It sounds like a simple proposition, but when selecting a recruitment supplier it’s critical that you are aware of what value they are providing for the money you’re spending, writes Joe Screnci
It's commonly espoused that the most important asset of an organisation is its people. If this is true, then shouldn’t every hire be important? Are there really any positions that are not important? Does a chain not break at the weakest link? Accordingly, shouldn’t processes be designed to attract the best person for the position (within realistic constraints such as remuneration, location, language, etc) rather than someone who’s available and can do the job? Over the last 30 years I’ve owned and managed 20 recruitment firms covering every market sector, from labour hire to executive search. This has given me a strong insight into buyer behaviour for recruitment services. The number of times I am surprised by the lack of insight and logic used in the procurement of recruitment services and the assessment of supplier performance – which is usually a high-value spend for the organisation – concerns me. Of course, there are also many organisations that are very sophisticated in their approach to appointing and assessing recruitment suppliers, but there are also some very high-profile brands that fail miserably.
In-houses vs outsourced
Despite most of my career being involved in the supply of outsourced HR consulting services, I’m a big believer in the effectiveness of in-house recruitment teams. They are a major asset to an organisation and essential to gaining competitive advantage. They are a resource that should be supported by the board and senior management as a means of engaging talent that will deliver superior outcomes. HR teams can add value and assist in the achievement of the corporate mission in many ways, including developing capability, culture, resilience, innovation and productivity.
The problem that some in-house HR teams face is that they are under-resourced, substantially administrative and sometimes under-skilled. This makes it particularly difficult to dedicate sufficient time and resources to search the market for the best candidates, and applies pressure to present adequate candidates to the hiring manager to fill the vacancies. This leads to a less-than-optimal talent pool for the organisation and greater difficulty for management to achieve the desired outcomes.
A question of fees
Organisations appoint recruitment firms to assist them in sourcing high-quality talent. The firms appointed are either contingent – ie a fee is charged upon placement – or retained, ie the fee is charged proportionally over time or is subject to specific benchmarks in the process. The appointment process varies from a simple phone call to a full-blown tender response. The assessment process varies from nothing, to the achievement of a variety of metrics.
Apart from when the fee is charged, the fundamental difference between the contingent and retained models is, in most cases, that contingent recruitment firms represent the candidate and retained recruitment firms represent the company. If you ask three contingent recruitment firms to work on an assignment, you’re likely to receive 10 CVs sourced from a general database, and the recruiters will tell you how great their candidates are. If you retain a recruitment firm exclusively on the same assignment, you’re likely to receive an introduction to three candidates who meet the requirements of the role after a thorough assessment of a large candidate pool specifically sourced to meet the client’s specification.
At middle management levels, while fees vary, a common placement fee charged by contingent executive recruiters is around 18% of total remuneration cost. For this same level of recruitment, a retained executive recruiter will charge a similar fee.
The contingent recruiter
Often contingent recruitment assignments are non-exclusive, and the client will appoint multiple contingent recruiters to the same assignment as well as undertaking its own recruitment processes. This lack of commitment by the client to the supplier creates a ‘first in, first served’ mentality. Accordingly, the contingent recruiter must focus on speed – ie getting CVs emailed to the client before a competitor does or before the candidates applies directly to the client. Otherwise, they will miss out on the fee.
A focus on speed reduces sourcing time and creates a tendency to simply do a database search or ‘post and pray’, ie post an ad online and pray that a suitable candidate responds. Further, as the client has no obligation to the contingent recruiter, the contingent recruiter has no obligation to the client and may also present that same candidate to multiple potential employers to maximise the chance of placing the candidate and generating a fee.
Consider the life of a contingent recruiter. They have multiple non-exclusive contingent roles they’re recruiting for where time is of the essence, and a budget set by their employer that they must achieve to keep their job. They know that unless they get a CV to a client before a competitor, they won’t get a fee. They also know that if they have a great candidate and only present that candidate to one client, the candidate may be presented by another contingent recruiter to another company and be offered a job there. Again, they will miss out on a fee. This motivates them to present the same candidate to multiple clients.
Recruiters that are retained to work on assignments are assured that their efforts are paid for. They are not wasting their time.
However, a retained recruiter must justify the payments they receive during the process by maintaining high service standards and constant communication with their client; undertaking a thorough and transparent recruitment process; ensuring that obvious and less obvious sources of candidates are explored; representing the client in discussions with candidates, and being discerning as to who they release job details to. They must assess candidates in accordance with the client’s needs, uncovering issues that may affect their performance, ensuring their work history is complete and accurate, uncovering potential conflicts of interest, digging deep into past accomplishments and checking them with referees, using a variety of interview techniques to assess the candidate, and potentially referring them for psychometric appraisal. They are not concerned that other recruiters will email CVs to the client and get the fee, so they can focus on the quality of their work and the client’s best interests. They will also not send candidates that they present to one client to another client, as this would be a conflict of interest.
Recruiting at the top
At senior management level, there are different dynamics at play. For example, CEOs and senior-level candidates will respond best to approaches from experienced search consultants who have credibility, well-developed communication skills, high-level negotiation skills, experience in senior management, specific industry knowledge, and are well connected in their circle. These search consultants have commonly worked at an equivalent peer level and can discuss opportunities at CEO level with greater insight and build rapport more easily. They will also be better at connecting with target candidates in the first place to influence them to meet for a discussion.
Senior search consultants also have the expertise to advise the client regarding the job description, organisational structure, outcomes required, selection criteria, strategy, market remuneration levels, etc, even before the search is commenced. This requires expertise, time and skilled support services.
Accordingly, the seniority, expertise and experience of these search consultants mean they are more expensive to hire for the search fi rm. Along with the higher-quality support services, dedicated researchers, quality premises and time put into the assignment, as you would expect, the cost is higher and commonly around 28–35% of the total remuneration package. This is usually invoiced in three- or four-part payments at various points in the process.
There’s ‘horses for courses’ and one size does not fit all. However, it’s important to ensure that when you appoint a recruitment supplier, you’re aware of the value they are providing for the money you’re spending and have an effective procurement and performance assessment process.
Joe Screnci is executive chairman of JRS International Search Partners (http://jrsinternational.com/), a member of Kennedy Executive Search and Consulting with 15 offices globally.