This article was originally featured on the Shortlist website on the 19th of January 2016.
Switching to transparent, services-based pricing has given Ambition’s client greater clarity and more realistic expectations of their recruitment service, says managing director of technology, Andy Cross.
When Ambition revamped its pricing structure it went from a traditional model of flat percentage rates charged to clients, to what the company calls ‘value-based recruitment’ – charging clients based on the complexity of services rendered.
As a result, clients have more accurate expectations, Cross told Shortlist.
“We’ve had much better quality conversations about recruitment and sourcing strategy as a result of this. We can now sit with [clients] and say ‘we’re not just interested in what salary this is, we’re interested in what’s important to you’,” he said.
“Instead of linking our price to the salary of the person we are trying to recruit for, we are linking our price to the amount of work the client is asking us to do. So less work, or a more junior position, would attract a lower price point. The more sophisticated service we need to offer, the more complex the recruitment piece is, the higher the price point will be.”
Transparent pricing provides an opportunity for the recruitment industry to enhance its image, Cross said.
“The recruitment industry hasn’t had the best reputation [so] this is raising the bar to say ‘pay us what we’re worth for the work that we put in’ as opposed to a magical 20% of salary or whatever number we pluck out of thin air,” said Cross.
“In the past historically it used to be a ‘black bag’ operation if you like. You’d pick up a piece of work and next minute you’d be placing the candidate and invoicing the client thirty or forty grand and you’d go ‘what did I actually get for that?’ and now we’re breaking that down.”
Cross said his company has recognised that many employers are trying to do their own recruitment now and may only need a small portion of the services the recruiter is offering, not an end-to-end, 360-type service.
Ambition hasn’t had to make any major adjustments to its new pricing model so far, Cross said.
“If our lowest price point kept having to be negotiated, we would use that as a catalyst to say ‘well we’ve got the pricing wrong’,” he said.
Incentivising consultants under the new structure
Ambition hasn’t needed to change its consultants’ incentive structures as its pricing is attached to the effort employees put in to each piece of work and the number of hours worked on each job, said Cross.
“Whereas in the past in the old model, you might have someone who works for weeks or months in a row and gets a very low return and that was inefficient. Arguably in that model, you should pay that person less because their return on investment is that much lower.”
Cross noted that, while the company hasn’t tracked individual employee efficiency yet, the model does allow managers to determine which consultant is picking up what service and analyse it for patterns.
For example, they are able to detect whether some consultants are consistently opting for simpler, more generalist jobs over more complex and specialised ones, and vice versa, he said.
“We haven’t noticed anything too drastic at this point, mostly because we’re selling this to clients and getting clients to choose.”
Main challenge is getting staff to ‘believe’
Cross said one difficult aspect of implementing the new structure was bringing consultants on board with the changes.
“We obviously have to get consultants to believe in what they’re selling, because… a lot of what we do is very technical and people fall back into the old way of doing things, or they let their clients dictate to them what they want because they feel that their clients are in a more powerful position,” he said.
“We’ve also found that there’s certain areas from the market where this is not as easy to sell – when it comes to large PSAs, clients who have got a strong focus on procurement models.”
No barriers to implementation
Recruitment businesses do not need to have a specific set of characteristics to implement such a change to their pricing structure, Cross said.
“They just need to be able to segment their service delivery in a way that shows understanding of the difference between taking work from a client that can be filled in one or two weeks, versus something which is complex enough to require market mapping and headhunting, and may take two months,” he said.