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.
Or visit www.wentco.com