I’ve been supplying companies with Contract Recruiters since 1988. That is a long time. Most of the time, the clients will not even accept an Agency recruiter, unless they have also worked on the inside. I understand the differences between the two environments, and it usually takes a special TPR to be successful inside.

Of course, when discussing the use of contract recruiters with potential clients, they always want someone who can make 10 – 15 hires per month without the assistance of corporate assets, advertisements, job boards, etc. That is when I explain to them that the person who can do that only works 5 months a year and spends the rest of their time on their private island in the tropics.

The key to success as a corporate recruiter is people management. How to get the managers to do what they need to do, how to get decisions from an organization unfamiliar with the concept, etc. When one has that skill, they will be successful, headhunting/sourcing skills aside.

At Quicken Loans a great recruiter WILL make TPR kind of money. Of course, I can’t give out the names of my Talent Acquisition Consultants and I can’t directly speak to specific annual commission pay outs, but I can assure you and back it up with evidence that we have TAC’s making well into 6 figures annually because they perform.

Sure, in TPR you MIGHT have the possibility of ownership but let’s be realistic. Those opportunities are for the few not the most. I come from TPR, I was very successful there and I know the drill on ownership – and it’s not all about performance either because, like in any company, politics play significant role.

The only other way that being a TPR is clearly better than a gig as a recruiter at a forward thinking company like Quicken Loans is if you own your own firm, work from home or something like that. I can’t compete with going to work in your pajama’s at the office 30 feet from your bedroom. But I darn well can compete with offering a world class recruiting model, a commission plan for recruiters that is significantly superior to anything else in corporate America and competitive with TPR commissions, a company in the top 15 of FORTUNE’s best places to work three years running….well the list continues to go on and on…..I have made my point.

TPR is great. I love it. I will likely return to it someday. But there are really sound reasons why a great TPR would join a corporate talent acquisition team like the one we have at QL. The sad and true fact is that I don’t think there is anyone else in corporate recruiting doing what we do here.

How many companies have taken to outsourcing all of their recruiting function?

And of those, how many are now bringing them back in house?

The reality is that there is no single, perfect model. Each company will need to craft the model, or models, that work best for them. Additionally, these models need to be dynamic, not static.

For any internal recruiting model to succeed it must have at its core the ability to adapt to the needs of the business.

So, that means that some companies will offer incentive programs that mirror the ‘TPR’ model, others will follow more traditional comp & bonus structures, others will rely more heavily on external recruiters.

That’s good news for all of us…so long as we keep our focus on delivering for the business.

You just forgot one thing in that comprehensive model:

WHY?

Why did it fail? Because in 3 years I haven’t seen it. Do TPR’s magically lose their skills and intellect when they ‘become corporate?’

TPR’s sure would like to think so. Because the success of a model like Quicken Loans gives them nightmares. 3 years ago, the recruiting function had 2 recruiters and about 20 vendors. Now we have 20, skilled, proven, talented, recruiters. I am not saying there will never be a circumstance that we will need a TPR, but we haven’t needed one in a year.

Others can continue to doubt it, and make hypothetical models that assume incompetence, bad decisions, and eventual collapse. Companies like Quicken will just continue to acquire top TPR?s who will acquire top talent for their organization?. Without third party firms. Sorry Bill, it’s happening.

Mike

I often wonder though how many of these ?contract recruiters? are really Misclassified. Expensive mistake if you take in Microsofts settlement of 97 Million.

Think you are On the Mark Bill ? Really, why would a darn Good recruiter who is top billing settle for a Salary and some bonus ? companies are limited in what they can pay to make it worth their while not to be utilizing the benefits of a TPR especially considering those other hidden costs.

Which then makes one question ? why would a top biller TPR also consider working hourly instead of making it all for themselves or at least having something tangible like future part ownership within a Recruiting company, or at least 50 Percent of the placement fee?

Please understand this is not a finger pointing session, but they are valid questions because as a business owner I don?t comprehend the why some strong recruiters would jump to the other side. I would love to have a better understanding ?

Personally it really does belie the concept of the Hunter and Gatherer mentality of Strong Sales and Recruiting.

There is another point that is always overlooked in these discussions that is so important. As TPRs, there are a number of important things we can do for the candidates that a Corporate Recruiter just can’t do because they are the employer.

So I agree 100% with your ‘real’ model and not just because of the artificial cost saving. We are in the world of outsourcing not insourcing. It’s easier to change supplier overnight if the results are poor than spend months getting rid of employees, replacing and retraining them.

When cost of hire is more important than quality of hire, it will always end up costing more.

What we often seem to forget, in our various discussions on techniques and methods, is that there is a venerable and foolproof way to attract and retain top talent—pay them more.There is also an almost lockstep relationship between compensation and performance.

That being said; I’d like to address your comment (follows):

‘I apologize for my generalizations, they are just my observations from my experiences working on both sides of it. After seeing how the recruiting functions works at Quicken Loans, and how the ‘headhunting’ mentality of the recruiters have saved the organization millions of dollars in costs, I can’t see why more companies aren’t doing it. But in building such a model, you must hire 3rd party recruiters, and that would require some painful changes in a traditional HR function. I do believe though, that THIS model, is the future of recruiting.’

The model, I believe, will look more like this:

. Company decides to hire ex 3rd party recruiters
to get headhunting mentality and save millions.

. Company offers corporate HR salaries ( and, perhaps some incentives) to ex TPRs, who, gleefully join company anticipating exciting 401ks and health benefits.

. A year or so goes by and company realizes that it got less than it bargained for; there’s been little change equal to the cost.

. Company repeats the above steps 3 or 4 times, interspersed with methodologies, approved vendors, SLA’s metrics, meetings , conferences, seminars, walking on hot coals, etc.

. At some point in the future, on the 5th or 6th iteration, someone says:
‘ these ex TPR’s we hire are settling for a lot less compensation than a moderately successful TPR outside would make, perhaps we’re just hiring failed TPRs—lets pay our new hires like outside TPRs get paid, We’ll get the best, I know it will be expensive but we’ll destroy the competition etc, etc, etc,’.

.Time goes by, CFO notices the cost increase in HR and says ‘it would make sense to outsource this’.

Save this post—That’s the model.

I’m a firm believer that the only reason fantasy football gets so much attention during the day is that far too many people work on a nice base salary and if they spend an hour reading about the exploits of Chris Palmer the previous Sunday it is no skin off their nose. And frankly probably benefits them more becuase they have some monetary incentive tied to their team.

A base salary in the world of recruiting is not enough to force mediocre performers to do better and it isn’t enough to ensure top talent remains happy. It is a perfect set up to make sure that complacent, decent talent is happy, and can make a nice profit for the company. Each person becomes an FTE and a certain p&l is assigned to each. The more you add the more the company makes. Nice scenario if you are at the top of the food chain.

What about a model that is serving both parties? The harder the employee works, the more they AND the company make. It’s the hardest high paying job you can have or the easiest low paying job you can have.

Seems to me it’s worth it to find out which people want to make it and those that want to be complacent.

I did enjoy what you had to say. There is some evident truth in it. People don’t get into or stay in sales because it is an easy job.
However, they cannot perform at their peak if they don’t believe in their product or love what they are doing.

The Best Sales people – including recruiters have an ingrained hunter and gatherer mentality. There is a love for the chase and the ether of ‘hitting the home run’ is indeed amazing. Yet that ?high? can only last so long, especially when takes in the reverse of the above sentence ? The negative aspect from sales can also generate immense burnout

One of the lures in what we do is the reward factor. It provides strong and Positive reinforcement and incentive to rebound from the losses and the constant No?s we receive in this job. That is as long as the Structure is reasonable and within the Salesperson?s Control and reach, if it isn?t Fear can come into play and that can generate paralyzing consequences and loss of trust.

Sales people do take a lot of abuse on a day to day basis, and though they can be resiliant on the most part, if they did not have some type of positive reinforcement to encourage their successess even the most successful sales person will ultimately become unproductive and ineffective.

That being said, I have been shocked to realize how rare incentive based pay is in corporate HR functions. I guess I just assumed that recruiters are salespeople at heart (side effect from starting and spending most of a career in 3rd party). But I think if more organizations adopted this, it would almost certainly lessen their reliance on 3rd party vendors. And wouldn’t that make some HR budgets happy?

But it doesn’t happen. You know why? Because too many corporate recruiters only view their role as part of HR. There is such a core difference between the approach and psychology between 3rd party recruiters and their corporate counterparts.

3rd Party Recruiters are hunters and gatherers, they do it for the thrill of the chase, and their mood for the week typically hinges on a signed fee agreement. They loathe processes and administrivia. The element of risk and uncertainty is their oxygen.

HR Recruiters and HR for that matter, fear and build their very function on avoiding that very same risk. Too many times I have seen process trump logic and efficiency in HR. An all too common occurrence in Corporate America. HR Recruiters view themselves more as gatepeople, protecting the organization they serve.

I apologize for my generalizations, they are just my observations from my experiences working on both sides of it. After seeing how the recruiting functions works at Quicken Loans, and how the ‘headhunting’ mentality of the recruiters have saved the organization millions of dollars in costs, I can’t see why more companies aren’t doing it. But in building such a model, you must hire 3rd party recruiters, and that would require some painful changes in a traditional HR function. I do believe though, that THIS model, is the future of recruiting.

I think the fact the Quicken Loans already trumpeted an aggressive comp plan for their recruiters, was one of the main reasons Michael Homula joined us in the first place.

I do think, however, that the reason Quicken Loans was so quick to embrace this idea some three years ago is because we are a performance-based organization to begin with. I can say with a good level of certainty that at least 75% of our 3,000+ team members here at Quicken Loans have some version of performance based pay.
Also, I think looking at our Senior Leadership team gives you an idea of why they were receptive to this:

Dan Gilbert, chairman/founder: Started in SALES
Bill Emerson, CEO: Started in SALES
Patrick McInnis, President: Started in SALES

My guess is that it wasn’t too difficult to persuade these guys into setting up performance based pay. I am also guessing that doing this at an organization that doesn’t have a sizable direct sales component, could be far more challenging.

Lastly, I think performance-based pay is about WHO you hire. Around 3/4 of our recruiting team comes from a 3rd Party Recruiting background. As a recruiter, I would never have joined this team if I wasn’t receiving some form of performance based pay. But there is a flip side. As a 3rd Party recruiter, I worked with a lot of ‘Corporate Recruiters’ that didn’t have a true sales or recruiting bone in their body. So in order to have a comp plan like this work correctly, you need to hire salespeople, with a sales mentality, who are will to work sales hours. Especially when you are recruiting…………. salesmen.

If the company make a bad hire, it?s the hiring manager?s fault, not the CR or the TPRs. Their job is to find the candidates, not hire them and then hold their hand for the next 12 months. Do you blame the newspaper if you make a bad hire through advertising with them? Do you insist on your money back or a guarantee? Of course not because you used them as a means to get introduced to candidates and that?s what TPRs and CRs do, introduce you to candidates.

If a good hire leaves the company it might not be them that?s unsuitable, but the company they work for, so why blame the CR or the TPR.

Whilst I admire any attempt to level the playing field between the remuneration of TPRs and CRs, this model is surely self defeating. Now before anyone rushes in (again), no I don?t have a problem with how much CRs get paid because it makes no difference to me. The reason I comment is that by trying to match commissions in this way, the function of the CR is being led down a path that will conflict with their job purpose and away from them being a Recruiter.

Let?s get back to basics. The recruiter?s job whether TPR or CR is to find the best available candidates in the market. The quality of their work is the accuracy of the candidates they present but ultimately 100% of the responsibility to hire sits with the hiring manager. If the hiring manager hires their candidates, then the recruiter can consider it a job well done. They have achieved their purpose.

What happens next is the difference. The TPR, as a sales professional, will raise an invoice and charge the client for their work. They will then get paid commission against this invoice as in any other sales job. The CR however has not sold anyone anything or generated any revenue so they cannot raise an invoice for anyone.

To now pay the CR based upon the after performance of the candidates they place will distract them from what they are supposed to do next. Rather than them looking for the next hire, they will be more concerned about the performance of the previous one, even though they have absolutely no control over them whatsoever. To suggest this is not true would be folly. They would be chasing their promise of a six figure salary like anyone else.

If an employee makes the 13 month mark it is down to a lot of factors but none of which are related to the person that found the candidate. Where do you draw line on whose fault it is if the employee leaves the company during the first 12 months?

What if the employee dies in their eleventh month? Recruiters fault? They might want to kill them if they cost them their bonus but probably not before. What if the employee has done their job well but was fired by an irrational or bad manager with one month to go? Can the recruiter make a case for the defence or rather the commission? And so it goes on. Before you know it the CR will be disputing the treatment of the employees and will certainly be on the side of the employees. They might even strike a deal with the employees to get them to hang around long enough and get a slice of the action for themselves. Who knows what people might do when moneys involved :-) They might even join a TPR (Just kidding)

Alternatively the only employee looking to leave might be the CR because they are not getting the commission they feel they deserve and were promised.

Back in the late 90?s we recruited for one of the big growing Telcos. They were recruiting over 100 people a month. Every employee that joined belonged to their unique share option scheme that was directly aligned to the ratings on Standards and Poors. At peak times, these invisible shares were going to be worth over ?1m to the individual at some point in the future. The excitement was immense and everyday just about every employee was watching their ratings and working out how much money they would make. The problem was that no one was doing any work. They were more interested in this theoretical payout in 1 or 2 years time.

Needless to say, the company was underperforming and no one got far enough to receive any payout. This incentive became their albatross and the company nearly closed. Today they have less people in the whole of Europe than they had then working in London.

The true dilemma I suspect is that when you have sold your employer on the fact that by using CRs instead or TPRs you can save them lots of money, you cannot justify paying commissions against a non revenue generating job. And no, saving money in fees is not the same as making money.

Paying against someone else?s revenue generation or performance sounds like a good idea but what about everyone else involved in the hiring process. Shouldn?t they get a slice of the action, especially if the candidate was via an ad or job board?

As for using any of the big players in Executive Search as an example, well that?s not a reflection of all Executive Recruiters or indeed the rest of the industry. The big players in this sector don?t have to look for the majority of their business, it comes to them. They get paid whether they fill a position or not. I?ll repeat. They get paid the full fee whether they fill a position or not and extortionate amounts so I don?t know why they would worry about extended guarantees. Who couldn?t afford to offer extended guarantees on $70k + fees.

We have cleared up many times after some of these big companies and they still get paid more for the placement they failed to fill than we do for filling it??but that?s another story. I?m not bitter about it really, honest.

I am proud to have been at the West Point. Much of who I am was formed during my time at the academy. I love West Point and admire my old ‘rockbound Highland home’. My respect for The Long Gray Line is intense and in no way do I want to mispresent myself as having graduated from West Point. The brave men and women who do complete their 4 years at West Point deserve better than to be muddled up with me.

Thanks!
Michael

If a company wants to hire and retain talent, hiring top talent recruiters is a must. Agency recruiters at the peak of their goals with an excellent retention history, (before they leave the agency for a solo practice) are a perfect fit. With every dollar invested in an outstanding recruiter, the company stands to gain endlessly with talent.

A Recruiter is paid the high dollars to recruit. That means: cold calls, extensive referrals, leads through references–the good stuff (before the internet). A company with an expectation of hiring star talent off a job board is unrealistic.

Great Recruiters usually prefer not to be job board lookers or bogged down with paperwork and meetings.

Excellent, seasoned recruiters know about candidate retention and are prideful their placement stuck it out for more that a few years. Those candidates usually become Hiring Partners and clients for life. Those recruiters ‘get it’.

With the help of incentive plans outlined above, corporate america can now attract top RECRUITING talent. The best recruiters in the business will appreciate this and seek after companies with this model. They’ll help them move past their competition-as an insider.

I have followed closely the posts about Michael Homula?s philosophies, practices, and career, as well as your articles on the need to change recruiter incentives.

As a TPR, I specialize in the niche of competitive intelligence (CI) talent and in building good CI into HR practices. Michael did just that at FirstMerit, plus he?s a West Point graduate and I?m an Annapolis graduate, so I was hooked.

After reading your articles on recruiter incentives, I am not one of those who think you are stupid, inexperienced, or na?ve. I think your ideas are provocative and worthy of further analysis.

I believe the accuracy of your statement that ?less than five percent of corporations give recruiters incentives beyond the standard employee bonuses that others in HR receive.?

It seems clear to me that the changes you urge will have to begin with the 5 % of corporate recruiters in the right-hand end of the bell curve who ?get it.? These are the folks with the knowledge and skills to work out a ?win-win relationship? with their TPRs.

So here is a suggestion for further analysis that links your thinking to the attitudes and practices of people like Michael Homula regarding TPRs:

Do a followup article about Michael and some others who are in the right-hand end of the bell curve, the ones who ?get it.? Answer such questions as:

? Do they employ TPRs in their talent acquisition efforts? If so, under what specific circumstances?

? What is their philosophy on compensating TPRs?

? How much access to the hiring team on the part of TPRs do they permit/encourage?

? Do they encourage TPRs to visit their facilities and meet face to face with them and the full hiring team? If so, will they reimburse the expenses of the trip?

? Do they encourage TPRs to conduct face to face interviewing with promising candidates prior to submitting them to the hiring team? If so, will they reimburse the expenses?

I have no idea how this inquiry will turn out, but I can?t wait to see it.