Spark of the Recruiter Civil War: The Pricing Paradox of Huge Fees

A New Recruiting Paradigm Emerges | james@techstardust.com | @techstardust | innovation leader, recruiting veteran, and advisor | Transforming Talent Acquisition | #recruitingwars

Spark of the Recruiter Civil War: Fooling, Fees, & Paradox Pricing

In the world of recruiting and hiring there will always be a need for the human element, even if it's minimal. That is not to say that the human is in effect minimized, but that we are fundamental to recruiting at its core with a certain discrete value, a quantum by definition. Take for example, the story of Steve Jobs in the lost 80's interview when he examines a bike as the extension of human possibility.

People and relationships will always be at the heart of recruiting. In fact, many of my key learnings originated from my exposure to Zappos, first as a business partner and then as an employee. Thanks to a very special group of HR and recruiting professionals at Zappos, including, Michael Bailen (now at EventBrite), Christa Foley, and Holly Delaney. Shout outs to each of you. AH, another former colleague of mine from Zappos and someone I've always respected as a recruiting pro, once said "sourcing is like marketing and recruiting is like sales" and that is our starting point. The function of our work is similar, but every recruiter knows that we become far more than sales professionals during the hiring lifecycle.

Replacing Recruiter Greed w/Goodwill: Boycott Huge Placement Fees centered around an opportunity for the recruiting industry to reject the old way and accelerate talent delivery with new innovation. Boycotting big staffing fees is better for corporations but it isn't popular in the recruiting industry because it jeopardizes the financial stability of big staffing business.

In this article, we transform our ideas about what value is in our recruiting role within the staffing stakeholdership and answer the question, why should we change? Will it help each other evolve as a company culture, a business community, or as a society; A wise person once stated, "you can't build happiness on someone else's misery." We will examine the cost of our primary method to hire.

Driven to Innovate

New ideas push us forward and become the precursor to output. Accelerated output is the key to unlocking innovation and the driving force behind the escalating #recruitingwars. Supply and demand. We want it, you've got it, so we'll give you something more for it, but at what cost? It's a free market and our awesome country was founded on free enterprise. What are the consequences when corporate entities use the industry of hiring and unintentionally create blockers that hold us captive from corporate growth? Are we suppose to accept an industry that keeps innovation in captivity? No, and that is why technology companies have started to bypass the captivity.

When big staffing inhibits the strategic ability of an organization, we have to consider a shift and repurpose it. Recruiting agencies use large fees and the financial and organizational cost drains the resources within our marketplaces resulting in less quality and stagnated growth. We can't hire the 130k person because we have to pay a 30k staffing fee so we settle for the 100k person who takes twice as long to do the project and inhibits a projects success. Wait until you read below about how staffing enterprises use outdated pricing structures to validate fees they charge for their services. It's a jaw dropper.

Origins of Talent Acquisition & The Pricing Paradox

Talent acquisition was founded on the idea that organizations should dedicate someone to help find a person to solve a problem and fill a void. A recruiter function could provide techniques to identify and present skilled labor at an accelerated rate so companies quickly solve their problems and finish their projects. The logic of pricing in staffing services was an estimate of the cost of vacancy of the employee that was being hired considering the amount of time it took to fill the role. 25 percent was equivalent to 1/4 of an annual salary because the average time to fill (TTF) for a position was 3 months. Most organizations today have a much smaller TTF ratio (thanks to technology) yet the cost of staffing services hasn't changed even though the times have. Also, if we really want to be honest about how ridiculous the logic to charge these big fees is, we can examine the pricing model used to rationalize the fee, and the primary factor being COST, or cost of vacancy. Anyone trained in a big staffing agency will push this concept but when has throwing more money at a problem ever solved it? Just this week, Techcrunch published an article stating that the number one mistake you can make in a business pricing strategy is to base your pricing off of COST rather than considering the actual value the customer assigns to the service.

Here is the article link: http://techcrunch.com/2014/12/27/the-top-ten-pricing-mistakes/

For further examination on value, check out The Stardust Equation: When the illusion of talent becomes reality.

Strong elements of dysfunction of "big staffing" cause bidding wars, bubbles, and greed-is-good adoration. Big staffing is the term I'm using to describe these colossal staffing organizations that are pushing for global centralization at the cost of creativity and innovation. 90% of big staffing agencies growth rests on hiring mismatches to generate business after a guarantee period. Industry bubbles help this happen. Poaching and turnover with an increased dependency in staffing service utilization sustain business lines. Cost of vacancy is still used as the crux. Is this a process of innovation or degradation?

Intermediaries like staffing firms should exist to cooperate together with companies in exchange for mutual value. Partnerships are great when they share a larger objective within certain verticals and horizontals. But what happens when one partner gains more value than another? When one parter starts taking more and justifying with invalid reasoning like the pricing example I mentioned above. If you fast-forward the scenario you will witness deterioration in relations and degradation in a fragmented supply chain that causes ripple effects in surrounding business ecosystems.

Economic growth over the past few decades and the shortage of talent has created a need for specialized talent acquisition services. However, giant staffing companies have evolved into organizations fueled by greed with processes that invalidate relationships, lack ethics, and burn employer capital. How they treat their recruiting staff is another issue which borders on repulsive. Where is the value? Where is the culture in these staffing organizations? What are their core values? Why do these companies only spawn in mass quantity during great times or horrible times?

We, as customers, need to consider reducing or boycotting the investment in big staffing services until they modernize so we can start perceiving an increase in value.  The pricing model is changing and they know it.  We have to enforce it.  This sends the message that they need to adapt and change to survive.  Hit them in their wallet.  Give them a RUDE AWAKENING.  Meanwhile, we already have new hybrid tech recruiting<>recruiting tech companies spawning with very cool ideas and service offerings. Check out techstardust.com to learn more.   Invest in new approaches, forcing them to change. This leads toward a phase of exploration into newer approaches that bridges the gap between human, technology, and hiring. The new tools are powerful.  They carry the force of 10 RPOs in your back pocket minus the cost and crudeness of an agency.  Begun, the Recruiter Civil War has.

What should you do next?

Find out more about these hybrid recruiting tech offerings.  There are innovative sourcing blogs that review the new tools.  Goto techstardust.com.  Start engaging and investing in newer, recruiting tech companies.  Reduce dependency on legacy agency structure.

An old recruiting adage states, "There are no secrets in the recruiting business, only head starts." This is your head start.

This concludes the first part of The Spark of the Recruiter Civil War.

Next time, we explore these writings:

The second part is coming up:

Part 2: Insiders within The Recruiter Civil War: A Covert Defection

The realtime story of several agency recruiting pros at different generations (Boomers, Xers, Yers, Millennials) explaining the disfunction that exists in their daily jobs at well known, global staffing firms.  Covert Whistle-blowing about their struggle to leave an industry that holds them captive.  The story of their defection to join a quantum-hybrid recruiting tech firm.

Part 3: Millennials Rising in the Recruiter Civil War: Generation Z Cometh
The Rising Generation.  A generation that believes in Being-Good & Everybody-Wins will do more than put a Dent in the Universe.  Stay Tuned,

#recruitingwars

Here is a snippet of an upcoming article:

And now we dissect each of the stakeholders within the staffing arena:

  • The Talent
  • The Investors
  • Monikers and Moguls: Recruiters, Talent Acquisition, Sourcer, RPO, MSP / VMS, Big Staffing, Agencies, Near/Off/On Shores, Out/In Source, How many more names? OMG.
  • Leaders, Teams, & Clients
  • Technology
  • Quantum Recruiting - The new paradigm

"Talent delivery will become as easy as pizza delivery. This notion that talented people are the hardest thing to find is going away. Propaganda from big staffing to maintain the value of their services. We will soon be able to open an app or go online to put in an order for talent and have it delivered just as easily as ordering your favorite pizza. Staffing services will use quantum-costing and crowdsourcing innovation will..."

Upcoming blogs you can expect to read in 2015!

#Quantum Recruiting Paradigm

The #Zappos-like Staffing Agency: Powered by Hires

Recruiter's Anonymous

The Recruiter Witness Protection Program

Views: 581

Comment by Nicholas Meyler on December 30, 2014 at 7:07pm

I am guessing that the "boycott" advice is directed primarily towards HR departments and people who make the choice or selection of search firms to work on their own hiring needs.  Is that what you mean?  I don't see any way I could boycott Korn-Ferry, for example, since why would they care, and why would I be buying anything from them (as a retained recruiter at another firm)?  

Speaking of which, my colleague submitted 95 candidates for a search to one of his clients, and the hiring manager said none of them were qualified.  Then, the search was handed to Russell Reynolds (or one of the other major players) and Russell Reynolds charged two or three times the fee that the client had already been charged, and then was unable to complete the search...

That bothers me a bit that other firms are charging a lot more and producing nothing better, and I would boycott that if I could, but I don't see how it is anything I could reasonably do, aside from spreading the word that such things happen quite often.

Comment by Nicholas Meyler on January 1, 2015 at 2:27am

Krwoting Misser Jams Shlaminksysyky:  "The accountability lies internally and externally. We can fundambetslly Chang tThe structure but in the future this will happen anyway. I suggest we evolve and decide on what our true value is. Any tool you can use can be automated so what is the real value we provide? The answer to that question is what I'm after."

Yeah!  Wht I'm sayin'!   Totttoallhy! 

"Happy New Yeaar!!!"

Who's buying the next round?

Comment by James Chmielinski on January 1, 2015 at 8:46pm
Dont be a cotton headed ninny muggin, Nicholas.

Here is my revision. Happy New Year yourself! :)

We can change the structure but in the future this will happen anyway. I suggest we evolve and decide on what our true value is. Any tool you can use right now can and will be automated so what is the real value we provide? The answer to that question is what I'm after. And show some respect for my last name. Polish and proud Mr. Nicholas Liar Meyer.
Comment by Nicholas Meyler on January 8, 2015 at 2:04am

lol...  I'm related to Poles going back to 1000 A.D. myself   

"cotton headed ninny muggin"  -- excellent!

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