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Brainfood Open Kitchen: Let’s talk about Coasian Constraints
For new readers, this segment is ‘brainfood open kitchen’ where I share what I am thinking and doing, as I’m thinking and doing it.
Today is our first sponsored edition, so I thought it would be timely to talk about sponsors and how to work with them when running a solo business. I’m hoping this will be directly relevant to anyone who is running a similar service, otherwise operating as an individual in the creator economy (writers, podcasters, vloggers…), but perhaps also freelancers, consultants, and even entrepreneurs in the early stages of starting a business who are looking to acquire customers.
Now getting sponsors (customers) is hard, but we make it harder for ourselves by routinely under accounting for the hidden costs of acquisition. I call these costs ‘Coasian Constraint’s’, after British economist Ronald Coase, who wrote about the Nature of the Firm in the 1930s, in particular, why we tend to become salaried employees under contract rather than independent freelancers trading in the open market.
This is because there are hidden costs of doing business that can destroy the independent business if you are not aware of them and have a plan to mitigate them.
So what are these Coasian Constraints?
- Cost of Discovery
This is how much effort it takes to discover a sponsor (customer) for your channel (service/product). If you’re running solo, any answer greater than zero is usually too much. Time spent on discovery is time not spent on doing what you want to do. Hence you end up being a consultant planning X service but end up most of the time being a salesperson/marketer for that service. Not having a plan to reduce CoD is the reason why most consultants ‘fail’ and drift back into being an employee.
For Brainfood, the strategy is to rely entirely on the channel itself to cover the CoD. There is no outbound, no advertising spend, no pitches – really, zero sales effort. That is not because I am lazy – which as my mother can assure you, I am – but because I am obsessive about controlling CoD. All sponsors must come from inbound enquires alone, even if that means leaving sales ‘on the table’. The most important point? if not enough sponsors make enquires, you accept a no sale outcome rather than pursue prospects in hope of a sale.
In the visual above, you basically never want to travel North-East, only ever due North. And it’s even ok just to stay where you are. You are optimizing for time spent vs units sold.
2. Cost of Negotiation
How many interactions does it take with a sponsor (customer) to close the sale? All great sales teams track this number because talking to prospects, especially negotiating about price, itself costs money. The more interactions, the greater the expense incurred, the greater the opportunity cost of missing ‘quicker yeses’ elsewhere. Hence, to reduce CoN, setting standard non-negotiable rates for everything – for everybody – is the way to go – not on customer ability to pay. Where you set this number is dependent on the sorts of priorities and obligations you have and are too many to calculate here. For me, everything is super competitively priced in order to further accelerate that quick yes. Am I ‘under pricing’ the value of brainfood sponsorships? Almost certainly. But remember the priority is not to increase unit cost but to reduce CoN. For a solo venture, that too needs to be at or near zero.
3. Cost of Fulfilment
The reason why 1 and 2 need to zero is that 3 – fulfillment, necessarily costs you time – you can’t avoid it. The customer has bought X, you need to deliver X. However, as a solo player, you still need to find a way to do this which is both high value to the sponsor and low cost (remember, in terms of time) to you. For Brainfood properties, one of the outcomes of this constraint is ‘sponsor exclusivity’ – only ever one sponsor per newsletter, per podcast, or whatever. Now if I were optimizing for revenue alone, I would create multiple sponsorship tiers (gold, silver, bronze – you have seen this) and therefore ‘create more inventory’ to sell. But this dilutes value to the sponsor and therefore would certainly increase CoN, which, as you know already know by now, needs to be at or near zero.
The gist of it is: your time (as solo) is the most precious commodity in your business and you need to actively conserve it. This means being super defensive over anything that costs you time because any time – spent on anything – is 100% of company time spent on that thing. Imagine you are running a software business and you – as the CEO – asked your entire business – engineers, customer service, CFO – to down tools for a moment to ‘help you with you with a slide deck’. As a solopreneur, that is basically what you are doing whenever you are ‘pitching for business. It is the reason why most freelancer/consultancy ventures, unfortunately, don’t succeed, and why – as Coase explained nearly 100 years ago – we end up drifting back to being salaried employees.
I haven’t talked about compounding yet, which is a huge dimension of how brainfood works in further reducing Coasian constraints, so happy to share more thoughts with you on this if you find this helpful or interesting. But this essay has been too long as it is so needs a Pt2, so comment below if you want to see it.
Anyways, time to exit the kitchen and enter the lounge ?
What’s In The News?
VideoMyJob is launching a State of the Video In Recruitment Marketing Survey 2021. This would be an interesting report and relevant to everyone here, so please take 5 mins (it is only 5 mins) to complete this survey. Completed responses also get a chance to win a prize – 3 x books recently published from luminaries in the industry, plus a free Uber Eats meal! Get to it, here
CodersRank – an interesting new (ish) player in the tech hiring scene – has given the community a time-limited offer. Click on this link for 29% off all price packages, DB search, or job posting. Super competitive already, even more so now with this deal. I particularly like their approach in breaking down engineering focus-per-job.
Oracle – yes that Oracle – announce Oracle Journeys, a comprehensive all-in-one Employee Lifecycle management product. Josh Bersin has the best breakdown of course – here
Jobvite launches Jobvite Academy – a new online resource center for TA professionals to upskill and get certified. Paid for certification, SHRM + HRCI credits earned as part of the qualification. Check it out here
Personio announces Personio Marketplace, featuring 40+ partners which are pre-integrated into the Personio experience. Great to see vendors collaborating in this way – I am old enough to remember when software providers were only interested in boiling the whole ocean themselves. Personio is one to watch folks. PS: I interviewed CEO Hanno Renner for FF last month – have a watch / listen here if you wanna.
Candidate ID, the talent lead generation software provider, raises £1.3 million from BlackFinch Ventures, to further build product and team in supporting recruiters access ‘hire ready’ candidates. More info here
Finally, more amazing work from community hero and my good friend, Roy Baladi. His Jobs for Humanity project (please do check this out), launches its latest initiative, Jobs for the Blind. 286 million people registered as visually impaired, 36% of them are unemployed. We all have a part to play to build a fairer global society, so please consider how we can give all members of society a fair shot in job design.
If you are a recruitment service provider or technology business and have any news to share, comment below, this is your application to get into next week’s edition of This Week, In Recruiting. Make sure to @ mention me so that I see it
What’s On?
Turning the Dial On Net Zero, April 20, 10.00 am GMT
The exciting-looking event hosted by recruitment giants Lorien, looking into the impact recruiters & HR professionals can make in helping make sure their companies go carbon neutral. Speakers sharing their experience include leaders from AutoTrader, KPMG, Bruntwood, and Nationwide Building Society. One to sign up for folks – do it here
Tech Hiring Community Conference, April 20, 11.00am – 6.00pm GMT
Day 2 of the superb THC Conference, again features a mix of presentations, panel discussions, and active workshops. I’m moderating a panel on Global Compensation for location-agnostic team members – with Jess Hayes (Whereby), Andrea Marston (VMware), and Manjuri Sinha (OLX Group). The prescient Harold Jarche keynotes to close. Tech recruiters: free register here
Peering into the Talent Acquisition Future, April 21, 10.00am ET / 07.00am PT / 3pm GMT
Mashup between TATech and Recruiting Future Podcast, this event looks like it’s going to feature Matt Alder doing a marathon of 5 x 30-minute interviews with rec tech vendors on the future of TA. Free registration, so have at it here
DW Digital, April 21, 22, 23 – 12.30pm CET
Dutch language event ran by brainfood Bas van de Haterd. An innovative take on the conference idea – recordings of the keynotes delivered via email in the morning, followed by Q&A with speakers and networking lunch with other attendees. Radical change up….but I like it. Free to register, must-attend for Dutch recruiters, so do it here
Brainfood Live On Air – Ep 105 – Quantifying Company Culture, April 23, 14.00 pm GMT
There isn’t a person reading this newsletter that doesn’t have ‘culture’ as a top priority for their work going forward. Can we apply any science to it? We’re bringing together TA practitioners, software solutions providers, and a load of Organisational Behaviour experts to figure this one out. Register here
If you have an event, webinar, or podcast going on next week and want it featured on next week’s newsletter, comment below with the link and event details. Don’t forget to @ mention me so that I see it
Who’s Hiring?
Another week, another massive list of jobs for recruiters. The aperture is not wide enough for us to be fully confident in the signal but along with other macroeconomic reports last week from Australia, China, and the US, there seems to be growing momentum for what appears to be the mother of all bounce backs. Still not a lot of UK recruiters jobs in here….any reason why?
Technical Recruiter, Expedia Group, Gurgaon, India
Talent Sourcer, Expedia Group, Seattle, WA, USA
Associate Sourcer, Expedia Group, Gurgaon, India
Talent Sourcer (Commercial Functions), Expedia Group, Gurgaon, India
Recruitment Co-ordinator (US Shift), Expedia Group, Gurgaon, India
Technical Sourcer (Data Science), Expedia Group, Gurgaon, India
Technical Sourcer (EMEA), Expedia Group, Gurgaon, India
Technical Sourcer, Expedia Group, Gurgaon, India
Technical Recruiter – Austin Based, Expedia Group, Austin, TX, USA
Technical Recruiter – Seattle Based, Expedia Group, Seattle, WA, USA
Technical Recruiter – Chicago Based, Expedia Group, Chicago, Il, USA
Associate Talent Sourcer – Multiple locations, Expedia Group, Seattle, WA, USA
Associate Talent Sourcer – Czechia, Expedia Group, Prague, Czech Republic
Technical Sourcer – Austin Based, Expedia Group, Austin, TX, USA
Technical Sourcer – Seattle Based, Expedia Group, Seattle, WA, USA
Technical Sourcer – Chicago Based, Expedia Group, Chicago, Il, USA
Global Technical Recruiter, Adyen, Amsterdam, Netherlands
Associate, Talent Acquisition Operations (f/m/d), Delivery Hero, Berlin, Germany
Project Manager, People Systems (f/m/d), Delivery Hero, Berlin, Germany
Senior Data Analyst, People Analytics (f/m/d), Delivery Hero, Berlin, Germany
Senior Benefits Specialist, f/m/d), Delivery Hero, Berlin, Germany
Executive Search Specialist, AngloAmerican, London, UK
Talent Acquisition Partner – Business, Spendesk, Paris, France
Head of People & Culture, DroneSeed, Seattle, WA, USA
Recruitment Partner, Brandwatch, Boston, NY, Florida or Illinois, USA
Junior Recruiter (f/m/d), Humanoo, Berlin, Germany
Talent Acquisition Manager – Business (f/m/d) (German Speaker), Personio,
Senior Talent Acquisition Manager (f//m/d) (German Speaker), Personio
Talent Sourcer (m/f/d) (German Speaker), Personio, Munich or Remote DACH
Talent Acquisition Manager – Product & Analytics (f/m/d), Personio, Munich, or Remote DACH
Talent Acquisition Manager – Engineering (m/f/d), Personio, Munich, or Remote DACH
Recruiter, Shakepay, Canada Remote
Lead Sourcer (m/f/d), Taxfix, Berlin, Germany
People & Talent Manager, Canvas, London, UK
Junior Recruiter, Fastned, Amsterdam, Netherlands
If you want your job freely promoted in this newsletter next week, comment below with the link to the job. No third-party jobs or links to third-party sites. Don’t forget to @ mention me so that I see it
Who’s Available?
The incredible Glenn Gutmacher, after 5 years as the Global Talent Sourcing Strategy Manager with State Street, is looking for his next opportunity. Glenn is a well-known specialist in sourcing, sourcing automation, and leadership of sources. Would be an asset for any employer looking to build direct sourcing capacity. Based in Boston, can work remotely or travel internationally 25% of the time. Check out Glenn’s one-pager here, and get in touch with Glenn directly, here.
If you are on the market or available for extra, comment below with the ideal type of job you are looking for (job title, type of company, contract type, location). Don’t forget to @ mention me in it so that I see it
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Who’s Moving?
Shannon Pritchett has joined Hiretual as Head of Community. Power move by Hiretual, grabbing one of the premier community builders in the Talent Acquisition space. Simultaneously launching Evry1, an online community for knowledge share and resource collection – sign up, you might as well.
Bob Memmer steps up to Chief Revenue Officer at our buddies SmartRecruiters, after 6 years as SVP of North American Sales. A key figure in the Cielo RPO deal reported two weeks ago, Bob gets the reward to overseas the global revenue growth of one of the most innovative businesses in the recruitment technology space. Press release here
If you have made a senior exec appointment to your business, and feel the wider community needs to know about it, comment below with the details and see it featured in next week’s issue. Don’t forget to @ mention me in it so that I see it
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Whose Story?
Gianluca Rosania, Principal Recruiter, Booking.com
Do you know Gianluca Rosania? I had the pleasure of meeting with Gianluca earlier this year when we shared the stage in a virtual conference. He is the type of fellow you don’t forget easily – super engaging, friendly, and all positive vibes. I asked Gianluca 20 Questions. Here are his answers – have a read, here
If you are in the recruiting / HR community and want to take part in the Brainfood Tribune, comment below and let me know you want to do it.
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What Are You Doing?
Lars Schmidt has a new newsletter, this time on LinkedIn. If you know me you know that I hold Lars in the very highest esteem – whatever he puts together, it will be worth it. I’ve subscribed to RedefiningHR – you should too.
Jonathan Kidder has published a new book, How to Become a Technical Recruiter: A Recruiters Guide to Understanding Technology-Based Roles. If you follow Jonathan (you should if you are an active recruiter) you will know that this tome will be packed with practical tips to do your job better. On Amazon Kindle, here
If you are doing something new, comment below with what it is and share a link to where you want people to go. Don’t forget to @ mention me in it so that I see it
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Ends Notes
So I think this week’s TWIR was super long – did it read ok?
I’m hoping the information architecture and my stream-of-consciousness writing style make it ok to read through. Let me know if it is too much though. Enjoying putting this together and I’m happy to keep doing it, so let me know if you have any updates from you or your business that needs to be included in next week’s issue.
Have a great weekend everybody
Hung
Hung Lee is the curator of Recruiting Brainfood, and now This Week In Recruiting. Subscribe to both if you are into recruiting or HR or just interested in the world of work.
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