Bidding for the best

Wed, 24 Jan 2007 | Updated: Fri, 21 Nov 2008 10:59 GMT

A shortage of people with the right skills means that more and more placings are falling through as employers, desperate to retain staff, entice them to stay with lucrative 'buy-back' offers, according to recruiters.

"There are numerous examples of offers and counter offers going backwards and forwards like ping pong in £5,000 increments," says Lee Dempster, director of financial services and HR at financial and legal recruiter Badenoch & Clark.

Dempster reckons that between one in five and one in two are persuaded to stay where they are. In one case an employee was able to double her salary in two days, get promotion and a place on a prestigious training programme, simply by accepting the buy-back offer of her desperate employer. In the specialist area of compliance, Dempster says "almost a half" of candidates are receiving counter offers.

But while this sounds great for the employee, it's not such good news for recruiters. According to Dempster, the loss in fees can range from £7,000 to £120,000, depending on the assignment. On top of that there's the cost of wasted time. "For fees of over £60,000 that would typically be between three and six months' work," he says.

Dempster (pictured right) says that it's made more "difficult" because sometimes candidates will wait right until the end of their notice period before deciding not to move. And if that's not enough, recruiters face the possible wrath of disappointed clients.

There is growing evidence that such a scenario is not confined to the City either, however. Recruiters in areas such as IT, engineering and construction are saying the same thing.

"It's an ever increasing problem," says Jon Butterfield, managing director of IT recruiter ReThink Recruitment. According to Butterfield, 40% of candidates' current employers attempt buy-back, with about one in 10 succeeding in turning the candidate around.

John Wakeford, managing director of Hitchenor Wakeford, a search and selection firm with branches in Leeds and Manchester, recalls one counter offer, which doubled a sales manager's basic salary overnight and gave him a guaranteed 50% bonus on top. "Ridiculous," he says.

However, Steve Leeson, manager of the senior finance division at banking and finance recruiter, Morgan McKinley, points out that it's not just money that talks. "They might offer promotion and salary, a new role and new responsibilities." Leeson adds: "Normally it's a change in the original role that justifies a higher salary."

So what is going on?
Recruiters agree that the main reason for the growth in buy-backs is a lack of people with the right skills. "It's a candidate-driven market, and there's a skills shortage," says Butterfield.

Employers are faced with an unenviable choice, he argues, with many coming to the conclusion that the alternatives, either a long wait to find a replacement or using costly short-term contractors, are even less attractive.

It's a similar story in construction where skills shortages in certain pockets of expertise and geography mean counter offers are "quite common", says Jo Kavanagh, owner of specialist built environment recruiter Kavanagh Recruitment. Kavanagh says: "Quantity Surveyors are particularly difficult to recruit for at the moment at most levels, so a prospective employer might offer £3,000 to £4,000 more and the current employer will match it or offer another couple of thousand on top."

Other damage
In addition to the direct financial cost of buy-backs to recruiters, Paul Mulcock, head of senior appointments at executive search firm sevenhr, warns of the damage they cause to the recruiter-client relationship.

"Buy-backs make our lives very difficult," he says. "It's a massive negative on the consultant… You didn't do a good enough job and there is real annoyance." Mulcock adds: "It's a difficult position for a consultant to come back from, and a good proportion of clients will use somebody else."

But although Dempster agrees they are "unhelpful", he argues that the effects can be mitigated. "Buy-backs are part and parcel of the marketplace," he says. The key is to have an open and candid relationships with clients so that they can be pre-warned when buy-back attempts are likely, he says.

What's to be done?
Recruiters are adopting a variety of strategies to reduce the chances of a successful buy-back. "The key is to spend a lot of time with candidates and understand their motives for wanting to leave," says Dempster. However, he suggests that it's no longer enough to look at what he calls "direct motivation".

Consultants need to build up a detailed picture of what really drives a person, he argues. For example, perhaps their real motivation comes from "Mum or Dad", he suggests. Dempster says one consequence is a greater need for face-to-face contact. "The connection between the people is the key. This is where the real work goes in."

Morgan McKinley's Leeson (pictured left) comments: "If they are genuinely motivated to leave for reasons other than just the money, such as greater responsibility and career progression, we would encourage them to take the role."

Understanding your candidate is key, agrees Butterfield. If the motivation is primarily financial then they are more likely to succumb to a buy back offer, but if they want to leave for other reasons such as greater career development, "recruiters are on firmer ground", he argues. Butterfield adds: "Unfortunately, 90% move for financial reasons."

Equally, he advises, it's important for recruiters to understand their clients and to present them to candidates to the best of their abilities.

Dempster points out that in a market where candidates can afford to be choosy, recruiters need to work closely with clients to ensure that the "candidate experience" promised by recruiters actually happens. "If we tell the candidate our clients will interview them like this, our clients will need to interview them as asked," he says.

Wendy Trevett, a director of Bristol-based office support recruiter Lucy Bristow, who recalls a couple of counter offers of more than £4,000, uses another tactic.

She says: "We would counsel the candidate that maybe a counter offer of money might be a short-term fix and maybe there is still a problem as to why they wanted to leave in the first place." Trevett adds: "If the reason they are leaving is the job isn't challenging enough, money isn't going to make it any better."

Simon Gerrard, (pictured left) a director at engineering recruiter NES International, says they employ similar tactics. "We suggest to the candidate that it's a little bit late; that if they really valued you they would already be paying you the market rate," he says.

Other than that he says his company has adopted a number of strategies to reduce the number of buy-backs, which he estimates cost the company an average of £5,000-£6,000, including man hours, money which he admits can't be recouped as NES tends to work on a contingency rather than a retained basis.

"We rarely work with people who move for money motives because they are the ones most likely to be tempted by counter offers," he says.

In addition, to counter what it sees as a growing problem in the lead up to the 2012 Olympics, he says the company is trying to bring in more qualified candidates from overseas.

The company also advises clients to conduct regular salary reviews. This helps them avoid being caught out, he argues, and gives them the information to make first time offers that are "too good to refuse". "That goes a long way to scaring off counter offers," he suggests.

Sometimes Gerrard says they will suggest the client up their own offer. "We tell them 'You can secure the person if you are prepared to offer X rather than Y, and that for the sake of £2,000-3,000 it would be ridiculous to miss out on that candidate'," he says.

Dempster admits that very occasionally they recommend a client counter a counter offer with one of their own. However, he warns of the dangers of getting into a bidding war. "That's the moment you lose control of the candidate and raise the frustration of all parties. There isn't any value in hiking anything," he says. "We advise clients that their full and final offer needs to be the first one they make."

It's a good idea to have a good number two candidate, suggests Kirsten MacLeod, operations director at ECHM.

Now for the good news
Dempster says that where candidates are enticed to stay with their current employer by more money, unless the underlying reasons for wanting to leave have been dealt with, there's a good chance of them being back in the market within a short period.

Or, as Matthew Reaney, a director of Sale-based recruiter, Jam HR Solutions, puts it: "Six months down the line they are back on the phone saying 'I wish I had listened to you in the first place'."

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