recruiting networks, like NPA, allow you to make money without the overhead of managing and monitoring your employees. Plus, you only pay those who perform. Can’t beat that model!

See the remaining 6 tips to reduce recruiting costs at SilkRoad’s website. In what ways does your recruiting firm cut back on cost?

Not All Split Placements Are Created Equally!

by Terri Piersma

Recently, I’ve noticed during conversations with some recruiters with whom I speak about membership in our split placement network that they say they have made split placements. Further questions reveal they didn’t make the split placements the “traditional” way. Instead, they provided a candidate to an employer via an online service like BountyJobs.

I propose that the “recruiter community” language for split placements has changed. You can no longer assume that when recruiters state they have made split placements that it occurred the “traditional” way. Specifically, what I mean by “traditional” way is when a recruiter with a job works directly with a recruiter with a candidate and the candidate is hired by the employer. This results in the two recruiters splitting the client fee.

“Traditional” split placements happen in one of the following ways:

1. Informal Network

Recruiters form their own, usually small, network of trusted trading partners. Most savvy recruiters will have signed split fee agreements even if they make splits with recruiters they have known for a long time.
In addition, larger informal split networks exist online including in LinkedIn. It is not unusual for recruiters in these informal networks to have never met face-to-face. Again, savvy recruiters will have a signed split fee agreement before working with another recruiter they met online.
If you are a recruiter considering making split placements with other recruiters or are currently making split placements and do not have an agreement signed with the other recruiter, check out our sample split fee agreement which can be used as a starting point to create your split agreement.

2. Formal Network

A recruiter pays to participate in a formal network. In NPA, The Worldwide Recruiting Network, members pay one-time enrollment fees, monthly dues, and brokerage payments when split placements occur.
Networks can have a general focus or specialize in an industry or niche. Some networks may include members located in only one country or state and others, like NPA, have members throughout the world.
Formal networks must have rules of engagement so that trust can build among its members. If the formal network is not built on trust, an environment develops where split placements will not flourish. The rules of engagement will typically including the treatment of candidate referrals. Also, a formal network should address what happens if something in the split placement process does not go well. Of course, clear and written communication between the recruiters can minimize these situations. As a cooperative of independently-owned recruiting firms, NPA recruiters are bound to act within the Bylaws approved by our members.
Signing the network’s membership agreement or contract binds its members to abide by its rules of engagement and may eliminate the need for a split fee agreement to be signed between trading partners. In NPA, a separate split fee agreement between trading partners is not necessary since the owners of the member firms signed the NPA Membership Agreement.

Many differences exist between informal and formal split networks as well as split job boards. It is important for recruiters who make split placements to understand the differences including the different definitions of a split placement?

What is your definition of a split placement? Do you prefer “traditional” split placements or those made through split job boards?

Image: FreeDigitalPhotos.net

8 Ways to be a Better Split Placement Partner

by Veronica Blatt

At a recent NPA meeting, members shared tips and ideas for how to be more effective split placement partners. These ideas are valuable whether you make splits within a formal network or on your own.

If you work the job/client side:

Share the client’s name with your partner. That way, your partner won’t accidentally source candidates from the company that is hiring. While you’re at it, provide the names of competitors that COULD be a good source of candidates.
Share how many candidates are currently in the process. How many have been interviewed? Are there any internal candidates? What’s missing from the candidates that have already been presented? This will help your split placement partner recruit more precisely.
Tell your split placement partner about your relationship with the client. Are you friends with the hiring manager? Do you have a long track record of making placements there? They have a great history of speedy payment? You can guarantee that candidates you present will get interviews? Especially for recruiters who work on a contingency basis, these details will help them feel more confident that a successful split placement will occur.
ALWAYS provide feedback on the candidates you receive. Nothing alienates a split placement partner more quickly than sending candidates into a black hole.

If you work the candidate side:

PLEASE talk to your candidates before submitting to a split placement partner. And yes, extensive written communication can ‘count’ as having ‘talked’ to the candidate in some circumstances.
Add value to the information you provide. Do at least 50% of the work, even though it’s common for the recruiter with the client to drive the hiring process. Be ready to support your split placement partner when it’s time to close the candidate, extend the offer, etc.
Make sure the information about the candidate is current. At a minimum, you need to provide the candidate’s current phone number and email, the most recent employment situation, salary requirements, and relocation details. Your split placement partner isn’t interested in sharing 50% of the fee for out-of-date (or incorrect) candidate details.
Don’t pester your partner for feedback on the candidate. Your partner is trying to get feedback from the client. Sometimes clients are slow. Nagging your split placement partner won’t make the feedback appear more quickly. And NEVER interfere with your partner’s client relationship.

It takes a great deal of trust and commitment to be a successful split placement partner. Many recruiters are more comfortable making splits within the boundaries of a formal network. If you’re making splits on your own, be sure to execute a signed split placement agreement with your partner to avoid any disputes.

How a Recruiter Networking Group Can Help You Change Your Specialty

by Veronica Blatt

Have you ever thought about changing your specialty? Or adding a new desk to your existing business? It seems like shifting to a new specialty should be fairly straightforward, but it’s often harder than it seems. Here are three ways a recruiter networking group can help you make the transition:

Peer coaching and industry knowledge. A recruiter networking group consists of trading partners who are already experts in your new field. They will likely be willing to share information and ideas about how to make the transition into a new specialty. This valuable insight can save countless hours, and money, so that you can quickly start making more placements.

Provide candidates and/or positions during the transition. A recruiter networking group consists of trading partners that you can make split placements with. If they have open job orders, you can source candidates in the new specialty. If you have access to candidates in a desired specialty, seek out trading partners with suitable job openings. Split placements can be an extremely effective way to build a new specialty.

Reduce overhead associated with change or expansion. It can be expensive to add a new specialty, or to change your existing business focus. Not only do you have to factor in your valuable time, you may need to purchase new resources, tools, lists, etc. A recruiter networking group can help offset some of those expenses by carrying them for you. You don’t have to pay your trading partner unless you make a split placement. You’re not paying for your partner’s benefits. You don’t have to purchase equipment or invest in training. It’s a “pay-as-you-go” situation that has no, or limited, ongoing fixed costs.

If you’re seriously considering a new recruiting specialty, and you’re NOT part of a recruiter networking group, you may wish to consider joining one. Your existing informal networks are probably made up of recruiters, job seekers, and clients based on your existing specialty. It takes time to cultivate new contacts, and it will be harder to start something new until those contacts are established. Joining a formal recruiter networking group can be a wise decision that will allow you to shift into a new market area more quickly and cost-effectively.

IT Hiring Outlook Leads to More Split Placements

by Veronica Blatt

Just when we all thought the Global Financial Crisis was solidly behind us, a smattering of not-so-great news reports has people getting jittery all over again. While it’s true that overall unemployment in the U.S. is far too high for comfort, and there are serious concerns about European debt, I am not convinced that a double-dip recession is imminent. In fact, according to the Bureau of Labor Statistics, the unemployment rate for workers with a bachelor’s degree or higher actually DECREASED to 3.9% last month. Read the rest of this entry »

Independent Recruiters: A Little Preparation Goes A Long Way

by Veronica Blatt

As I pack up my desk and bags to head to Dallas, TX for a couple days to attend The Fordyce Forum, I find myself also preparing for what is sure to be a great event and even greater networking opportunity for me. No doubt, it will be the people I meet that will make the event worthwhile – not to mention the knowledge and training I will pick up along the way. This morning I prepared few ideas and goals that I think will be crucial to my success at The Fordyce Forum. Having said that, I thought it would be rude of me not to share my prep-strategy with our readers. Granted, as recruiters yours might be a little different, but I think the same basic fundamentals are there.

Create an elevator speech: rehearse a 30 to 60 second speech that identifies who you are, what you do, and why you are there. As an example, mine is below. Depending on the days events and who i’m talking to, this will obviously change a bit. It’s a starting point nonetheless.
“Hi, my name is Annie Weller and I’m with NPA, The Worldwide Recruiting Network. Our network’s primary goal is to help our recruiters make more money through split fee recruiting and increase opportunities for their clients and candidates. We currently have about 400 member firms on 6 continents with the average member’s ROI at more than 800%. Our members share between 7 and 10 million dollars annually and their membership in NPA represents the difference between an average year and a good year. I’m here for the next couple days to talk to recruiters who are interested in increasing revenue through split placements. Are you interested today or in the coming days to talk further?”
Set goals: If you don’t set any goals, how do you know if you are successful? Try to make them as specific as possible and break them out into categories.

Identify a strategy: Review the schedule or agenda and decide which sessions would be most beneficial for you to attend.

These are obviously very basic ideas; however, I do feel a lot more prepared than before I nailed down my elevator speech, goals and strategy. I am a very “dive-in-head-first-kind-of-girl” so this type of preparation is not something I do very often. I have to admit, though, I feel much more confident

What do you do to prepare for this type of an event? Are you attending The Fordyce Forum? If so, I’d love to connect with you!

Evaluating Split Placement Networks

by Veronica Blatt

Independent recruiters have a lot of choices when it comes to finding recruiting partners to help them make more placements. There are job boards, informal networks, social media networks, and recruitment associations, to name a few. There are also split placement networks. A split placement network is a smart decision for many independent recruiters. But how do you know which one is right for your recruitment business? Here are four major criteria to consider when evaluating a split placement network:

Geographic Reach. What are your current and future geographic needs? Do you source local candidates to fill local positions? Is that a sustainable business model for the next 5-10 years? Do your clients operate globally? Are you interested in global recruitment? If you are a global-minded recruiter, with an international business focus, you’ll want to seek out a split placement network that supports those needs.
Industries, Niches, and Occupations. There are many different ‘flavors’ of split placement networks. Do you recruit in a specific niche? Do you work an entire industry, or only a certain occupation? A good split placement network can help you make more placements in your existing space as well as help you broaden the scope of your recruitment activities.
Ownership. Who owns the split placement network? This is an important question for a couple of reasons. First, if the network is owned by an individual, the profit motive is typically for that individual. In other words, the person who owns the network makes decisions that will maximize his or her personal profits. Second, if you’re joining a split placement network that has a single owner, will you have a ‘voice’ in any decision-making? Do you care? If you have a passion for leadership or a desire to ‘give back’ to your profession, will you have any opportunities to do so?
Policies & Procedures. How are disputes handled? Are there specific rules in place for how split placements are handled? What happens if another member interferes with your client relationship? Even more important, will you be protected if you don’t get paid your portion of a fee?

There are no right or wrong answers to these questions. They are strategic questions, and differ widely for different recruiting firms. Look for a split placement network that is a good fit for your current needs, and can also help you grow your business. Click the button below for a free checklist to help you evaluate split placement networks.

Split Placements