Is the Transactional Corporate Recruiting Model Doomed?

Aug 10, 2006

We just closed our annual hiring challenges survey, with a few hundred participants describing their perspective on the state of the recruiting industry. From a preliminary review it’s not comforting, especially if you’re a corporate recruiter or recruiting manager. Most alarming is that things haven’t gotten better since we took the survey last year. In fact, the situation has deteriorated. For example:

  1. Agency recruiters on average handle eight to 12 requisitions while most corporate recruiters handle anywhere from 20 to 40 at any one time. Retained recruiters handle even fewer searches. Not many would dispute the fact that candidate quality correlates directly with the number of requisitions a recruiter handles.
  2. Sixty-five percent indicated that they were very experienced recruiters with over five years of experience. Yet the average salary for all of the recruiters taking the survey was around $75,000. This seems light compared to the amount of experience people had, but there was certainly an obvious link between experience and compensation. There was also a significant gap between agency and corporate recruiters. Corporate recruiters have an average cash compensation of $65,000 to $70,000, and third-party recruiters have an average compensation of $85,000 to $90,000. The best recruiters in the survey are making $150,000 to $300,000.
  3. A total of 80% noted struggles with hiring managers. Fifty percent of the survey respondents indicated that dealing with hiring managers was the biggest problem they faced, while another 30% indicated it was the second- or third-biggest problem they faced. Collectively, these problems had to do with their belief that managers are not strong at assessing competency or recruiting, and that many overvalued skills and experience when determining which candidates to interview. I think these are symptoms: the root-cause problem is more associated with using a transactional vs. account manager model. But more on that later.
  4. Eighty-eight percent cited sourcing, with 48% ranking it as serious or severe and another 40% ranking it as a frequent problem.
  5. Approximately two-thirds of the survey respondents indicated that they used four primary sourcing effectively to meet the bulk of their hiring needs. These included job boards, employee referral programs, resume databases and their career website.
  6. Regardless of type (agency vs. corporate), 70% of the recruiters said they are exceptional or very strong in most areas of recruiting performance. This included delivering top candidates, assessing candidate competency, and using technology effectively. This seems quite high when asking recruiting managers to rank their staff, or when asking hiring managers to rank their recruiters.
  7. About 60% of the respondents indicated that there is little ? and usually informal ? tracking of most measures of recruiter performance, including factors like sendouts/hire, candidate quality, and the use of Web analytics. It’s hard to know how well a recruiter is performing unless you have specific metrics tracked daily and weekly.
  8. 60% of the respondents indicated that their workforce planning methodology was either nonexistent or that it was poorly implemented.

While there is much more analysis required to draw any definitive conclusions, here’s my quick assessment of these results:

  1. We’re reacting far more than initiating. One of Stephen Covey’s basic principles in The Seven Habits of Highly Effective People is “Begin with the end in mind.” As far as I can tell, corporate recruitment management doesn’t even end with the end in mind. This is largely attributed to the lack of formal planning. To see where you stand on this scale, just assign this past week’s activities into a reacting or initiating bucket. If you spent over 50% of your time reacting, you have a severe problem here.
  2. Anarchy rules. Although there is no standard, fully recognized training method and quality-assurance reporting mechanism in place, most recruiters and hiring managers believe that they are pretty good at what they do. While recruiters are unhappy with their clients’ skills, these same clients are equally unhappy with their recruiters. Of course, all hiring managers believe they are great at assessing competency ? even though they all do it differently and rarely agree on which candidate is best. Worse, most don’t even know real job needs ? so they wind up assessing technical competency, personality, and presentation skills. From my view, both groups are right: anarchy rules, not a business process.
  3. Basic process controls are not in place. From what I can tell, many companies are using Band-Aids to solve their hiring problems when major surgery is required. Underlying this is the lack of appropriate metrics in place to figure out the root-cause problems. To me, the most important metrics are daily and weekly recruiter performance measures like sendouts per hire and hiring manager responsiveness. This equates to fill rate, time to fill, and quality in a factory or distribution center. Operations managers would be fired if they weren’t tracking and focusing on improving these core process-control metrics. Somehow, the recruiting department gets a free pass here.
  4. We’re not getting better. Available tools and techniques that could minimize some of these problems in the short term ? like better use of technology, workforce planning, process reengineering, and better recruiter and hiring manager training ? are not being used properly or to the degree necessary. Of course, it’s hard to get better if you’re not aware of the real problems. Regardless, planning is the key to long-term improvement, and separate from this survey we are starting to see more companies emphasizing the importance of long-term global workforce planning.
  5. We’re using a craftsman-like mentality to solve an information-age problem. Somehow, the recruiting department forgot the Industrial Revolution ? standardization, scalability, and process control. Instead, recruiters are hired based on years of experience and the quality of their “art” of recruiting. They’re not tested, measured, or trained, and they’re expected to do it their own way. Since there is no training available for best practices, we don’t have a way to train new recruiters other than in some “apprentice-like” manner. This is like a factory letting each worker make each part using his own tools and measuring his own quality his own way. This was America pre-1850.
  6. Corporate recruiters are set up to underperform by using a transactional rather than an account manager recruiting model. Good third-party recruiters who have strong peer-level relationships with their clients and their candidates have much more influence on the overall results. They also make more money and consistently deliver better candidates. Much of this is due to the recruiters handling fewer searches ? performing as account managers, not order processors. It might make sense for corporate recruiting departments to consider this approach for their more important positions and their more challenging searches.

In future articles, we’ll get into more details regarding the survey and some actions you can take to improve recruiting department performance. For now, here’s one micro and one macro suggestion you can try right away.

From a micro standpoint, every recruiter should read part II of my article, On Becoming a Great Recruiter. This describes how to take the assignment to better understand real job needs. There is a clear correlation between job knowledge and the recruiter’s performance and his relationship with the hiring manager. Job knowledge is not the job description. Recruiters must understand real job needs in order to attract top people and assess them properly. Getting this information from the hiring manager is one way to move from a transactional recruiting model to a more consultative account manager role.

The macro suggestion involves workforce planning. For a quick way to institute a workforce plan, first conduct an 80/20 Pareto analysis figuring out which managers will be doing the most hiring in the next six months. Then send an email to these managers, asking them to give you a forecast of their hiring requirements for their most critical and/or important high-volume positions. (This is another 80/20 subset analysis). Email them monthly, including their last six-month forecast, and have them revise it and add one more month. This crude process will give you a real heads-up on what is happening throughout your company. These forecast-to-forecast changes will enable you to spot changes in your hiring needs four-to-six months out.

We’ll provide more survey details in upcoming articles and in a free conference call in September. Sign up now if you would like to participate.

While there are specific issues raised by the survey, the big one for me is the lack of progress on getting better. My sense is that this is due primarily to corporate recruiting departments’ lack of influence in effecting change. Feel free to send me your thoughts on this topic. Solving this problem most likely requires a shift from a transactional to an account manager model. This would involve a major reorganization and strategy shift, probably involving outsourcing or moving recruiting out of human resources. Whatever the solution, it’s obvious that the problem needs to be addressed head-on.

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