For those of you who are unaware of Michael, he first came to prominence as the director of recruiting for a small banking firm, FirstMerit (he’s now director of talent acquisition at Quicken Loans). His aggressive, business-focused approach to recruiting caused a stir in the recruiting community as he firmly placed his team’s emphasis on personal relationships and passive candidate sourcing. Today, less than five percent of corporations give recruiters incentives beyond the standard employee bonuses that others in HR receive. This is not surprising, as the majority of recruiting departments reside in HR. Obviously, the expectations for recruiters aren’t aligned with the compensation plans paid. Recruiting is akin to sales, as we are expected to source, build relationships, and get results — usually under heavy pressure. Agencies understand this, and skew their compensation heavily toward the number of hires a recruiter makes (often to the detriment of relationships).

Michael Homula strikes the balance between both worlds. At Quicken, Michael has found leadership that understands the importance of quality hiring to the bottom line. He sits on the executive committee and meets on a regular basis with the CEO. “Our leadership believes in making the recruiting culture like the mortgage banking culture,” he says. “Mortgage bankers are rewarded for productivity, effort, and quality. I believe in the same for the talent acquisition team.” Let’s start with productivity and effort: All recruiters receive a base salary. However, that’s where the similarities between Quicken Loans and most corporate recruiting teams ends. At Quicken, recruiters receive a cash payout for every candidate they hire. The payouts vary based on the how the candidate was sourced:

1. The first tier is for “company sourced” hires. These candidates come from the company applicant tracking system, referrals, company recruiting events, online job postings, and advertisements.
2. The second and higher-paying tier is for “recruiter sourced” starts. These come from any database, or referrals from candidates in process.
3. The third and highest-paying tier is for “recruiter sourced, no lead” starts. These are for passive candidates who are sourced by a recruiter through any non-company sponsored recruiting activity.

Recruiters do not receive cash payouts if their hires leave within the first 90 days. Michael has strong opinions about backing up his team’s hires. “Any sales organization would stand behind its product, so why not recruiting?” he says. “We won’t stand behind our hires forever, as there are many factors in play, but there should be a period of time that we do stand behind the quality of our work.” Quicken recruiters are expected to maintain a minimum number of hires each month. If the target number is missed, the incentive bonus will be decreased by a percentage. If the recruiters exceed the target number by a certain percentage, they can expect to see an even bigger payout.

Suitable Talent That Sticks Around

If you think this plan does not take into account proper recruiter behavior and etiquette, think again. In order to be eligible for the payouts, recruiters must attend team meetings, promptly return phone calls and emails, train and mentor others, update the applicant tracking system, and act as role models and leaders within the company. What really sets Michael and his team apart is their focus on talent suitability. Talent suitability is a hiring technique based on finding candidates who will be both productive and retainable. This is done by matching each candidate to your critical criteria, and ensuring you are well-matched for the candidate. If companies make bad hires, or make good hires that leave, then they have hired talent unsuitable to their environment. Quicken’s “quality hire component” brilliantly takes into account productivity and retention to reward its recruiters for hiring mortgage bankers who are making a difference. Homula is currently developing a plan where recruiters are eligible for exceptional bonuses when new mortgage bankers reach the 13-month mark. The team calculates the average revenue the new hire made for the tenth, eleventh, and twelfth months. If the new hire’s revenue falls within a predetermined range, the recruiter will receive a hefty bonus. If it falls in a higher range, the bonus is increased 50 percent. Says Homula, “Our mortgage bankers are rewarded for productivity, effort, and quality, and we will be as well.”

Mixed Reactions

Many of you will say it can never be done at your company. You will never hear Michael say that. He has the intelligence and confidence to create a new plan, speak with his company’s leaders, and make a business case that makes sense to them and their bottom-line mentality. You can do it too. It means moving out of your comfort zone and either creating a plan and business case yourself, benchmarking, or hiring a consultant to help you. As you can imagine, an incentive plan like this will cause a reaction. But he says it’s easy to differentiate the recruiters focused on passive candidates from the recruiters focused on passive recruiting. The passive recruiters will likely look for new jobs, and the recruiters who stay will enjoy the benefits. His best recruiters are making well into six figures. And so they should. “If you are a great recruiter,” he says, “who consistently produces the talent that drives the success of the business, and you are only paid a base salary, you need to either make the business case to your leaders or leave and find a company that will pay you for what you produce. It really is that simple.” Michael continues to blaze the trail for modern corporate recruiting. He blends the best facets of agency recruiting with the extra demands placed on corporate recruiters. His ideas are fresh, and he is influencing leaders as only a business partner can do. His words say it best; “I am sitting in a dream situation right now and working with some of the best recruiting talent in corporate America.” My article on agency recruiter incentives caused much debate, including personal emails calling me naive, wondering if I ever worked for agencies, and stupid for ever considering that agency recruiters should be paid incentives for new-hire milestones, as it is out of the recruiter’s control. My point to agencies is the following: If you give your recruiters incentives for talent suitability, they are going to:

1. Get more information about the position and what it takes to be successful in the company culture from the hiring manager.
2. Screen candidates better than they do today.
3. Discuss the candidate’s qualifications in better detail because they understand what to look for.
4. Not sell, but actually match the candidate with the position and culture.
5. Once the new hire starts, actually check in with the manager and new hire periodically to ensure everybody is happy.

Why? Because if they are motivated to find candidates who will be productive and stay for the long term, they are going to learn more about what it takes to be successful in their client’s environment. Remember, your client cares about hiring quality and retention. If you don’t, then you are not a partner. What does this achieve for you? Your clients will stop viewing you as a body shop and start viewing you as a trusted partner. This will result in you getting more business, as they will eventually migrate away from the cattle-calls and only work with the agencies with which they have great relationships.

I worked in the agency world for a number of years. It amazes me that the incentives now are as bad as they were back then. Agency leadership does not recognize that quality of hire is paramount to the success of their clients. Incentives reflect this fact, resulting in a system that is antiquated and must change. One suggestion for changing that is to spread recruiter commissions out over a one-year period as mentioned in the article. Speak with your customers and negotiate a productivity and retention plan. For example, if each Oracle DBA you place reaches 12 months, you get an extra kicker from your client. Another example is if you hire call-center representatives, negotiate an extra bonus if they are still employed at 12 months, and are at a certain productivity level. The key to building a talent suitability plan is communication. Ask your clients what hiring success looks like at the one-year mark. If you can align your goals with theirs, you will be in for a rewarding partnership. You will also have an inside track on all the body shops. It just takes some imagination and good communication. In regards to building partnerships, I would suggest agencies start by talking with some of the better recruiters in corporations. How do they build trust with their hiring managers? What do they not say in case they harm the relationship? Ask ex-agency recruiters the difference between working on the outside and getting results in-house.

Secondly, speak with executive recruiters. How do they build relationships that continue for many years? Why are their retention guarantees far longer than agencies? Robert Fong, senior client partner at Korn/Ferry, says it best: “As a professional services firm, we believe it is important to stand by the work we perform on behalf of our clients. Clients appreciate the long-term relationship we seek to build and value the fact that we are not “transactionally focused.”

I hope that in five years’ time we can look back at the state of recruiter incentives at companies and agencies and laugh about the bad old days. “Remember when recruiters used to get paid the same even if they hired the best sales rep in the company’s history?” or “Remember when agencies were called body shops?” It is time for more companies to build proper incentives into recruiter compensation plans. It is time for both agencies and corporations to make a commitment to quality hiring and retention, and not just transactions. All it takes is some more trailblazers.

After finally putting down the phone, it became apparent to me that this conversation was not the recruiter’s fault. The problem with his approach could be traced to the agency he worked for and its flawed incentive structure.

Incentives in Recruiting: Corporate vs. Agency

There are two prevailing methods that are used by corporations and agencies to motivate recruiters. Both are complete opposites when it comes to incentives. Unfortunately, neither method promotes the right activities for successful hiring. For the purpose of this discussion on incentives, I will refer to them as the Corporate Method and the Agency Method. The Corporate Method treats recruiters like any other employee. Corporations believe that since recruiters are in HR, they should be paid a straight salary and periodically receive bonuses, just like their co-workers in finance, IT, engineering, and other functions. The Agency Method, on the other hand, is based on paying a minimal wage (if any at all) and offering hefty commissions based on the number of people recruiters place at their clients’ companies.

The downside of these two methods is that corporate recruiters are given little incentive to aggressively recruit talent, and agency recruiters are given little incentive to build long-term partnerships with their customers. Neither incentive system promotes the recruiter activities that are necessary to ensure successful hiring practices for the companies served. In this article, I will focus on the problems inherent in incentives for recruiters working at agencies. Let me start by describing a successful hire. A successful hire is someone who joins a company, excels in his job, and stays for an extended period of time. In my previous article on talent suitability, I discussed how the key to a successful hire is hiring someone who is a strong match for the right job, group, and company — and where the job, group, and company are a strong match for that person. We do not pat ourselves on the back and say we have made a successful hire the week a new hire starts. The real determinant of talent suitability success is what happens weeks and months after someone starts. What you want are new employees who are productive and stay a long time. When it comes to addressing this issue, agency recruiting incentives are a disaster. Agencies pay commissions to their recruiters based on the number of people they place. Their recruiters typically get paid a percentage of the newly hired employee’s first year salary. Agencies will usually have an agreement with their customers that any new hire who leaves the client company in the first 90 days (in rare cases up to six months) will be replaced free of charge. Based on this incentive system, the Agency Method is detrimental to ensuring quality hires. It cannot build fruitful long-term relationships and can only survive by the “hit and run” tactics utilized throughout the industry. Let me explain. By focusing on quantity, agency recruiters work aggressively to fill as many positions as possible. If recruiters are working on 20 positions concurrently, they will focus on the positions that are fastest to fill and will typically ignore the more difficult or longer cycle positions. As an example, if one company makes slower hiring decisions than a second company, the agency’s recruiters will focus on the company that makes faster decisions, to the detriment of the more thorough customer.

Annie Rihn, head of recruiting at Zillow.com in Seattle, has engaged several local agencies to help meet the hiring goals of the pre-launch start-up. She says, “We offer a unique and challenging opportunity and have an incredible culture. But having a very high bar when it comes to talent standards has caused frustration for several of the agencies we’ve worked with. Some agencies are less motivated to work with us because they can’t get as quick of a hit. The few that have been most successful are clearly focusing on building longer-term relationships and feel much more like a trusted business partner.”

Agency recruiters usually make two other costly mistakes. First, because they are competing with other agencies, and sometimes the customer’s internal recruiter for candidates, they will call and screen candidates quickly, without much attention to detail, as they want to win the “race” for candidate submittals. Second, they will take an aggressive tack with hiring managers to get their candidates interviewed, making comments like “you must see this candidate,” or “he is absolutely perfect for the job.” If hiring managers interview candidates who have not been well screened and who are not “perfect for the job,” the agency recruiter’s credibility is ruined. But with the focus on quantity, not quality, and so many prospects out there, agency recruiters simply move on to the next opportunity. Another poor practice of the Agency Method is the 90-day replacement guarantee. There is absolutely no incentive in this guarantee to ensure the hiring manager and candidate have a happy and productive relationship over an extended period of time. If a recruiter is only worried about a new hire staying for 90 days, there will be minimal effort given to principles of talent suitability.

Fixing the Agency Method

So if talent suitability equals successful hiring, what concepts would agency recruiters need to embrace in order to improve?

• They need to build long-term relationships with their corporate customers. Customers want to work with their recruiters over an extended period of time, as it takes a while to learn the nuances of the job and the manager’s hiring expectations. Agencies who invest in their customers’ success over the long term are more profitable.
• They need to help hiring managers fill all, not just some, of their positions. Positions are given to agencies for a reason: The manager needs all of her positions filled as quickly as possible. Extra effort should be made to fill difficult positions, as the agency should be concerned about the hiring manager’s success.
• They need to become business partners with their hiring manager clients. Hiring managers want to work with a partner, not a salesperson. Poorly qualified candidates who are pushed on hiring managers result in short-term relationships and lost business.
• They need to be invested in the new hire’s success. Back-filling a poor hire after only three months is not good enough. If an agency is paid a full commission and its placement leaves after four months, the hiring manager is going to feel cheated.

As you can see, pushing recruiter behavior with commissions for each placement is not conducive to the above values. Recruiters are not motivated to work on all positions; they are rushed to produce hastily prepared candidates; they are motivated to oversell; and there is no downside to a new hire leaving after a short amount of time. None of these points ensure a healthy agency/customer relationship. If agencies want excellent long-term relationships with their customers they should set up incentive programs that reflect the best facets of talent suitability. Hiring people who are productive and who stay a while should be rewarded. Working on all of their customers’ positions should be expected. Ultimately, making their customers successful should be a cornerstone of the Agency Method. Here are some concrete ideas for a new Agency Method:

1. Set the expectation that all companies and positions are worked on with equal diligence. Incentives for recruiters should be based on the percent of open positions filled for each customer. For example, starting in January, 2006, the success rate for all customers could broken out as follows:
   • If 30% or more of requisitions are successfully filled, commissions will be paid.
   • If 30% of the positions recruiters worked on from Microsoft are filled, 42% of the positions from Yahoo! are filled, and only 18% of the positions from Costco are filled, commissions would only be paid to the recruiters who successfully filled positions for Microsoft and Yahoo.
   • Keep an ongoing tally. If Costco’s success rate goes above 30%, then all successful hires over the year now get paid. If Microsoft or Yahoo! drops below 30%, future commissions are stopped until the proper percent is attained.
2. Pay commissions based on new hire milestone dates. Agencies could pay their recruiters a portion of the commission at the date of hire, another portion when the new hire has been on board for six months, and the remainder at a year. (The agency should be paid by the customer at these milestones as well. It communicates a strong commitment to the customer’s success, which will itself pay dividends.) Paying out recruiter commissions further down the road demonstrates that the agency and its recruiters are committed over the long term to each new hire’s success. This will not only motivate recruiters to source, screen, and present higher quality candidates, but it will also serve as an excellent retention tool for the agency recruiters themselves. With commissions being paid out over many months, how can a recruiter ever leave?
3. Pay agency recruiters a higher base salary. The emphasis should be on partnering, not selling. Your customers will appreciate it. Besides, there is nothing worse for your company’s reputation than the voices of increasingly desperate recruiters!

These are only a few ideas for aligning agency recruiter incentives with talent suitability. If your agency utilizes a different plan, or if you’re on the corporate side and you’re aware of other incentive plans that motivate the right behavior, please drop me a line. Your feedback is very welcome. In my next article, I will discuss what can be done to improve recruiter incentives on the other side ó corporate recruiting.

• Learn the real factors that will make someone successful in a particular job.
• Learn what the culture of the group is really like.
• Learn the important aspects of the company culture.

You can build talent suitability into every step of the hiring process, from position identification to bringing the new hire on board:

1. Hiring manager meeting. This is the most important step of the process. It involves setting expectations for the search and writing a job description with talent suitability components. This allows the manager to thoughtfully identify the skills, traits, and attributes needed to be successful in the role and the type of environment the new employee will be entering. The important thing is to be realistic rather than idealistic. Company values should also be included so you make a hire that fits the behaviors and ethics expected by senior leaders. Some of the information gathered will be for the job description, and the rest will be used to determine the success factors needed throughout the hiring process.
2. Candidate sourcing. Although your aim is to attract candidates, the focus should be on attracting the right ones. Your employment brand should reflect reality, not fantasy. Employee referral programs should target high performers who will thrive in your environment, not just anyone. Care should be taken in defining and messaging job requirements and opportunities. Define what your company and group cultures are like. Talk about your culture to candidates. These are just some examples that will make sourcing more effective.
3. Candidate pre-screening. In addition to focusing on the skills, traits, and attributes required for the position, talent suitability screening includes disclosing realistic information about the company and group culture. For example, if your group offers minimal direct supervision and direction, but offers an entrepreneurial environment, then let the applicant know. The right fit will be motivated by the opportunity, the wrong fit won’t. How many recruiters and hiring managers do this today?
4. Interview day. Each interviewer should have a distinct area of focus which includes interviewing for skills, traits, and attributes that will ensure the candidate is a good position and group fit. Each interviewer is also assigned a “360 degree informational,” which discloses some information about the group or the company culture. The intent is to allow the candidate to learn more about the opportunity and environment. For example, perhaps your company encourages constructive confrontation at meetings. Here, the interviewer explains the meaning of the concept and gives an example. Remember this is a program to ensure you hire people who will be productive and stay a long time. The right candidate will be motivated by your environment.
5. Closing candidates. This is the easiest part of talent suitability. The right person for the role, group, and company will be highly motivated to join. The wrong person won’t even get past the interview day, and many unsuitable candidates will “select out” themselves.

Talent suitability is about hiring for your company’s future. If you don’t hire with the intent of improving performance and retention of new hires, then you are taking a huge risk that could result in millions of dollars in lost revenue. Take the time to integrate talent suitability into your hiring discipline so you are set up for success in the coming talent wars. The impact will be enormous. Both on the company’s profitability and your career.

1. What attributes and behaviors can we consistently assess to ensure we make a hire who will be more productive and stay longer?
2. Which kinds of experience and knowledge are essential for a job, and which are merely “nice to have”?

As I mentioned, #l is more important to a quality hire than #2. But if you can satisfactorily address these two issues, you will have conquered the Holy Grail of recruiting. Let’s talk about #1 first. A person’s core attributes and beliefs will determine her motivational fit and future behaviors. A good example is peeling back the onion when looking for a spouse. If your date is beautiful, successful, and drives a great car, but at the same time angry at the world, rude to your family, and terribly selfish, the marriage will not work. That’s why you must find a way to learn more than what a candidate has done at previous jobs and what she knows about her profession. You must learn her personal attributes and the behaviors that result from them. My suggestion to get this information is through the use of professional pre-employment assessment tools. A tool will ask questions that will give you a good sense of what matters to an individual and what behaviors to expect. If you have not invested in assessments, you can still get some information about attributes to interview for. That is accomplished by investing your time with your hiring manager. Which brings me to issue #2. This one goes back to peeling back the onion with your hiring manager and building a great job description. It never ceases to amaze me how few people pay attention to analyzing and building job descriptions in recruiting (Kevin Wheeler and Lou Adler have written some excellent articles about their importance). Invest the time it takes to develop a good job description with your hiring manager. Always ask him “why.” Why is a particular skill set required? Why are three to five years required versus someone with less experience? What behaviors will make an employee successful in the role? What personal attributes will ensure the employee will want to stay a long time in her environment? Will an employee be working in an ambiguous environment with little direction, or will she be working in a structured environment with specific direction? You want to peel back the onion and find out what the manager is really looking for. You want to learn as much as you can about what an employee can expect. Remember, hiring is about talent suitability, not filling a seat. Your experience requirements and job description should be realistic. Candidates should be able to determine whether they will be happy and successful in your environment. You should spend your time sourcing for the right talent. You should not take a shotgun approach and submit a wide array of backgrounds. Taking the time to do this will result in faster time-to-fill because you are now focused on the right targets. You will know what experience and knowledge to source for, and you will know what personal attributes and behaviors to assess for. If you find the right person, she will be more productive and she will stay longer. This is the goal of all excellent recruiters: quality of hire. Quality of hire results from peeling back the onion with your hiring managers and your candidates. If you want to hire the best, you will need to peel back the onion. First with your hiring manager, and second with each candidate. Equate it to looking for a spouse. If you don’t learn more about what will make someone successful in a long-term relationship with you, and if you don’t learn more about the attributes and experience a prospect should have to be successful and happy, then you have not peeled back the onion. The result is an unhappy and unproductive employee.

1. Can we hire people when they are needed?
2. Will those people perform well?
3. Will they stay?

Do you address any of these when you report metrics to your customers? Let me start with hiring people when we need them. In recruiting, we refer to this measure as “time to fill.” At the end of the day, your clients don’t care much about this metric. But they do care, for example, that a project deadline was missed because their team wasn’t fully staffed. When you meet with your customers before every project, discuss their business needs, and align your measurements with their milestones, you are indeed being strategic. At the end of a project, when you meet with management again and are able to demonstrate your contribution to the continuity of their strategy and the growth of their business, you become a Recruiting God! Secondly, I strongly advise you to report hiring information beyond what your organization typically measures. At T-Mobile, for example, we define “quality of hire” by the performance and retention of our new hires. A year ago we piloted an online assessment program focused on our retail hires. We measured performance (based on average percent of sales quota) and retention of new hires, both pre and post-assessment, to get an understanding of how these hires were performing over time. We reported to our client groups the changes in performance from 2003 to 2004, as well as the improvement in retention over the same period. This made it very clear how recruiting was affecting the bottom line. The pilot resulted in an increased investment in assessments, a mutual agreement that we were hiring the “right” people, and a stronger bond with our customers. We proved our relevance to their success. In order to leverage this new data to help drive our recruiting strategies at T-Mobile, we also cross-referenced our new hire assessment data with hiring sources. We compared quality of hire measures for each of our sources. Sources that did not result in new hires that met expectations with regard to performance and retention were de-prioritized. We were able to focus our time and money on the sources that were providing the highest quality of hire. The data we developed to help our clients understand our value proposition also helped us drive a more targeted and effective sourcing strategy. Your main goal should be to give your hiring managers information that is relevant to their success. This is when they will start caring about your metrics and will embrace you as a true business partner. Can you provide hiring data that is relevant to them, even if it is not entirely relevant to you? Can you show a link between what you do and their business success? You can. It takes work. But you will find yourself being more strategic than you are today, and this will improve your relationship with your clients. Your hiring managers will simply perceive you differently. Your goals will align with theirs. You will find it easier to get funding. You will become irreplaceable. Outsource vendor calls will go unanswered. In my next article I will share some best practices for presenting relevant information to hiring managers. I will give you some examples of what we have done at T-Mobile, as well as practices used by other companies. In the meantime, if you would like to share something your present or past company does, please contact me directly at randall.birkwood@t-mobile.com. I would love to hear from you!