“How do they do it and what can be done to prevent them from doing it to us?” is a question many corporate recruiting leaders are asking. The underlying premise here is that if corporate recruiting departments could be organized and run like contingency recruiters and executive search firms, lots of money would be saved.

Despite the promise of the objective, very few companies have been able to successfully pull it off.

There are a variety of reasons for the this. Following are the most obvious:

1. The hunter vs. farmer issue. External recruiters are more hunter-types, drawn to the challenge of commission sales. Corporate recruiters are farmer-like, cultivating relationships, seeking more security, and focusing on activity.
2. Compensation vs. security. The best third-party recruiters make tons of money and the pretty good ones do OK. These recruiters are driven by the compensation, just like any top salesperson, so if the pay isn’t comparable, you’ll attract a different person with different motives and achieve different results.
3. The ability to cherry-pick assignments. The best contingency recruiters select the jobs they want to work on, and the best always have enough assignments. They also can walk away from those that turn out to be too time-consuming. Executive search recruiters are known to be industry specialists and seek out assignments that match their interests and abilities. Corporate recruiters just can’t say no.
4. The ability to select hiring managers. The best external recruiters develop long-term relationships with their hiring manager clients. This increases their influence, they hear about potential openings before the reqs are formalized, and they are more influential at every step in the process. This matching isn’t so easy for corporate recruiters who are assigned to work with hiring managers.
5. Workload differences. It’s much easier to develop and maintain client and candidate relationships when a recruiter is working on fewer assignments. Most retained recruiters handle 3-4 assignments at any one time with the help of researchers. Most contingency recruiters handle 8-10 assignments, but only focus on the easiest three or four. This is far less than most corporate recruiters.
6. Multi- vs. single-company focus. External recruiters — again I’m only referring to the best here — tend to be subject-matter experts and represent similar jobs with different companies. This is a real advantage to a candidate, since he or she can leverage her efforts by dealing with fewer recruiters and be exposed to more opportunities. This advantage doesn’t exist for a corporate recruiter who only represents one company and probably a smaller range of job opportunities.
7. Continuous vs. long-term candidate relationships. Good external recruiters have access to more jobs in the short run, and are more likely to be someone whom the candidate will work with again in the future. Corporate recruiters tend to be more transactional, filling jobs and moving on. This is huge disadvantage for corporate recruiters, since they also lose the ability to network and get as many top referrals.
8. Speed vs. bureaucracy. Good active candidates are easy to place. Just call up three to four companies and present your candidate, and bingo — a placement. It’s very likely that one of the companies called will have an instant need for a strong person. Corporate recruiters are tied to the pace of their company, which is usually slow and methodical.

Most of the differences noted above are organizational and compensation-based, and not easy for a large corporation to emulate, but all is not lost. Much of the competitive advantage external contingency recruiters have is speed of execution — finding the best first and getting them out on interviews quickly.

With this in mind, here are some ideas on how corporate recruiters can close this time gap and get to the best people quicker:

1. Be found first. Getting top people as soon as they enter the job-hunting marketing is a huge competitive advantage. A well-connected third-party contingency recruiter can present a top person to multiple clients within days. By the time a corporate recruiter finds this same candidate, it’s often too late. The person has either already accepted another position or is too involved to be interested. External recruiters work very hard at getting candidates to call them first, either through aggressive advertising or word-of-mouth networking. To offset this, corporations need to develop early-bird sourcing programs to compete on this level. This includes compelling advertising, search engine marketing programs, and the use of talent hubs.
2. Leverage your employee referral program. While each individual corporate recruiter is unlikely to be able to develop a deep network of potential prospects, a company’s employees are. To get this going, have your employees reach out to every great person they’ve worked with in the past using LinkedIn or something equivalent to establish the connection. Make the program formal, with regular emails, having your employees tell their contacts to contact them first, whenever they want to consider leaving their current company. This way, you’ll increase your odds that you’ll have a crack at attracting the best before everyone else.
3. Build a pipeline of prospects. Over many years, you should be able to build a huge prospect database filled with leads, business card info, and resumes. Some of the newest and more robust CRM systems can help you nurture this database and reach out with compelling emails when an opportunity arises. RSS feeds, agents, and Twitter job feeds are also good ways to stay in touch. The key is to be compelling and be regular. This is a great way to build your brand and attract good candidates before they’ve thought of looking on the open market.

As part of all this, you must provide prospects you find early in their job hunt an opportunity to learn more about the job on a non-committal, exploratory basis. Too many corporate recruiters, reinforced by their hiring systems, force candidates to commit before they’re ready. This means you need to allow these prospects to talk with or IM recruiters or managers, rather than send a resume or fill in an application. Finding candidates first is important, but if you push too hard you’ll turn the best off, so a balance is required during these initial discussions.

Even if you get the person first, the real work now begins. You’ll need to offer a compelling job that rivals everything else out there. As part of this, your corporate recruiters must be great negotiators and be able to fight off their external rivals who are aggressively trying to place your great catch before you make an offer. It’s important to think through the hiring process end-to-end including how job descriptions are written, the professionalism of the interviewing process, and how offers are presented and closed. It won’t much matter how soon you find these stars if the back-end falls apart.

It’s not possible to create an external search firm environment within a corporate structure. Regardless, there are things recruiting leaders can do to at least be in the hunt and minimize their reliance on external firms. But whatever you do, expect these external firms to do something better, different, and sooner, in response.

I’ve been a contingency recruiter for over 11 years. Some days I say to myself, “There’s got to be a better way to do this.”

Think about it: How do contingency recruiters get business? They compete with other recruiters for the privilege of spending their own (or their boss’) money on clients who may hire a candidate we present at some unknown time in the future.

To curry favor with clients and potential clients, we survey the market to provide intelligence about competitors’ offerings, introduce candidates who they can compare to those they’ve sourced on their own, place Monster, CareerBuilder, and other ads on clients’ behalf, and screen out the unqualified.

We consult with them and give them the benefit of our knowledge and experience. All this and more?at no charge!

Clients prefer the contingency model because they perceive little or no risk in using it. If we provide a truly stellar candidate, one they couldn’t locate on their own and desperately need, they’re happy to pay the fee. If not, they haven’t lost anything. The recruiting industry has sold its services on this very basis for years.

Don’t get the wrong idea: I’m not suggesting clients purposely take advantage. I’ve met very few insincere clients.

What I am saying is that we, the contingency recruiters, have trained the marketplace to expect this. We’ve trained the clients that we, the recruiters, are anxious, even desperate, for a job order. We’ve trained the market that recruiters are like taxis (if you miss this one, another will be along any minute).

There’s no need to even return our calls. We’ve trained them that we probably won’t actively work their job anyway, so they should give the job to multiple recruiters. We’ve trained them that our services and our time are worth nothing because that’s what we ask them to pay for it.

Wait a minute! What about those recruiting fees that get paid when the candidate gets hired? Thousands of dollars are hardly nothing!

The recruiter collects a substantial fee for a placement, a fee that far exceeds any costs incurred in performing the actual work of making that placement. Compensation for talented people has been rising, which has driven fees based on a percentage of compensation higher and higher. You can buy a pretty nice car for the average recruiting fee. Or you can pay a $60,000-a-year employee, including benefits, for three months. Is it any wonder that more and more clients see this type of recruiting as too expensive, as a function they want to bring in-house?

Our clients’ customers are constantly pressuring them to provide better products and services, faster, and at less cost. Why are we surprised when our clients expect the same of us, and make changes when we fail to deliver?

Why do we do recruiting this way? We do it this way because we’re accustomed to it. Because that’s how we were trained by our predecessors, mentors, and franchisors. Back in the old days (I can say that because my career started in the early 1970s), there were employment agencies, or companies that found jobs for people for a fee.

The fee was based on a percentage of the wages or salary of the job (sound familiar?). The better the pay package, the larger the fee. There was one major problem. How do you collect a fee from someone who’s unemployed?

Some smart people looked at the problem, and the concept of “employer-paid fees” was born. I remember it well. In 1972, I was out of college, out of the Army, and out of work. The prospect of paying a fee to the employment agency was too scary to contemplate. I insisted on employer-fee-paid jobs only.

From this beginning, the recruiting profession was born. Very little has changed since then. We still work with “employer-paid fees.” We still work on a percentage of the compensation. We still get paid only when the candidate is hired and starts work.

News Flash

In case you have not noticed, the world has changed since the 1970s. We need to adapt, innovate, and overcome. We need to find a new way to do business that better serves the needs of everyone involved: the clients, the recruiters, and the candidates.

Corporations want access to talented people quickly and at the lowest cost. Open positions cost them money. They know this intuitively, even though our accounting systems fail to show it. They don’t want to watch their business plans circling the drain due to vacant positions. They want to be in control of their destiny.

Recruiters want to use their skills to find talented people, introduce them to the clients, and get paid for their efforts. They want to be in control of their destiny.

Candidates want access to opportunities to improve their lives and careers. They want to be in control of their destiny.

This is where the current contingency recruiting system hits a disconnect. The reward for performing the search isn’t aligned with the control of the process. Recruiters try to find people with a specified set of qualifications (location, education, skill set, background, salary, valid reason to make a job change, etc), interest them in the opportunity offered, and introduce them to the client company. From that point on, the client and the candidate have all the power. Recruiters try to facilitate the process, but our control of the process is a big, fat zero. We have no control over whether the employers offer a job or a candidate accepts the offer. We become observers, watching the process and hoping that something good happens so that we can get paid.

Contingency recruiters are interested in making a placement, any placement, because they need it to pay the bills. This presents a potential conflict-of-interest with the client and the candidate.

Once the process has started, the recruiter and the client start to have a love-hate relationship. The client loves the service but hates the thought of paying the large fee. Clients who pay too many high fees for unworthy candidates don’t keep their jobs. Recruiters love the clients but hate the process from which there is a lot of heartburn and heartache on the way to getting paid. The candidates are caught in the middle.

Time to Change

It’s time to retire the contingency recruiting model and replace it with a model that reflects alignment of responsibility and control. Recruiters would be paid to produce qualified, interested candidates. Fees charged would be based on a reasonable cost of the work being done, plus a reasonable profit margin.

Recruiters could still charge for their expertise and continuing services they provide. Clients would pay for qualified candidates they interview. Recruiters will produce qualified candidates, for which they will get paid, or they won’t produce them and they won’t get paid.

Hiring or not hiring a candidate is the client’s and candidate’s decision. The power, responsibility, and costs would be in alignment.

I can hear the wails of protest already.

This is heresy! Burn him at the stake!

Before you stack the wood, pour the gasoline, and light the match, think about this. There is a long list of benefits to be accrued by changing the system. Imagine how much more efficient everyone could be if the new recruiting landscape was a place:

• Where there was clear, consistent communication between the recruiter, the client, and the candidates. No need to play games.
• Where the recruiter becomes a partner rather than a vendor, with the client’s and candidate’s interest first and foremost, rather than their own (making a placement).
• Where the definition of a “qualified candidate” was clearly understood and agreed upon from the beginning.
• Where “When in doubt, send ‘em out” is no longer valid.
• Where it no longer made sense to find so-so candidates on the Monster board and present them on the outside chance they may get hired.
• Where a skilled recruiter could devote serious time to finding the qualified candidates, secure in the knowledge that they’d get paid for their efforts.
• Where candidates who fit the qualifications were interviewed, as a matter of course.
• Where recruiters knew their market well enough to determine quickly which assignments were realistic and which were “mission impossible” and communicate it to the client up front.
• Where there was no fear that the compensation feedback you get from recruiters is inflated to jack up the fee.
• Where the timetable for expected results was clearly communicated and agreed upon.
• Where the client knew their financial exposure from the start. Cost would be determined up front rather than through negotiation (of the salary) at the end.
• Where the recruiter knew that they would be paid for recruiting and presenting interested, qualified candidates.
• Where there is less angst over the possibility of paying big bucks for a candidate that isn’t worth it.
• Where the heartburn, heartache, and 11th-hour surprises are minimized.
• Where the cost of using a recruiter becomes competitive with Monster and CareerBuilder.
• Where the client’s cost to recruit goes down substantially, reflecting the cost of the work performed plus a reasonable profit margin, like every other product or service in the world!

Instead of a system where a recruiter is living for the big payoff, modify it so that the recruiter works on projects and gets paid for their work. Instead of a system where the client pays nothing unless they make the big payoff, pay for the work that’s actually done. Adoption of this system will put pressure on recruiters to deliver good candidates on time and put pressure on clients to define their needs and wants more accurately.

Good recruiters will find ways to get better and more efficient. Poor recruiters will be driven from the business. Smart clients will learn to define their needs clearly and communicate them to all involved. Not-so-smart clients will end up paying for their own inefficiencies. Candidates will have more opportunities to better their careers.

Pioneers and early adopters will receive the greatest benefits, saving money and improving their performance. Late adopters and laggards will benefit least, when the new cost of doing business is already built into their business model, and the benefits will be much harder to recognize.

Currently some staffing suppliers are opposing the sale of the system to Ensemble Chimes Global’s former president, and alleged improprieties have come to the surface about the financial dealings of executives of Axium International Inc. the parent company of Ensemble Chimes Global, as reported by the Los Angeles Times. As these events transpire, clients are realizing how they can become vulnerable, should their vendor management system supplier be acquired, file for bankruptcy protection, or handle funds inappropriately. While the bankruptcy trustee has made interim arrangements for the operation of the system, at the very least, clients face the potential for business interruption should vendor management system firms go belly up and all of the financial ramifications have yet to be identified or decided in this case.

As of Friday afternoon, Ed Lenz, senior vice president for public affairs and general counsel for the American Staffing Association said he had heard from staffing suppliers that outstanding receivables owed staffing firms by Ensemble Chimes Global totaled anywhere from $100 million to as much as $300 million. Lenz said it was his understanding that the majority of the outstanding balances represent billed but unpaid client invoices.

Also still at issue is $22 million in funds swept away by Axium’s owners Golden Tree Asset Management as reported by the Los Angeles Times last week and contractors who were paid directly by Ensemble Chimes Global are blogging about being laid off and having little recourse for unpaid wages.

How staffing suppliers that provided temps under the Ensemble Chimes Global system might weather large write-offs is another potential concern for clients.

At the very least, many Ensemble Chimes Global clients originally contracted with a company that operated under different ownership and a different set of financial circumstances, during the pre-acquisition period. While clients may have felt protected under the terms of their original ECG agreements, it’s hard to say if those agreements will provide complete financial protection for clients, until everything shakes out.

“Now everybody’s trying to put Humpty Dumpty back together again,” says Lenz. “I think there will be lessons learned from this insolvency. For example, clients will want to make sure that VMS suppliers have escrow accounts, so they don’t co-mingle funds, and clients may place a premium on sound management in the future and require more assurances that the VMS company will continue to operate. All of the issues haven’t surfaced yet, and right now, clients have a right to be skeptical.”

Manpower has bought an IT recruiting company, another company doing internal audits, the career-transition company Right Management, and is in the recruitment process outsourcing business. It is rebranding itself as a full-service giant, doing testing, training, and retention work. Most of its sales is overseas.

Allan McKisson, Manpower VP human resources, North America, came over from Whirpool, where he spent 20 years. (Whirpool went through its own branding exercises 10 years ago.)

McKisson is examining what the implications of Manpower’s new direction are to the employment side of the business. Right now, he says, that means two things.

First, the candidate experience. He’s pondering “What should it feel like, what should it look like” for a candidate to apply for a role at a company that wants to be the expert in most everything work-related, not just temp-related. He calls this “Fit, finish, and feel.” “It’s the softer side,” McKisson says. “When people connect with Manpower, what does it feel like?”

Also, he’s looking at assessment criteria. “Our brand is forward-thinking, fresh-thinking, innovative, inclusive, resourceful. How do you translate that into selecting people who fit the culture?” he asks. Industrial-psychology majors on staff are helping out.

McKisson says that as Manpower develops tools to better hire people who fit its culture, it will keep one eye out to the question, “How can we make that into a product to provide for our clients?”

McKisson has read a lot about branding, and sees it as “[another] one of those HR things of the year. People do it and get all excited.” He says it’s not that complicated: “It’s about, ‘How do we translate our brand into experiences for our candidates and for our people?’”

Meanwhile, McKisson’s spending much of his time on a “talent management system.” Essentially, this is a process to make sure Manpower has the right people with the right skills going forward. The senior management team in North America is all involved one way or another. It’s assessing managers based on such things as their ability to manage change and drive strategy. It’s determining whether it has the people it needs to fill the jobs that will soon come open.

Most of all, Manpower’s asking?managers where they want to go, what they want to do, what they want. It’s starting with 100 director-level employees, and then in the third quarter moving to manager-level. His mantra for the project: “Think big, start small, go fast.”

On May 24, Standard & Poor’s Rating Services upped its outlook on Manpower from stable to positive, “based on improved operating performance, slightly greater business diversity and declining debt leverage.” “It’s a good time to be at Manpower,” McKisson says.