Change vs. more of the same

Traditional agent commission agreements are the problem [6 min read]



I recall a first year lecture in which the sixty-something Professor talked briefly about how easy it is to fall into relationships and, conversely, how hard they can be to exit. His smile said he knew he was right, and that he knew most in the room would grasp it intellectually but still go ahead and learn - truly learn - the hard way.

Mick you were right: exiting personal relationships is challenging and unpleasant. But what about uncoupling from an impersonal business arrangement that's not giving the required satisfaction? With a few exceptions (gyms? phone carriers?), contract law seems to reduce pain. Relationship terminated, each party moves on.

But what if you deeply need the help of the entity with which you've entered into an agreement, and aren't quite getting the outputs you crave? Let's say you're an education provider and you have written agreements with education agents who help place international students into your academic programs, but your margins, and your partner agents' margins, are being hammered ever-thinner. What do you do then?

Perhaps you renegotiate terms, adding in increased detail on expectations of deliverables, KPIs, minimum thresholds. And of course there are other agents, and other providers, so maybe you sign-up with more partners, and you vary your risk by signing different types of partner (global agents >> mom & pop agents; Russell Group universities >> vocational colleges). You might even increase commission and bonuses.

But if the same challenges keep coming up, what then?

Maybe then it's reasonable to ask if it's the contracts that are the problem.

An Analogue Solution for the Digital Era

From a cottage industry in the mid-90s, with mostly solo consultants or small businesses each counselling relatively low volumes of prospects, the agent sector has grown to a multi-billion-dollar sub-sector of international education. The methods have evolved, with a digital emphasis enabled by software and devices that didn't exist in 1997, but the processes and the framework for success remain largely the same:

Find prospects to counsel

Counsel them

Successfully place them

Receive a commission

A key difference is this is all happening in a global market three times the size of the one 25 years ago, and agents are increasingly making the weather.

Today tens of thousands of agent firms of varying sizes source prospects for institutions globally. Some of those artisanal operations now have a regional market focus, and a relative few have opted to grow by becoming pan-regional or even global. All agents continue to work one step removed from providers whose bottom lines rely more than ever on sufficient numbers of qualified international commencers to keep appearing at enrolment time.

If parallel universes exist then it’s doubtful there's one in which education providers have deployed this operating model, or that many providers here on this earth would create this model from scratch if given a blank slate. Whilst a no-win-no-fee agent model can be fantastic for a smallish subset of agents, it can most charitably be described as suboptimal for the majority of providers, the ones carrying 100% of the risk in these relationships.

And the risks are significant. 

The risk of wrongdoing; of students not staying the course; of offering to or enrolling non-genuine prospects; and, (ultimately) that places on courses and programs will go unfilled at all. Most providers globally will have these on their Risk Registers, likely with a few almost permanently in the ‘Issues’ column at a majority of institutions.

Why then do providers persist in this arrangement?

I'll offer a guess, though it might only be part of the actual answer.

We Tend to Play By the Rules We Know

In the agent recruitment space within providers there’s a proportionately tiny number of people making (or guiding Executive members on) these often multi-million-dollar decisions. Mostly these are road-weary, well-connected, former recruiters who've moved into leadership roles. They attend conferences and talk about what they do to move the dial incrementally, and they observe and imitate the best parts from other institutions. They are viewed by other colleagues in their institutions as authorities on how it all works, because indeed they are expert. They’ve legitimately earned their reputations as experts.

They’ve also been trained, as I was, to think within the traditional agent framework that’s grown around them as they've progressed within their careers. They’ve built and run teams largely to fit this traditional dynamic, including shaping processes to safeguard the quality of "relationships" as an almost guarantor of good outputs by agents. In seeking this, they're always contactable via WhatsApp by the managing directors of their most critical agencies, and often persuade their executive leaders that it's important to hand out certificates at agent award ceremonies and that the six-figure budget line item for agent fams  is crucial. They do these things because today's contracting model is more inclined to reward these high-cost, high-effort behaviours.

Clearly it isn't all same-same. Many operators also try to push the bounds of what works and can work, and innovate. Someone was the first to suggest per-head bonuses. Someone was first to partner with private recruitment firms in offshoring university presence. Etc. There are brilliant people in these roles.

Much of the pushing has only been incremental, however. Little forays outside the traditional methods, because innovating within a provider, and especially a university, is a very difficult thing to do. It can be systematically disincentivised and discouraged even when it’s culturally or outwardly supported. I've observed this firsthand at multiple institutions.

Until now, few have done both of the following:

    1. Asked why the sector’s agent-led sales do not work in the way other commodities' sales work.
    2. Developed a different way of selling via agents based on the answer to 1.

This is no fault of the sector. Providers work in defined sets of rules, and at the largest of them change can be slow. They adjust spends and shift effort in pursuit of the single-digit percentage uplifts in conversion or volume usually cherished by leadership. 

Can you name a firm selling car tyres or shoes or makeup that’s happy with 2% uplifts, or holding steady in years of sector slide (or worse, boom)? Probably not many. 

Much of the innovation in this space has been driven from the agent side, of which aggregators are the best example. So why do contract terms today remain largely in offline, analogue, static, siloed documents when every other part of the recruitment funnel has been in some ways digitised?

Perhaps It's Time to Change the Rules

The international ed sector survives because it’s critical, crucial. Demand reflects this. That’s the reason approx. $4B USD in agent commission flows globally each year. Dollars carved from providers’ bottom lines, sometimes to the point we must wonder how this is economically viable. Finders’ fees for giving a provider what it needs and which can only be sourced - in this traditional ecosystem agents have helped create - via this crazy supply line that few working for a provider would ever devise from scratch. A 2022 report showed that institutions (a top-slice of universities, which are of course not representative of all international recruiters) intend to spend their way out of trouble and to double-down on growth and, less critically, diversification.

Instead of spending all this money within the same set of rules, why not change the rules slightly and spend significantly less? i.e. retain more.

If providers are serious about margin improvement and diversification of intakes then weaning themselves from the current model is an ideal start. Today's dynamic  benefits few agents and disadvantages all providers, even those whose leaders would perceive that they are doing well from it. Do you know what a future with reduced agent reliance, of acquisition costs slashed, of a controlled reduction in load from X or Y markets looks like?

In this universe, at least, most don’t because we've been playing by the wrong rules.

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