Common Recruitment Myths, Dispelled!
“Let me in and I’ll show you my database!”…..and other lies.
Myth 1: "Our fees are competitive and represent good value" (Yes...especially to us!!)
The most commonly resented aspect of recruitment concerns fees. Clients have tended to grudgingly suffer the high perceived cost as there was no viable alternative.
To be fair, many recruitment companies do strive to be genuinely competitive, but only in comparison with each other. Agencies try many things to sell themselves in a more compelling way, but it is quite obvious that all they manage to do is rearrange the same old problems within the business model. All of the bigger agencies are burdened with the same significant embedded costs because they share the same business model.
There are three main drivers of the high fees in most established agencies.
- Office Rental and Fixed Costs
- Multiple Management Layers
- Recovery of the Cost of Unsuccessful Assignments (Low fill rates)
Recruiters have traditionally been slaves to their image. Flashy offices have long been regarded as an essential sign of success even for the small agencies.
Whilst annual rentals of up to $250,000 per year for the largest agencies sounds like a big waste, it is one of the smaller cost drivers.
A far more significant cost is the multiple layers of management required to whip along what is usually a predominantly very young army of consultants.
Typically these commercially inexperienced consultants require a team leader in the first instance. The team leaders are supervised commonly by practice managers, the practice managers by geographic managers, the geographic managers by the NZ manager and he or she often reports in to another layer of management either at board level or offshore.
The problem here is that each management position can command a six figure salary, rising significantly with each step, whilst becoming less and less productive and out of touch.
Added to this, the egos become so great that in an effort to retain some experienced consultants they are often conferred ‘manager’ or ‘senior consultant’ titles and increased remuneration whilst only having one or two direct reports. Although this wastes millions of dollars annually, this is still not the largest cost driver.
Un-billed hours cost recovery
This is the real biggie.
If you have ever wondered why the recruitment fee is $15,000 for a 90k position, when you as a client did most of the work selecting and interviewing, then you should be aware of the following:
Although it can vary depending upon market conditions, the average fill rate for a ‘good’ agency is still only about one job in every three.
Simple cost recovery accounting dictates therefore that the cost of unsuccessful processes for agency clients (sometimes three or four other clients), must be spread across the clients the agency does successfully bill.
I haven’t met an organization yet, that isn’t furious about paying for other organisations’ services and many concede that they knew or suspected this was the case but there was no simple and effective alternative.
Additional cost drivers to be aware of –
- Foreign owned agencies, that are commonly forced to repatriate the bulk of the profits they make, to pay the parent company shareholders and executive bonuses.
Over-engineered solutions which are endemic in what is essentially a very simple business.
- Individuals or teams who have broken away and formed their own small independent agencies, but have not questioned the model, and simply replicate it, fees and all. Often the only environment they have ever worked in is a large corporate and so, either independent commercial thought escapes them, or they are just greedy (There are exceptions,but they are rare).
Despite many good intentioned staff and managers, the effect of a decade of good times, of industry self-justification and a lack of lean commercial focus, means the large recruitment agencies are now struggling within the dated model. Faced with rapid economic climate change their fate has probably been sealed.
The Recruitment Project’s Approach
Our ‘virtual organisation’ model
Our recruitment collective delivery model has been specifically designed to deliver sustainable, top quality services whist avoiding all of the three major unproductive cost drivers above.
We have elected to work from our own homes, with access to CBD interviewing offices when required, supported and coordinated from a central ‘Home Office’ which provides admin, marketing and financial support functions.
In addition we have installed a simple, state of the art, locally built CRM /Recruitment software platform accessible from remote locations by our consultants and even our clients.
Elimination of management requirement
Because our consultants are established specialist recruiters and self-employed contractors we do not need to manage them.
We do not pay for down-time and they of course are not driven to achieve pointlessly time wasting phone call / client visit / marketing KPI’s.
TRP consultants are held accountable based upon efficient delivery times, successful performance and client feedback.
Elimination of un-billed hours
Most importantly however, the majority of our work is completed successfully on an hourly rate basis in an average of 25 – 35 hours. There are minimal costs associated with unsuccessful processes, so the biggest single cost driver in the industry is largely eliminated.
Our fees represent only work actually done for a client to fill their particular role.
Myth 2: "We’ve got the biggest database"
The emergence of cheap efficient job websites has meant less reliance on the much touted databases. Databases are tantalizingly attractive and seem to promise much.
Every agency, including TRP, accumulates one and thus tries to extract some value or advantage from it. After all, it represents work done that someone needs to pay for. They are mined every day by recruiters who also like to know background information about candidates.
However when it comes to actually filling roles, even in a tight candidate market, they constantly fail to live up to expectations and deliver far less than clients and consultants would wish for.
The reason for this is not rocket science. Candidates actually get jobs reasonably successfully and quickly; on average within about three months of visiting an agency. Obviously there is an imperative to work. Thus the only candidates on the database that are likely to be available at any given time, are those who have been rejected quite recently from other roles. This does NOT mean that they are necessarily inferior. However, this also does not mean that because they have missed out on one job they will suddenly want the next one that is offered (See also the section on “The Myth of Multiple Offers and Multiple Candidates”).
So again the benefit is very limited in any market conditions.
Databases have traditionally been vital in running the contracting side of recruitment but even this is becoming less true. The line between candidates interested in permanent jobs and those interested in contract assignments has become blurred (See “The Dualism of Contracting and Permanent Roles”). The effect is that current roles are filled increasingly from whomever is available in the market at any given time. Thus, many agencies find themselves running a ‘short database’ or ‘Hotlist’ to track those currently available in the market, or coming available soon.
The Recruitment Project’s Approach
We have simple effective candidate management software and keep track of all candidates who apply for roles. Although we are aware of people on our own database who are still in touch with us and actively looking for work, we believe inexpensive internet advertising is still the best starting point in conjunction with current market knowledge and supported by established consultant and ‘sister organisation’ networks.
Myth 3: "I was head-hunted"
Candidates are sometimes heard to boast that they were ‘head-hunted’.
Whilst this may happen occasionally, most commonly at the very senior level, it is very seldom the reality of the situtaion. Despite the cynical belief of many a client, it would be very rare for an established agency in NZ to actively head-hunt or ‘shoulder tap’.
However, employers themselves often identify talent in their competitors’ organisations and make an approach. These head-hunters generally only operate at the highest levels of corporate recruitment in NZ, and do make discreet approaches to a small circle of senior executives.
This is a fairly pragmatically driven process of identifying and approaching people for roles which are commercially sensitive and therefore cannot be advertised widely. Although in larger markets such as Sydney and London, the practice of raiding a client’s staff is not necessarily discouraged. Certain organisations which have a poor or non-existent relationship with any agency may find themselves prone to being targeted repeatedly. Hence relationships are sometimes established purely as a protection strategy and the term ‘Recruitment Mafia’ was coined. Again the reasons we don’t see it in NZ are pretty simple; the cities of NZ operate like villages.
Reputations and networks do still matter. There just aren’t enough large companies for any agency to be able to afford to get offside with too many, if any of them.
This unfortunately also provides companies with an opportunity to strike back at agencies. In retaliation for the high fees or bad past personal experiences, HR managers or hiring managers have sometimes dished up unethical behaviours of their own, knowing the agencies will not challenge them in the hope of living to fight for another fee another day.
Another more subtle reason why headhunting is rare. Most recruiters have (or have had) a performance target to sell a large number of ads. The ad is the holy grail of the industry (See “The Myth Of Advertising”). Added to this, head-hunting is a slow and inefficient process for sourcing candidates, without necessarily gathering any strong commitment from the candidate to accepting the role if offered. They tend to simply enjoy having their ego stroked then pull out of the process if offered, or worse, use the offer to leverage a salary increase out their employer. Good consultants are generally too busy and under too much pressure to take this path. Other consultants are complacent anyway and it is always easier to simply place an ad. Generally only a short-sighted consultant, desperate for a placement to meet budget will consider shoulder tapping. In such cases, regard for the best long-term outcomes for candidates and clients is not usually foremost in their mind.
The Recruitment Project‘s Approach
We never ‘shoulder tap’ for regular recruitment assignments.
We do sometimes operate at the head-hunting level (for a fraction of the normal fees) but we do so through our networks of executives who have already approached us and signalled that they are looking for a new challenge, or our client themselves may indirectly invite a person they have an interest in to apply for a role we have discreetly advertised.
Generally we only work with candidates who approach us with their CV and are actively searching for a new job.
Myth 4: "We have a Preferred Supplier Agreement"
Problems sometimes arise when clients undermine them, but most of the failures occur back in the recruiter’s office.
Preferred Supplier Agreements (PSA’s) vary in effectiveness. Some organisations, especially the larger ones like banks and local government, ethically and strictly enforce them in a spirit of genuine partnership. Where they fall down is that they can include all of the larger recruitment firms and appear not to hold much exclusivity or advantage in return for the low fees negotiated. Consultant’s within those firms often feel that there are so many agencies working on a given role, and at such low rates, that there is probably some better paying work they could concentrate on instead (See ”The Myth of Multi-Listing”).
There has been talk and suspicion that in the past some large firms negotiated PSA’s with as many major recruitment firms as possible, in a bid to thwart having their staff head-hunted. This was based entirely on misunderstanding of the way the industry operates (See “The Myth of Headhunting”).
Whilst PSA’s can be a holy grail for some recruiters, they are simultaneously regarded with deep cynicism and suspicion by others. Ironically PSA’s have unexpectedly backfired for clients over the last few years, as they found themselves locked into supply agreements with traditional recruiters and unable to cut their recruitment costs by taking advantage of TRP’s services or other discounted offerings which arose during the Great Recession. Given time though this situation will undoubtedly correct itself.
Myth 5: "We’ve got lots of vacancies - come and see us today"
This is seldom the case.
In fact, these are most often invitations to become part of the agency’s database, not invitations to apply for actual roles. The consultants don’t actually want to meet with you. Interviewing is usually reserved for specific roles, but sadly sometimes it is just aimed at fishing for information about contacts and opportunities at the organisation the candidate currently works in. To this end, a minority of unethical recruiters will actually advertise generic roles (or sometimes non-existent roles based on other agencies’ ads) just to lure applications in case they can use them.
The widely held belief is that, armed with a massive database, they can beat their competitors in preparing a speedy shortlist, especially since it’s very common for clients to give the same job opportunity to several agencies. Hence, candidates are simply being used as ’cannon-fodder’.
The result of this is low levels of genuine commitment to the candidates. The client gets the entire focus. Consultants are focussed primarily on selling their services, and are so busy with their client obsession that of course they don’t have the time to reply to candidates.
Fortunately there are some exceptions though, and some individual consultants in some large firms work huge hours in order to treat candidates with great respect.
The Recruitment Project’s Approach
Our recruitment consultants are focussed only on recruiting.
They are not required to do any marketing or sales calls and they are measured on our promise to respond to every single application and keep every interviewed candidate fully informed of their progress.
Myth 6: "I‘ve got 5 great job offers / We’ve had 50 applications!"
Fundamentally a client only needs one person for the role and a person only needs one job.
There is usually only one or maybe two outstandingly suitable candidates on a shortlist and conversely a candidate can only really be an outstanding fit for one or two career enhancing roles. That candidate or that job can arise in any market at any time – in good times or in bad. The chances seem better when there is more to choose from but the numbers don’t necessarily contain any solution. A good recruiter can see past the static or distractions.
If the market is job-rich or candidate-rich there may be a statistical improvement in your chances of success, but it can be just as easy for a candidate to find the perfect job in a tight market or for an organisation to find an outstanding candidate during a skill shortage.
Consequently it can be argued that there is no best time for either camp to be looking. The advantage is more in having an expert recruiter who can sift through large numbers of applications, or who is experienced in finding the ‘hard to find’.
Myth 7: "We’ll promote your employment brand"
Perhaps they will, but the recruitment agency will ensure their name is all over it.
Many clients are aware that they are not only paying for the advertising of their role, they’re paying to advertise the recruitment agency, build the agency’s brand and thus build the recruitment agency’s business for them. To add insult to this injury, the agencies also added a massive margin onto the cost of the ad for the privilege!
A newspaper ad which cost the agency as little as a couple of thousand dollars would be on charged sometimes at almost twice that, helping the consultant to a wonderful bonus. In fact in one instance, a consultant didn’t successfully fill a single job in a 3 month quarter, yet still achieved a bonus simply based on ad revenue!
While online advertising has largely stifled the fee profiteering practice, the branding is still an issue.
The Recruitment Project’s Approach
Advertising is still the best method to source available candidates, and fortunately nowadays it is inexpensive as well as transparent.
Because we so often recruit for our clients as though we are an extension of their organisation, we actually prefer to advertise using our client’s branding. There are many instances where a ‘blind’ ad is preferred because of market sensitivities, but TRP is very happy to remain invisible and seamlessly integrate ourselves with our client organisations. There are several extremely useful dynamics unique to our recruitment model which arise when we do this and are of great advantage of our clients.
Contact us and we can explain this in detail.
Myth 8: "We’ve already contacted three other agencies"
Clients often make the mistake of believing that multi-listing increases their chances of finding the right candidates. However, it is almost always perceived as a lack of trust in a recruiter (which is quite warranted in some cases).
The reality is that good recruiters will be busy and probably have other work available to them, which has a far greater chance of yielding a fee. Therefore the multi-list (contingent) work will be delegated to a junior recruiter or ‘para-consultant” rather than occupy too much of their efforts. This typically gives rise to the situation where a client will complain that none of the CVs matched the job specifications. Of course not, because an inexperienced consultant put the shortlist together, or the experienced consultant just flicked some CVs back to the client out of obligation just to pretend they provided some customer service.
The lesson here is that if the client doesn’t value the recruiter, it is highly likely the recruiter will not value the client either, despite their polite veneer. Genuine partnership is infinitely more effective, and clients should be aware that it is an industry norm for over 90% of ’exclusive’ roles to be filled successfully, the first time around. The best advice is to pick one consultant or agency you believe is professional and astute and rely on them to deliver. The consultant will usually walk over hot coals for such a client.
Lastly of course in New Zealand, the pond that agencies fish from is small and multi-listing causes confusion with agencies bumping into each other in the marketplace, like three people trying to catch the same fish in a bath tub. Other difficulties include confusion among potential applicants as to which agency is the best to apply through. To cover their options they may apply to all the ads, causing confusion and sometimes unethical behaviours from agencies over which agency is actually representing a particular candidate. Worse still the company’s employment brand may be tarnished and in some cases candidates can even think there is something wrong with the job, and that it must be hard to fill.
In summary, we advise strongly against this practice, as it is self-defeating unless an organisation perhaps wants to see how a couple of agencies compare, in order to commit to the one which delivers more consistently over time.
As an industry insider with 12 years’ experience Rowan Larsen provides a view here of common large and small recruitment agency practices.
Many of his closest friends have held senior management positions in a variety of recruitment agencies and the commentary is based upon their shared experiences.
The purpose is not to vilify the recruitment industry, or individual organisations, and especially not to denigrate the many excellent specialist recruiters who work in them.
The issue is with the traditional industry model, and the inefficient behaviours it encourages, rather than the good intentions of the players.
In our view, changes in market forces mean that the casting aside of wasteful or inefficient practices is inevitable over time.