Conflict of Interests
An enormous conflict of interests exists between the Contingency Recruiters and their client. What may have seemed like a good idea, in actuality has turned out to silently pit recruiters against their clients. Let’s face it, to many people in business, recruiters have become nothing more than a “necessary evil.” In fact, many HR professionals will tell you that one of their top priorities is to use fewer and fewer recruiters and in an ideal world, they would eliminate using them entirely. After being on both sides of the table in industry for over a decade and now more than a decade as a recruiter, I can assert that the Tragic Flaw in this process isn’t the recruiter per se’, but instead the means by which recruiters are engaged.
First and foremost we must acknowledge that contingency search makes sense on the surface. It is hard to argue against the idea that if you aren’t happy and don’t hire, you pay nothing. However the law of unintended consequences takes over and the fall out is what may look like a good short term outcome rarely lasts and HR very rarely knows the truth of what happens behind the scenes. Evaluate the process, and I think you’ll see that it is rife with embedded conflicts of interests which create all the right conditions for a terrible long term result. Pay for performance seems pragmatic enough right? After all, this is a “Market Driven Practice” brought on by competition and demand. But why don’t we engage all functions on contingency? Why only recruiting? Is it because the barrier to entry to become a recruiter is a phone and a PC? Is it that anyone can make any claims on the other end of the phone about being an expert in any field? But what about the results? Isn’t that what it is all about? I believe that I can make a case that what lies beneath the surface is a conflict of interests of Epic proportions which ultimately rewards the worst possible performance and most unethical and self-serving actors in the recruiting industry. If you’re familiar with the book, Freakonomics, then you know that with each economic incentive comes an element of unintended consequences. This could easily fit into a chapter of their next book because it is a clear example of the negative outcome being more destructive than the specific intended benefit, which was “Paying Recruiters based on their Performance.” Why would it make sense to have a consultant who conducts so important a role have any other priorities apart from yours?
Lets take for example a company in need of a product re-design in order to fix a complex problem with one of their existing products. When the company hired a design firm on contingency, they determined the effort the firm could put into the process which is inseparable from the outcome. Would the design firm enlist their best and brightest designers to thoroughly study the problem to find innovative ways of solving the problem without creating new ones? I can promise you that they would NOT if there was even a remote chance that they would never be paid for the work. If they did, they would compromise their very existence. Then what would happen if the same company openly discussed its product needs with other design firms in hopes that they may have an innovative solution. This sort of thing happens all the time. What if the company suddenly changes direction and scraps the whole project after weeks of design work? The design firm will have lost all their time, materials and opportunity to make another part for a paying customer. Any design firm willing to work this way either is in a desperate situation and needs the work, which begs the question, “Why?” Is it because their work is sub-par? A good design firm would never work on contingency because it doesn’t afford them the time and security to make the product that best suits the needs of their client. It would force them to rush the job and commit very little time and energy to the project.
Essentially, a recruiter is no different than a design firm. Although they don’t create people, they must essentially commit the same time to identify and recruit talent with all the right features, skill sets, character and chemistry, to solve a problem that a company has. All of this takes great time and attention if done correctly. On contingency, a recruiter simply cannot do the necessary work and truly put the needs of the client ahead of their own need to secure the fee.
I contend that this conflict of interest is easy to eliminate provided that you find the right firm to partner with; one that understands your unique value proposition and culture. Without a real commitment, not merely words on paper, but a real, “skin in the game” commitment, the immediate pressure is off and the fear of loss is eliminated thus allowing them to do the work right in stead of cutting corners. In a contingency search, it is a race to the most readily available candidates which means that they must already be actively pursuing a new job.
Without this level of commitment from a company, a recruiter will not be committed to the long-term success of the company, which is finding the absolute best people in the industry for your job. Instead, they will be committed to securing a fee above all else. Why don’t contingency recruiters share your priority? Because they are human and their basic needs come before anyone elses needs. This translates directly to the caliber of people they will put in front of you. They cannot take the time to truly understand what your company needs and the challenges this person will need to overcome. They cannot afford to take the time to truly find those people who’s head is down and they are successfully plowing away at their jobs.Those types of candidates are harder to recruit and they do not interview like an “applicant” does. They don’t need your job. Yet, the active candidates who I like to call “Mis-Employed,” will interview in a compelling and aggressive way out of their own need. The “Mis-Employed” fit in to either one of two general categories, “Currently Unemployed” and “Nearly Unemployed.” In either scenario, these candidates are the ones that you will see when working with a Contingency Recruiter simply because they are ready to move. They are motivated to make a change and already have made a commitment to get a new job. These people tend to interview very well because their motivation to find a job compels them to sell themselves. Contrast that with the “Gainfully employed” person who frankly doesn’t need your job. These candidates are completely different. But who would you rather have at your company, someone who is out of a job or discontent with their job? I contend that these people make short term decisions about their future because of the pain that they have. When your boat is sinking, any land mass that is dry seems like a good place to land. To someone who isn’t looking for work, they are more discerning about their future and they focus on what pulls them into a new opportunity instead of what pushes them. This is a concept that once you grasp, I believe that you start to see the breakdown of the contingency search. It doesn’t force the recruiter to rush the search and thus find the best people, but the most available.
If they operated while in a contingency search while trying to find the best prospects for the job, they would certainly lose out to the opportunistic job shoppers because I we just learned, they do a better job of selling themselves. In fact it takes a discerning person to tell the difference between the two. These nuances are critical to understand what motivates your candidate. If however, you’ve hired your recruiter on contingency, you most likely won’t know this because they will conceal these little facts such as the candidate is on a 30 day plan, or she hates her boss, or he has done something against the rules and is under discipline. You will never know this or any other fact that might hurt the contingency recruiter’s chance of making a fee.
I like to tell people that it is the job of an honest recruiter to reveal the blemishes of each candidate, not to hide them. It is the responsibility of the recruiter to tell the prospect what the role entails and what they need to be able to do to be successful, not tell them the “hot buttons” of the hiring manager so that they can check all the boxes of what he or she is looking for. If you don’t believe me, then you’ve never been through the any Contingency Recruiter Training. There are dozens of ways recruiters know how to overcome your objections through preparing candidates to make the grade.
Alignment of Interests
If a recruiter has its clients best interests at heart, then it is constrained to do what is right for the company and not for himself. It is their fiduciary responsibility and sacred trust to do everything in their power to recruit and vet each candidate until they find those who to the best of their ability to discern, the candidates will be successful in their new role and be a valuable and loyal employee for years to come. To make matters worse, most companies have a policy of only paying the first recruiter to email a resume when hired. It shouldn’t surprise you to know that this is an incentive to email a resume prior to speaking to and vetting a candidate. Where do recruiters find such resumes? The Internet of course. Knowing this, how confident can you be as a Hiring Authority that this recruiter will do what is in your best interests. When their top priority is ensuring that they put someone into the position as soon as humanly possible? The truth is that you can not. You have instead undermined your own chances of hiring the best possible candidate. You have forfeited the best for the most expedient. I am fairly confident that no one would think that was a good way to do business when it comes to designing a new product? Why should it be any different when it comes to hiring a full-time employee?
If what you want is a race to the “low hanging fruit,” contingency search is a great way to do it. The incentive exists to do the work as quickly as possible by taking enormous short cuts essentially putting the needs of the recruiter above the client’s. I cannot understand why this would be acceptable to any company. Rates aside, the terms are what determine the outcome of any search. Either it is rushed to make a buck or it is executed responsibly with the highest priority being finding the best possible people to fill the role and excel in it for years to come. Furthermore, I don’t believe that any smart business person would ever knowingly entrust so important a task to such an irresponsible process, let alone arrange the terms in such a way as to guarantee it. However, companies do this all the time when it comes to hiring a full time employee.
The right process involves establishing a relationship with a firm that invests the time to gain a thorough understanding of the problem or the position that must be filled by the acquisition of a very specialized skill-set. Then the comprehensive design/search process would be conducted to be sure that all the specifications of each prospective candidate meet the demands of the role. Thorough vetting of the candidate would then be conducted prior to presentation of the product to the client to minimize risks and ensure the best possible outcome.
I contend that contingency search has incredible pitfalls as it creates a gross misalignment of priorities between the recruiter and the company. No recruiter can do their best work on contingency. When a company and a search consultant have conflicting priorities, the process is undermined and the product and result is severely compromised.
10 likely consequences of Contingency Search:
- Active Candidates are simultaneously interviewing with other companies
- “Mis-Employed” candidates are less focused on your job. Push vs. Pull
- Candidates accept your offer only to later renege after accepting a competitive offer
- Candidates stay a short time at your company and never quitting their job search
- Candidates turn out to be different people than who you hired. “Over prepared” or “Force Fit”
- Search takes much longer than it should have due to turned down offers and other problems
- The Replacement guarantee you now need was only 30 days
- You lose large amounts of Time & Money not to mention the “opportunity costs”
- Multiple recruiters submit the same candidate creating conflict and risk
- You grow increasingly skeptical of all recruiters and unwilling to trust them with your best interests
The more I consult with business people, the more convinced I am that HR has settled for scraps when a feast is only a few contract “terms” away.. Companies should never engage any consultant with an incentive any other than delivering the products and services which are in the company’s best interests. The odd thing is that the fees for each respective process are the very comparable, while the process and product are significantly different. Partnering with a search firm in such a way that promotes a healthy alignment of priorities, a company can and should have nothing but the best possible slate of vetted candidates/prospects from which to hire without losing them to a competitive offer or worse, losing them a few short months after their start to an aggressive competitor/suitor.
The choice is yours to make. Either continue to gnaw on scraps or set the table for a feast of epic proportions.