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The Recruiting Industry Is Broken (Part 1)

December 14, 2016 by Kurt Wilkin

Yeah, I said it, the recruiting industry IS broken.

Have you ever had the feeling that a recruiter was trying desperately to “sell” you on their candidate? Have you ever compared a recruiting experience to a bad real estate transaction or your prototypical used car salesman experience?

Most of us have real-world experience with bad recruiters – I know I do. And I’m confident that most of our bad experiences are due to the misalignment of incentives of contingent recruiters and the firms they represent. This blog post will focus on the challenges inherent in the contingent recruiting model.

If done right, recruiting is an honorable profession and recruiters have the potential to make a significant positive impact on their clients. However, in my opinion, the majority of recruiters are doing more harm than good, due mainly to the misalignment of incentives.

To be fair, there are good recruiters out there, no matter their business model. There are honorable recruiters who have their clients’ and candidates’ best interest at heart, then there is everyone else…

You see, most recruiters, especially those who serve the middle market, have two problematic things in common: (1) they are (mostly) “contingent” recruiters and (2) they are (mostly) paid on a commission-basis only. These are the main reasons why most of us have bad experiences with bad recruiters.

Let’s focus on the word “contingent”; which means that you don’t pay the recruiter until they have delivered a candidate who is acceptable to you. This also means they don’t get paid unless they can sell a candidate to you…their candidate. It means they don’t get paid if they don’t move lightning fast. It means they don’t get paid if you hire someone through another contingent recruiter or through your network or a referral from your employees.

Well, it also means they don’t have time to look for really good candidates, especially those who are not looking for a job. It means they don’t have time to challenge your job description assumptions. It means they can’t afford to be patient if your hiring process has a high bar. It means they have an inherent incentive to discredit any candidate you want to hire for whom they won’t get paid. It means they are in competition with Y O U, their client. And I’m sorry, but any business model that puts a service provider in direct competition with their client, is an F’ed up business model.

On top of all of that, most recruiters are paid on commission – meaning that if they aren’t able to (a) sell you on the candidate or (b) sell the candidate on you – they don’t get paid.

Now you’ve got a recruiting firm who only gets paid when you hire a candidate put forth by their firm…and a recruiter who only gets paid when you hire “their” candidate. Talk about misaligned incentives. This explains why recruiters within the same firm backstab each other over candidates and why clients feel pressured to “move quickly before we lose this candidate”. It also explains why the recruiting industry is broken.

Next month we’ll dig deeper into this broken model and suggest ways to protect yourself and things to consider before engaging a recruiting firm.

HireBetter is a new kind of talent firm with a refreshing approach. We help your business unlock success with the hidden power of talent. We are retained search and talent consultants; Austin-based with a national reach. Contact HireBetter to learn more about our approach to recruiting and how we can help your business grow and scale.

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