The following idea doesn’t tend to sit well with most recruiter colleagues I’ve talked to. But as the talent war escalates, it makes sense.
It’s about our billing model. The vast majority of third party recruiters in the US operate on a contingent model. Fewer work on a retained basis. And a small, but growing minority have adopted an hourly model. I’m a big fan of the hourly approach. Following are three reasons it’s better for everyone involved.
1. It’s More Equitable
As recruiting projects get easier to find and harder to fulfill, the hourly model creates a far more equitable revenue model — customers pay for exactly what they get. It’s also more predictable revenue. As someone who started and grew a recruiting practice that began as contingent and moved to hourly, this saved me a lot of stress! And it often let me charge customers quite a bit less than what contingent billing would have amounted to, while still keeping me more profitable. It was better for my bottom line and theirs.
2. Allows Us to be Consultative
As we head into a time when it is exactly what our customers need, the hourly model allows and encourages recruiters to be far more consultative. We’ve all experienced customers and hiring managers who have unrealistic expectations, or make things a lot more difficult (time-consuming) than they have to be. The hourly model makes it very easy to explain, without any need for defensiveness, why any given expectation or practice doesn’t make sense.
You should probably reword this, but something like, “I’m happy to continue to spin my wheels on your behalf, for as long as you’d like, but here’s why I don’t think this is the best use of your budget, and what I’d suggest instead.”
3. Enables a Menu Approach to Services
The hourly model is a boon to a la carte recruiting services. This is a concept that doesn’t even make sense under a contingent model, and doesn’t work well under a retained model. I found this to ultimately be customers’ favorite thing about the model.
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The Competitive Hiring Advantages of Small Businesses
For all the advantages, switching to an hourly model is a big change, and you can expect resistance. I remember one HR manager who looked at me incredulously and said, “So we have to pay you even if you don’t find us a candidate that we hire?!” The best way to overcome customer’s financial concerns is to point out that they have complete control over the cost. I would invite them to set a weekly cap, and/or an initial pool of hours, after which we could pause to discuss results to date.
Outlining the other benefits also helped dispel the initial pushback. There were two ideas that seemed to especially resonate with employers new to the idea. One, a la carte services tended to grow on them. In many cases, they wanted to manage final interviews and offers, for example. They also liked having more control over the process. In some cases, they wanted us to be very thorough in our screening (including in-person interviews, reference and background checks). In other cases they just wanted us to send a steady stream of roughly qualified candidates (based on just phone screens) their way.
Finally, candidly, the hourly model changed my feelings about my job as a recruiter. Think about what the contingent model incentivizes us to do. For example, to try to spend the minimal time on any given requisition that will lead to a successful placement. No matter how I responded to that incentive, it never felt right.
Switching to an hourly model made me fall back in love with being a recruiter.