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Let’s Revolutionize the Standard Recruiting Model

Apr 21, 2008

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.

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