Recruiter Incentives: It’s Time for a Change

“Recruiters should get paid for what they produce!” These are the words of a trailblazer in the corporate recruiting world, Michael Homula.

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

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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.

Randall Birkwood is a former director of recruiting at T-Mobile USA, Cisco Systems, and Microsoft Corporation, and HR at Intermec Technologies. While at T-Mobile his organization was listed in an ERE article as a top 10 benchmark firm in recruiting and talent management. He has been an advisory speaker at General Electric and AT&T for VPs and directors of HR, and spoken at a number of conferences in the U.S. and UK. He was the subject of a cover story on the "War For Talent" in Internet World Magazine.