Using Retained Search as a Model for the Future of Hiring

First, the vision. As I finished up my presentation for the September 13-15, 2004, ER Expo 2004 Fall in Boston (which you should attend), the overwhelming idea came to mind that hiring top talent can some day be a systematic business process. By this I mean that companies and their hiring managers can assume that when a hiring need arises, it will be quickly filled by a strong person. When this day arrives, the systems will be in place to automatically ferret out the best people available, using a variety of effective sourcing techniques. Diverse candidates of all shapes, sizes, and colors will be represented in this best candidate pool. Recruiters and managers will then accurately interview and assess candidates and select the best ó using objective and highly accurate techniques. The goal: 90% of people hired will be competent and highly motivated to meet all job objectives. This hiring process will furthermore be fully integrated with the on-boarding process to ensure that the new employee gets up to speed as rapidly as possible. Of course, the hiring process will be an extension of the company’s performance management system, with the new employee managed, coached, developed, and reviewed based on the same criteria under which he or she was hired. As a result of making hiring top talent a systematic business process, turnover will decline, employee satisfaction will increase, and overall company performance will improve. This is what can happen if hiring top talent really becomes #1 and hiring the best becomes a business process. Now, the reality. Despite apparent advances in the hiring process in the last 10 years, hiring performance based on quality and time to fill hasn’t improved much. Cost to hire might have declined somewhat, but this is no savings if candidate quality declined as well. This conclusion is supported by numerous surveys of hiring managers, company executives, and corporate and third-party recruiters. The biggest change in the past 10 years has been the enormous increase in the quantity of candidates applying as a result of job boards. This necessitated the requirement for more robust candidate tracking systems. The Internet/job board/ATS alliance promised that we could win the war for talent. Companies were sold on the idea that they could dramatically reduce costs by eliminating third-party recruiters, bringing the recruiting agency model in-house. However, corporations got greedy and lost sight of the prize: that is, lower cost with higher quality. Not only did corporations want to eliminate the 20% to 30% fees, but they also wanted to do it with fewer people. The result: lower cost while sacrificing quality. To succeed in bringing the agency model in-house, the first goal should have been to make the agency model more efficient, reduce some overhead, get better trained recruiters, and allow them to keep the agency profit for themselves. This would have reduced overall hiring costs by about a third while maintaining quality. Not a bad result, and it would have worked ó except for the greedy part. Rather than focusing first on efficiency improvements and modest cuts in headcount, just about all corporate recruiting departments bought into the job board hyperbole ó that hiring for quality would be easier, so you didn’t need as many recruiters to do it. This is the fatal flaw in the internal agency hiring model. For an example, if an outside recruiting firm took 10 recruiters and sourcers to hire 100 people in a certain time frame, corporations felt they could do it with three people. It really would have taken six. However, the die was cast, and the problem accelerated as more and more requisitions were piled upon fewer and fewer recruiters. With a modest hiring increase as we’re now experiencing, corporate recruiting departments are now reaching out to their third-party cousins. Now back to today. The problem is solvable. I believe that quality can return with only a modest increase in cost. Let’s consider the external recruiting model for some guidance. When you think about it, there are three basic types of third-party recruiters: retained executive search, contingency recruiters, and high-volume agency recruiters. Most people would agree that retained executive recruiters do the best overall job when using the quality of candidate as the primary measurement standard. Some contingency firms also do well on this measure, especially those that emulate some of the more important characteristics of retained search. Very few corporate recruiting departments do as well on the quality-of-candidate measure as a top executive search firm. The reasons why are revealing, so a direct comparison is in order:

  1. More resources per hire. Most retained executive recruiters work no more than three or four assignments at any one time, and they use two or three researchers to help. On this basis, requisitions per recruiter and researcher are typically in the one to three range, maybe five on the high side. Requisitions per corporate recruiter, on the other hand, are typically 10 to 25, sometimes more. Contingency recruiters typically work six to twelve assignments at one time, and have better results than corporate recruiters, but not as good as retained recruiters. Conclusion: Quality is directly a function of the size and quality of recruiting staff support. You’ll need to conduct an ROI analysis on quality versus cost to obtain the added resources. It’s easy to prove. Just ask any top executive if they’d run an ad or use a corporate recruiter to help fill a critical hiring need.
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  3. Strong partnership with the hiring manager. Retained recruiters all work closely with their hiring manager clients. This teamwork is essential. The further removed the recruiter is from direct continuous contact with the actual clients, the less likely they are to place top people. Some contingency recruiters have strong client relationships, but many are prevented by HR from talking to them. Not surprisingly, when HR intervenes this way candidate quality declines. Conclusion: If corporate recruiters don’t have the time to spend with their clients, they won’t be consistently successful.
  4. Clear understanding of job needs. The best recruiters (retained and high-quality contingency) know the job as well as their clients. This allows them to find and screen the best candidates without wasting time dealing with the weak candidates. Conclusion: Corporations should reorganize their recruiters around specialties to take advantage of this important principle.
  5. Strong referral and networking programs. Top recruiters have strong networks, which they can tap into to find top people quickly. Most corporate recruiters continue to rely on advertising to find active candidates. While targeted advertising can help here, a more proactive employee referral program can quickly level the playing field. One way to do this is to have all your new hires identify every top person they worked with at their prior company. Then get your best recruiters to call and bring these top people into your pipeline.
  6. Accurate assessment of candidate competency. The best recruiters are good interviewers. I won’t pitch my one-question performance-based behavioral interview again, but it does work. My advice is to use it. It will help if you know the job. If you don’t know the job, it won’t matter. You can never be a good recruiter unless you know the job (see point 3 above).
  7. Recruiting and closing. The best recruiters know how to recruit, negotiate, and close the deal. This means they can convince top passive candidates to evaluate their opportunities. They can build strong referral networks, and they can negotiate and close complex offers on a fair and equitable basis. Too many corporate recruiters have an HR mentality of low cost using transactional negotiating techniques. This is okay for active candidates who need a job, but inappropriate for top people who have multiple opportunities.
  8. Becoming a career consultant to your candidates. Top recruiters present their opportunities as positive career moves, not just another job. This means that the recruiter must know the job, know the candidate’s motivating needs, and be able to craft a persuasive case that the job at hand is worthy. Many corporate recruiters could handle this, given more time.
  9. Time to do it right. Outside recruiters, while under the gun to perform, generally have enough time to find the best talent available. A strong network helps speed the process. Corporations can do the same thing, using workforce planning and pipelining techniques. The Internet allows anyone to build a network of passive candidate in days (use Eliyon, SearchExpo, and AIRS Oxygen). If a recruiter is overwhelmed, the need to fill positions always overrides the need for quality.

My advice to all corporate recruiting managers: Work with your team and build a game plan around the eight points presented above. Get as many people involved as you can ó including hiring managers. Start with a pilot program built around critical hiring needs. Use a small task force to get some quick wins. Use their success to justify more resources and to fine-tune the process. Soon you’ll be on your way to making hiring top talent a systematic business process. It’s time to take a lesson from your more expensive rivals. They do it right. So can you. This is how you make hiring #1.

Lou Adler is the CEO and founder of The Adler Group – a training and search firm helping companies implement Performance-based Hiring℠. Adler is the author of the Amazon top-10 best-seller, Hire With Your Head (John Wiley & Sons, 3rd Edition, 2007). His most recent book has just been published, The Essential Guide for Hiring & Getting Hired (Workbench, 2013). He is also the author of the award-winning Nightingale-Conant audio program, Talent Rules! Using Performance-based Hiring to Build Great Teams (2007).