The inherent conflict of interest in recruiting
How do you measure the effectiveness of either your internal
recruiting efforts or your outsourced solutions? What is the overall cost
of your recruitment activities? What does recruiting mean in the digital
age when resumes are everywhere and access to candidates is infinite? These
are common questions we face in this industry, but perhaps at the root of it
all lies the conflict of interest between the HR/Recruiter and client.
In a recent interview, and #1 in a forthcoming series, with the
founder of Wentworth Recruiting, a recruitment and talent acquisition
consulting firm based in Southern California, we discussed the state of
recruitment in the digital age. John Wentworth spoke candidly about the “elephant
in the room," i.e. the inherent conflict of interest with outsourced recruiting
business models.
He begins his tale in the mid 1970’s, as manager of the Carte
Blanche HR department. “I had no
rational way to determine an annual raise for my in-house recruiter,” said
Wentworth. “We did not measure her performance in any meaningful way, so I
had no way to incentivize productive work. My best guess as a measurement tool was lack
of complaints. Low number of complaints, high raise."
He went on to tell the story of this particular recruiter
invoking the "myth of difficult recruiting." The “myth of difficult
recruiting” purports that the job is too hard for one individual in-house
recruiter to manage and succeed at. Because they believed her complaint about
the barriers to her success, they farmed the recruiting function out to an
agency. Then after a few months when the
position went unfilled she complained about the agency not fulfilling their
promise to get the job done. Somehow this recruiter still got her annual raise
and the band played on.
Does this sound familiar?
John eventually left that position and went to work for a
recruiting agency specializing in IT and working on a Contingency business
model. If you are not familiar, Contingency recruiting means the agency
doesn't get paid until the person is placed. In this situation, John
encountered an attitude of impatience and disdain among his colleagues, who
regarded the client as the unfortunate obstacle between them and their money. Hiring
managers at their clients were demonized for ridiculous and irrelevant
candidate requirements and for sluggish compensation policies. In Wentworth’s
words, "we were taught to do whatever it takes to get the placement.
I will leave it to your imagination to figure out what that means.”
The takeaway lesson in Wentworth’s last experience was that the
contempt was transparent to the clients and this caused a relationship of
distrust. This dynamic between recruiter and client has led to a negative
reputation for contingency agencies across the board, driven by the flow of
money which incentivizes the wrong behavior. “They didn’t trust us and we
didn’t trust them,” said Wentworth. So a real partnership was not possible.” Without
a good partnership, good recruiting is just not possible.
As John continues to describe his journey, he next went to work
for a group practicing a more elegant recruiting model: Retained Search. In
this business model clients generally pay a third up front, a third at a
progress point and the last third either when filled or at a final progress
point. To his surprise the client was still the enemy but for a much
different reason. The internal pay
structure (bonuses, commissions etc.) was based on the amount of money that was
brought in and not connected to service performance. The emphasis was on
booking business, and not enough on filling jobs with the right candidates. The
way the money flows incentivizes the wrong behavior, again.
In today's digital and social world, recruitment firms face a
whole new slew of issues. Before the digital age, human resources were much
harder to find and the broker relationship had value. But today, that model is
outdated because of the proliferation of and ease of access to previously
difficult to find resources. It is why your insurance broker talks to you more
about services and other products you can purchase from them to make your risk
management easier. Same idea for us recruiters.
The dual challenge of moving beyond the brokerage function of
client service and operating so that the money flows in the right direction to
incentivize the right parties to do the right thing, continues to challenge
today’s recruiting firms. At the Wentworth Company, we operate beyond the
brokerage relationship by providing highly successful results through a data
driven process that captures the culture of the organization, the design of the
job and the compensation package. When you follow the money, it moves the wrong
way with most recruiting models used today. At Wentworth Company, we take care
to avoid the inherent conflicts of interest between the recruitment process and
the client, so that the money moves in the right way, rewarding both sides with
the benefits of successful placements.
In my next dispatch, we will explore this data driven process and
the value it provides to clients in a world of LinkedIn, Ladders, Indeed and
Glassdoor.
If you would like to talk more about these ideas, please reach
out to Dennis Bernstein at dennis@rnr_llc.com.
