The contingent permanent recruitment model is failing us as an industry.

Career, Data, Precision Insights, Recruitment

The contingent permanent recruitment model is failing us as an industry.

It’s time to rock the boat in the world of recruitment. While everyone talks about technology disrupting the industry it is something closer to home that can make a significant change to candidate, Recruiter & client experience. Of all the issues that people speak of, I see it as the contingent payment model, for permanent hires, that is the biggest affliction.

Firstly, it is important to define how the majority of agency recruitment works in the permanent hire space;

  • A permanent position is signed off within a client
  • The said client looks to fill the role internally and through their own networks
  • Role is not filled, and the client engages chosen agency or agencies
  • Agencies work to fill the role and upon placement invoice the client

It seems like a perfectly simple process. Not so. There are so many holes in this process that usually end up giving someone a terrible experience (which often ends up in a LinkedIn rant!). Before the solution I’m going to explain the issues;

  • When multiple agencies are engaged it creates a rush to get CVs in front of the hiring manager rather than the right person for the team, role, and company. If each agency only has 1 candidate in process and therefore less chance of filling, they are less inclined to nurture that role as a top priority.
  • The above model leaves too much of the hiring pressure on the final decision. The full cost of the hiring comes down to the moment after final interview and before offer. That significant agency cost can lead to increased indecision, desire to ‘have some more people to compare’ and often delays which lead to candidates dropping out; starting the whole process again. Often the correct candidate hasn’t been identified as agencies haven’t spent proper time on the role.
  • Recruitment portals can take the human element out of the hiring process. When a role is sent out through a portal (again to multiple agencies) and there is no face to face contact between agency and manager or even phone contact; problems abound. Top candidates in the market are agencies bread and butter and a good candidate experience is essential. Without the full details of the role, an agency Recruiter cannot properly sell the right role to the right people, again creating poor candidate experience.
    • In situations like this the 2 most common gripes of the industry are born;
      • Candidates say – I submitted my CV and I just never heard anything back, but I’m bang on for the role.
      • Hiring Managers say – I got over 100 applications and not a single one of them was right.
    • Words on a portal, job description or advert are not enough & the world needs to wake up to it!
  • The average fill rate (thanks Greg Savage for this figure) for permanent roles in agency land is 20%. 20%!! Think about that. Imagine 80% of your work going nowhere. Not just going nowhere but you have to deal with people telling you that your work is subpar. You are rejected 4 out of 5 days a week. No wonder there is high turnover due to a ‘lack of resilience’ in recruitment.

 

A myriad of issues. But it is important to be solution-focused to create a better experience for all. I’ve listed 3 solutions, but this is by no means exhaustive. There are so many other ways to skin a cat, but the below models have created better conversations for all parties (explained at the end). These models include the agency sitting in on interviews, market maps, feedback times agreed beforehand, processes defined before engaging candidates, full job description taken face to face and much more. A true partnership.

Solution 1: Traditional retained model;

This is nothing new and is often used for executive search, so I won’t spend long on it;

  • Client engages Recruiter to fill open role/roles
  • Client pays % of fee upon engagement (say 33%)
  • Client pays % of fee upon delivery of Candidates and/or interview (33%)
  • Client pays the remainder of fee upon placement

 

Solution 2: Time based retained model;

A slight variation on the above model but something that helps to keep hiring as a time-based project. The sooner we can see hiring processes as projects, similar to projects run by traditional project managers, the better a candidate experience we can deliver. If time scales are stuck to the end goal is reached quicker and more efficiently.

  • Client engages Recruiter to fill open role/roles and agrees to timescales for placement of a successful candidate. In this case, lets say 2 weeks
  • Client pays 20% (say $3,000) on engagement
  • Client pays 20% on delivery of candidates (3 days work)
  • Client pays 20% on 1st interview (3 days between)
  • Client pays 20% at 2nd interview (2 days between)
  • Final payment on placement (2 days between)
    • The caveat of the model is that if timescales do not adhere to the fee changes i.e. if it takes 6 days to deliver CVs the fee can reduce to $2,000. Conversely, if the client doesn’t stick to timescales (leading to bad candidate experience) the fee rises to $4,000.

The above is completely flexible based on the number of stages and time to place expected. In this process candidates are kept 100% in the loop on timescales, the agency (not just 1 Recruiter but a team) is able to act as an extension of the business and spend a full 3 days looking for appropriate people not just rushing to get CVs out the door and on to the next role.

 

Solution 3:

This is something we have done for a client very recently who had a poor experience with the normal contingent recruitment model and had been burnt by a guarantee period.

  • The client engages Recruiter to fill role
  • 33% of fee upon placement of the candidate
  • No guarantee period in place
  • 66% of fee upon the candidate completing 3 successful months in the role

This is a squirly solution but added in here to show that a solution can and should be client-specific and what works for one does not necessarily work for another. Clients and Recruiters should have the ability to build a payment solution that works for all.

 

What have we solved with the above? Key parts of the process are changed, and we can create;

  • Full agency engagement based on the Recruiter knowing they will get paid for their work throughout the project. The Recruiter will drop everything else, send their best people and find the right person for the role.
  • Candidates having a fantastic experience as the agency will be able to give them timescales, a full view of the process, proper interview prep and the holy grail – proper feedback. Candidates will want to engage that company in the future.
  • Agencies working on fewer roles but with a higher hit rate delivering job satisfaction.
  • A situation where a client is guaranteed the right candidate and they are also able to truly understand their preferred Recruiter to work with who 100% understands them, their team and their company. This would reduce apathy towards the ‘typical Recruiter’.
  • Recruiters are less KPI driven and less salesy and can focus on partnering with a business and candidates that value their service.
  • The pressure is spread across the process so decisions can be made pragmatically rather than under the pressure of the whole fee at the end.

 

The simple message of the above is that every permanent recruitment process should be bespoke. It should be right for the situation and that means the current model works in certain situations. However, we must look further into what is possible in recruitment payment models and past the current method used for 99% of roles. Everyone is in the people business but so often recruitment is viewed as an unnecessary cost and is kicked to the bottom of the pile in terms of time. People are a company’s key asset and it’s time they were treated as such, not just when they join a company but in any time spent engaging a company.

 

 

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