Do I Keep the Money?

Fall offs. It's a term no recruiter likes to experience, or even hear. So, my apologies in advance for using it!

It started out as a typical placement. After signing the agreement, we submitted a total of two resumes to a new client. One candidate we knew was a slam dunk fit! Over the course of six weeks or so, our candidate (let's call him 'John') had two phone and two face to face interviews. The hiring manager loved him; the corporate big wigs loved him; from Ireland to the US, HR was told "hire him, he's the one for the job."

After some low ball negotiations, a starting salary was agreed upon, and a start date of two weeks later was determined.

Then typical turned irregular. A week or so after John accepted, but prior to the start date, the hiring manager -- the report to guy -- was let go. Hmm.

The client gave great reasons for letting him go: they are moving their business in the direction which our candidate excelled, that's why they hired him, and the hiring manager lacked that background. We were told it was an even greater opportunity for John, as the director level was pretty much his for the taking.

Our candidate started as agreed.

Immediately upon becoming the client's employee, John learned things... bad things. The client had failed to disclose problems with their quality systems, to both him and us: manufactured materials had been recalled because they weren't up to snuff. Let's just say when the FDA issues warnings, it's a problem.

There were bad, deep-seated cultural problems, too. For example, the client's main customer was on site, and John asked an assistant to order lunch for them. The assistant said she didn't have the authority to do that, only top bananas could. No one had authority -- or the balls -- to do anything. Except John, who knew the trigger had to be pulled on certain things if the FDA was to be calmed, and for him to successfully perform his duties.

John tried sticking it out, but was 'let go' six weeks after starting. A fall off! :(

The very next day, the regional HR person called, and asked for the money back. He seems to be setting things up as if WE did poor work: "you only sent two candidates... he's not the same person we interviewed..."

We have since been in contact with the original hiring manager, who told us that his superiors instructed him to NOT reveal certain things to John during the interview process.

Naturally, I have gone over the fee agreement with a fine tooth comb. (Yes, we did that before signing it, too.) There is nothing about a candidate being hired for one job, and being utilized in another (the hiring manager would have been a great buffer between corporate and John). There is nothing that applies to deceptive practices. Just that in the "event the candidate's employment is voluntarily or involuntarily terminated for any reason other than workforce reduction," we have to provide a full refund.

What would YOU do, and why??

Replies are closed for this discussion.

Replies to This Discussion

Permalink Reply by Ben McGrath on November 30, 2010 at 3:01pm

I'm surprised that you would sign any kind of contract with any sort of guarantee at all. The only exception would be if you failed to uncover something about the candidate that was completely unacceptable. (i.e., felony rap, etc). Something within your control.
I believe that our job is done when the candidate starts with the company. We should not be in the employee retention business. We make timely professional introductions per the requirement of the client.
Sounds like from a legal standpoint, if they push it, you're doomed to return the fee.

All the best,
Ben

Permalink Reply by Bill Ward on November 30, 2010 at 3:04pm

I'm really surprised at how many recruiters simply took the "lay down and die approach" here. Especially the supposed "experts." Path of least resistance is so typical in this god forsaken industry. How are you to be taken seriously by clients when you allow them to pull shit like this? The simple truth is that clients expect most recruiters to simply act like a low level transactional vendor that rarely adds value until you prove otherwise. Great recruiters in this situation will go on the offensive and engage, not disengage.

Bill Ward said:

I would ignore HR at the moment and engage the people who actually made the hiring decision (that's right...HR has absolutely ZERO influence in the hiring decision). Get in touch with someone in management and have a dialogue of what is really going on and how you and the hiring team can move forward in finding an appropriate candidate. You don't work for HR, you work for the hiring manager who needs needs great people working for them to advance their own career. You need to demand transparency. You need to communicate the fact that you and the hiring authority are partners. Successful partnerships are rooted in transparency and communication. Your client needs a solid line manager and you need the business. This client has issues, so get to the bottom of what the key issues are and if they are deal killers or not. There might be a number of great people who would see this company's issues with the FDA as terrific professional challenges rather than career suicide. Great people like challenges.

Have the guts to pick up the phone and engage the leadership team at your client and offer a solution. If you determine that the company is beyond help, refund the money and move on. Make sure to revise your fee agreement to ensure your protected against similar events in the future.

Permalink Reply by Bill Ward on November 30, 2010 at 3:12pm

Agreed Jim. Due diligence is key. Representing companies that are beyond help is not in the recruiters best interest. They key is to truly understand the issues associated with the role and the organization. In some cases, the need for restructuring and moving people out that are impeding the company's progress may be necessary. That kind of information does not come from internet research, but having open and honest dialogue with the stakeholders...and that's not easy to do unless you have creditability and trust. Easier said than done!

Jim Damico said:

I won't weigh in whether or not to pay the refund, it sounds like there is already a consensus. I will offer advice on how to better vette a company:

Listen to candidates in the market. Bad companies have lot's of future former employees actively looking. If you see an unnaturaly high number of candidates out there, beware.

Run a search on the company for employee and customer chatter. Sometimes you have to measure against the fact that the disgruntled tend to be the loudest, but look for themes.

Check average tenure of employees (present and past) using a linkedin search. If the company blows through people rapidly, you'll see the pattern there.

Check references. If you find former employees, call them and ask them about the company, their experiences, and why the left.

These are just a few things that you can do. They all involve little time investment, and can help you make a more informed decision on who to work with and who not to work with. Remember, it's your reputation on the line when you choose to represent a company as a vendor.

Permalink Reply by Bill Ward on November 30, 2010 at 3:14pm

Really Ben? You don't have any skin the game beyond the introduction? Spoken like a true hack. You sound like a used car salesman.

Ben McGrath said:

I'm surprised that you would sign any kind of contract with any sort of guarantee at all. The only exception would be if you failed to uncover something about the candidate that was completely unacceptable. (i.e., felony rap, etc). Something within your control.
I believe that our job is done when the candidate starts with the company. We should not be in the employee retention business. We make timely professional introductions per the requirement of the client.
Sounds like from a legal standpoint, if they push it, you're doomed to return the fee.

All the best,
Ben

Permalink Reply by Jerry Albright on November 30, 2010 at 3:16pm

Excuse me Bill - but if you consider honoring your written agreement as some sort of "path of least resistance" I'm going to disagree.

My word is solid. If I've agreed to something I stand behind it. While I would certainly suggest a replacement scenario - that was not the question here. It was "do I give back the fee" which in this case includes a written agreement stating just that.

As far as great recruiters going on the offensive - that point is lost on me. "Great" recruiters know when to chalk one up to the "lessons learned" category and move on. Demanding transparency and partnership with a client who has clearly been dishonest during the process isn't the direction I would take.

Respectfully,
Jerry (Not an expert)

Permalink Reply by RuthAnn Platt, MSHRM PHR on November 30, 2010 at 3:16pm

All in all, very solid advice. Contracts need to be honored yet lessons should be learned. I wholeheartedly agree that 100% refunds should never be offered. You have already provided a professional service and should be compensated in part for the efforts made. A tiered refund based on length of service and a more comprehensive termination agreement will protect both you and your candidates from "irregular" practices that might result in the untimely or unwarranted termination of employment. If your Client knows in advance that any changes to job responsibilities or direct reporting/corporate structure will invalidate the contractual guarantee on the placement within the first 90-120 days they will be far less likely to implement them until after your obligations are through.>

Permalink Reply by Maureen West on November 30, 2010 at 3:19pm

This probably isn't going to be popular, but while it's still a falloff, I might advise you to keep the money if the contract has any kind of loophole and you are going to write-off the client anyway. As a corporate recruiter, I am frequently called upon to do confidential searches with agencies to replace an executive "gone bad" and/or deal with related bad corporate decisions. But we tell the agency and the candidates what the challenges are and let the candidates decide whether they want to be a hero and take on the challenge. You and your candidate were not given a fair chance to succeed because of all the deception. You put effort into making this placement that was doomed to fail. Have your client's lawyer speak to your lawyer about it and work it out. Chances are the client's management may not want that visibility and will let you keep the fee.

Permalink Reply by Ben McGrath on November 30, 2010 at 3:23pm

Mr. Ward,

Thank you for the kind words. No I don't believe we should be involved in... "employee retention". There is rigorous work involved up to the point that the candidate has an offer and subsequently begins their employment. There is no way in hell that I can guarantee what happens in the workplace.

Permalink Reply by Cindy J. Biter on November 30, 2010 at 3:27pm

Quote: "I'm really surprised at how many recruiters simply took the "lay down and die approach" here. Especially the supposed "experts." Path of least resistance is so typical in this god forsaken industry."

First of all, I never take a "lay-down-and-die" approach. I am an independent recruiter, with 15 years of experience, working anywhere from 8-11 orders at once. I am only one person. If a client acts like this, I'm going to de-select them to work with. I have too much on my plate to focus on negativity like this cr*p. Let them go hassle one of the big firms like Robert Half, etc. Those guys love to play games with their clients. I've got to focus on the positive and eliminate the negative.

Permalink Reply by Todd Lempicke on November 30, 2010 at 3:38pm

One word. Compromise. Reputation is everything and even if you legally are in the right it's not worth the risk of staining your good name.

Permalink Reply by Jim Damico on November 30, 2010 at 4:12pm

Bill, that's why I threw in actually talking to people as well. There are various kinds of actionable intel, and deciding which fits best in your decision process is key. Sometimes getting something direct from the stakeholder is great, but if it's BS, it's BS, just because they are a stake holder doesn't give them a greater propensity for honesty.
I believe do a little due dillegence, and for more often than not, you'll find fire where there's smoke.

Bill Ward said:

Agreed Jim. Due diligence is key. Representing companies that are beyond help is not in the recruiters best interest. They key is to truly understand the issues associated with the role and the organization. In some cases, the need for restructuring and moving people out that are impeding the company's progress may be necessary. That kind of information does not come from internet research, but having open and honest dialogue with the stakeholders...and that's not easy to do unless you have creditability and trust. Easier said than done!

Jim Damico said:
I won't weigh in whether or not to pay the refund, it sounds like there is already a consensus. I will offer advice on how to better vette a company:

Listen to candidates in the market. Bad companies have lot's of future former employees actively looking. If you see an unnaturaly high number of candidates out there, beware.

Run a search on the company for employee and customer chatter. Sometimes you have to measure against the fact that the disgruntled tend to be the loudest, but look for themes.

Check average tenure of employees (present and past) using a linkedin search. If the company blows through people rapidly, you'll see the pattern there.

Check references. If you find former employees, call them and ask them about the company, their experiences, and why the left.

These are just a few things that you can do. They all involve little time investment, and can help you make a more informed decision on who to work with and who not to work with. Remember, it's your reputation on the line when you choose to represent a company as a vendor.

Permalink Reply by Nick Lagos on November 30, 2010 at 4:15pm

Refund the money and move on. Salvaging a deal with a “shady” client who pulls this crap does not convert them to a “good” client and they’ll probably screw you again down the line given the chance. Wouldn’t “spin my wheels” with losers like these. Robb’s right! “Source-City!”

May not apply to you Mia, your situation or even your client, but typical ALL my recruiting experiences going back further then I care to advertise, the multitudes of prospective candidates spoken with culminating ultimately with a hire has always uncovered the “dirt” surrounding clients I’ve worked with.

ALL industries are small when you’re committed to, and working in them (for recruiters and the professionals working in the industries). REAL secretes companies might try to hide seem to circulate despite companies best efforts to “hide” them (dare I say “Wikileaks”).

If I haven’t spoken with enough people via telephone to start “hearing the dirt” (or contrarily, admiration for a company) I know I haven’t made enough calls. This is not conscious policy it just starts to happen when questioning past employees for referrals, current prospects for interest, current hiring managers and the staff the candidate will be working with.

Your experience is admittedly a bit “left of center”, and not pointing fingers, just sharing my experience. I too have had “hits” with only 1 – 2 candidates submitted, but the prospect pipeline to get to the 1 – 2 is far deeper, and can be reported on through my ATS if a client ever challenges my work effort.

BTW, refunds for work already preformed on contingency searches are BS. By the time we make a placement, we’ve already “expended” our efforts (financial resources (time)) and if the client is ENGAGED throughout the process, and we” BOTH” get burned by a fall-off after hire, why are we, the recruiter accepting “additional” financial loss. I’ve successfully made this argument to prospective clients during contract negotiations and have walked from deals when I couldn’t, but of late, looks like “too-many” are accepting “crappy” conditions just to get the JO.

Granted, these types of fall-offs are rare (risk is low), and the work mentioned above medicates such occurrences, but it’s the perception perpetrated regarding the service we provide to clients when we accept deals like these that irks me most.

What other professional services industry allows such blatant imbalance on itself?