We all know the talent market is tight and recruitment agencies are busy. When an open req (non-exec) needs external help from a Recruitment Agency, what goes into the selection process? Do corporate recruiters ask:
- How their company will be represented
- How long the agency will work the opening
- The agency to justify their fee amount
- For a certain number of on-target candidates
- For a hire guarantee
I get it, some of these answers are less important when there’s no financial exposure with a “job order.” There’s little to be concerned about unless a hire is made. To get there, using a “candidate chasing” business model may not be the best solution. As an internal TA VP, having signed too many $25,000 checks for agency fees, and cashed even more as an agency exec, I believe this sector needs a major overhaul.
I’ve never understood recruiters who think so little of their work they do it for free
When I started out, I had a few friends that worked in a NYC contingent chop shop. I saw hours of work going unrewarded when an employee referral, a waffling internal candidate or an executive’s relative surfaced at the last minute to thwart a stellar hire from one of my friends.
This type of recruiting leads to unwanted and unintended consequences. First, if multiple agencies compete for the hire, rarely is information given that a recruiter needs to do the job well. A job description and a five-minute phone call with the internal recruiter won’t set them up for success. It’s all a simple garbage in, garbage out scenario.
Making a contingency sweepstakes out of a difficult to hire role makes no sense
A bigger issue is if an agency doesn’t have candidates to submit right away from their network, they may not work the opening at all. Since it’s typically a difficult opening, the agency who won’t be paid unless their candidate is hired, may not even try. Or, once they feel their chance of success isn’t great, they’ll move on to something else.
Contingent recruiting staffs are typically not paid a salary. Like salespeople, they’re paid a commission for fees they bring in. Most contingent companies have hundreds of “job orders” and the companies that pay the most fees typically get attention, the rest suffer. Of course when asked, they’ll tell clients they’re working on it because they want to keep job orders coming.
With uncontrolled variables contingent agencies charge more to cover losses
The typical formula of an arbitrary percentage of a candidate’s first-year salary is where this is buried. Talk about crazy, who pays for a service without knowing what it costs to deliver? Can you think of any other service that does this? Companies end up overpaying agencies by typically 25-30% for these contingent inefficiencies. *
It’s not the agency’s fault
It starts with the client companies that fall into the contingency trap, thinking it’s smart business. Companies think they’re helping themselves, but it’s the exact opposite. Candidate quality, internal recruiter time wasted, slower time to fill and out of whack fees are the real results. No other vendor in any other corporate function works this way. Think about that. Why is this the model for one of the most important business functions of them all?
There are many agencies that develop strong clients, they get access to hiring managers (HMs) and work on exclusive projects, but only a small fraction is handled in this manner. Also, they’re still contingent, and when a last minute internal transfer surfaces they still end up working for free.
The Bottom Line
When a recruiter needs external help, they ask the HM to approve it (it’s their budget). Once the HM gives the green light,
The decision is not whether a fee will be paid, but to who and for how much
Choosing a true hiring partner and committing to use them exclusively the same way Payroll, Training or OD services are selected would eliminate the issues listed above. This hiring partner should:
- Guarantee Hires are Made
- Provide Candidate Delivery Deadlines (15-30 days)
- Only Deliver Top 20% Performers
- Provide a Dedicated Project Team (only experienced recruiters)
- Charge a “Fixed” Project Fee (based on the actual work done)
- Offer a commonsense project cancellation (first 30 days)
Once a hire is guaranteed, all the rest falls into place. To be more profitable and earn repeat business, an agency will try to beat their deadlines by only submitting top performing candidates that are “no-brainer” hires. By making commitments to an agency, they’ll be able to eliminate their uncontrollable and inefficient activities, and companies will see stronger outcomes. Talent agencies, like any vendor, need to be vetted. Once you’re sure of their capabilities, engaging agencies in this manner will shrink time-to-fill rates, expand top performing new hires and lower external agency costs.
Isn’t it time to end the “ambulance chasing” model and demand more of our professional talent agencies?
*Based on 15 years of using Fixed Fees for actual costs, compared to the typical industry fee of 25% of a first-year salary. On average, the fee based on a percentage of salary is about 25% more.