Wednesday Wisdom: Short-timer's Disease

Dear Claudia,

Should third-party recruiters be held to the same standards for new hire retention as internal recruiters? My corporate recruiters are held accountable financially for retention up to one year post-hire (their bonus is tied partly to the retention of the candidates they hire), but our agency recruiters currently have no standardized expectations around this metric. What do you think is reasonable?

Cat Herder

Dear Cat Herder,

Reasonable is one of those words that depends entirely on the perspective of the beholder, don’t you think? Since you already know that you won’t be able to please everyone in setting this policy (and there are those who may get downright pissy with you when you do), keep your eyes on what you believe is most important in the outcome. Here are a couple of things to think about in that regard:

What is “healthy” turnover at your company?
Having zero turnover can be as debilitating for a business as having unusually high turnover. And turnover in some jobs can impact the business more heavily than others. So what’s healthy for your company? Usually it’s not a number that stands alone; it is influenced by other numbers like revenue (and who produces it), expenses (and who manages it), and productivity (and who drives it). Before pay is tied to performance for recruiters, you need to know the impact that turnover is having financially on your company, which recruiters (or agencies) are the “source” of that turnover, and if the departure was desired or not.

What is the role of the recruiter in the decision to hire?
I’m a firm believer that the punishment should fit the crime, so to speak. How much influence do your recruiters (agency or otherwise) have on the hiring decision? The more control the recruiter has on the selection of the finalist, the more they should be held accountable for turnover in that first year. This goes for managers too, by the way (although their sphere of influence extends for as long as the employee reports to them); a policy like the one you are considering should affect the company as a whole, and not just recruiting. Are manager bonuses tied to retention in their departments as well? If not, consider to be an agent for this change at your company.

How do you incent long-term outcomes when payment is made immediately after hire?
Ultimately, accountability implies that there are consequences for actions, and it seems to me that there are only so many consequences that can be imposed on agency recruiters: you can fire them, give them more business, or set a minimum fee for their services that is increased based on a solid track record of employee retention for their hires.

I like the third option, because you’re paying for a win-win: lower turnover and a long term working relationship with agencies that are as committed to your business success as you are.

**

In my day job, I’m the Head of Products for Improved Experience, where we help employers use feedback to measure and manage competitive advantage in hiring and retention. Learn more about us here.

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Replies to This Discussion

Permalink Reply by Thomas Patrick Chuna on July 8, 2009 at 8:12am

Option three works, with the exception of the minimum fee. If I've never worked with a company before, yet I bring them mr. or mrs. perfect, and keep them motivated towards their opportunity, I would say that's deserving of a fee in line with whatever their other agencies get.

I've had success with calming the new to me and still somewhat nervous hiring authority by going with this arrangement: a 90 day guarantee where I invoice half the fee on the start date, and the other half is due 90 days later..if the candidate doesn't make it to that point, the company keeps the other half..this way, neither side gets totally hosed if a moonbat gets by everyone's BS detector.

beyond that, the final judgment as to a candidates suitability rests with the hiring authority.. after all, they write the job description, are free to ignore the careful screening of our candidates and go with their gut feelings, demand to check references on their own, etc..it's all perception, and humans can't be truly objective if their lives depended on it..so why should a hiring authority hold a recruiter financially hostage, if the preference and judgment they exercise doesn't work out?

Thinking further..

I've told clients that YOU are going to hire the candidate that YOU think is best, and my job is to give you a choice of qualified and pre screened candidates..and to assist in the process of selection as much as I'm needed to.. but once the guy comes on board, it's up to you to fulfill the expectations you set during the interview ( likewise for the candidate ). I can't control either party, therefore, there's no way i would agree to fully refunding a fee..

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Permalink Reply by pam claughton on July 8, 2009 at 10:37am

No, third party recruiters are not responsible for retention. Most recruiters offer a good faith guarantee to make sure the fit is right once the candidate starts. After that, it's on you, the client to fulfill the expectations you set with the candidate and to ensure a positive work environment.

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Permalink Reply by Claudia Faust on July 8, 2009 at 11:55am

For me, it is quite simple: The more control the recruiter has on the selection of the finalist, the more they should be held accountable for turnover in that first year. And like Rayanne, I don't care what flavor the recruiter comes in: corporate, agency, contractor, or an alien from outer space. But here's the truth: the ultimate test of great recruiting is the quality and longevity of the new employees.

So if a recruiter simply provides pipeline and no other consulting services in the selection and placement of the finalist, a guarantee probably is sufficient. It is certainly the minimum I would expect from a TPR to make placements at my company.

I agree that recruiters should not be held accountable for things outside of their control; but as a corporate recruiting manager I also think that I would strongly consider paying more for the services of a TPR whose efforts over time consistently resulted in employees with higher engagement and loyalty to my business than I would for a TPR who had varied results and a great guarantee.

Thanks for that clarification, Rayanne - it was important to state the difference between voluntary and involuntarty turnover..

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Permalink Reply by pam claughton on July 8, 2009 at 1:01pm

Rayanne,

I've never heard of a TPR not having some kind of guarantee, ever. So, I don't really understand what you are saying here?

Rayanne said:

I guess I should not be surprised that this is still an issue. I have never placed a candidate, as a third-party recruiter, where a guarantee was not attached. Recruiters, TPRs or In-House, are responsible for retention. It needs to be one of the primary objective during the recruitment process.

Yes, the client is responsible for the hire they think best, which also means they may not think YOU, as the recruiter, are best the next time there is a TPR requirement. Consider it part of your OWN retention efforts.

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Permalink Reply by Peter Ceccarelli on July 8, 2009 at 2:31pm

I don't see anything beyond a guarantee (90 day, or 6 months for higher level positions) as anything more I would ever hold a TPR accountable for. They don't work at the company, they don't impact culture, and if the internal hiring manager is doing their job and using compentency based interviewing skills (by asking the "right" questions in order to "dig" down deep), then ultimately they are accountable for turnover. NOT the in-house recruiter. Albeit we feel bad when a seemingly great hire goes south before the first 6 months is up, but the failure is due in part mostly to the fact that there was a poorly developed 90 day new hire plan in place, which means the goals and objectives and the measurements of success were NOT clearly defined by the hiring manager, or management in general, AND/OR the position was not properly scoped in the first place and they hired someone to do a job they weren't qualified to achieve success in. That's typically the scenario that plays out again and again when there is failure at 90 days, 6 months, or before 1 year is up. And even if all the success components are in place, if they manager and the new hire are NOT touching base on a regular basis and fine tuning and tweaking the job responsibilities along the way, there's going to be trouble.

Every now and then you do get the "bad fit" because they interviewed well, but perform terribly on the job. But typically too, references when you can get them deep enough warn you of that potential, AND/OR, the conversation at the termination is usually something along the lines of "I had a gut feeling that this might not work out when we hired him/her, but went with it anyway.......blah, blah, blah!." If I had a nickle for every time I heard that line from one of my hiring managers, or from even myself, I'd be retired, living in Capri with a view of the ocean. I trust my gut all of the time and the only thing I'm truly held accountable for is the quality of candidates that I screen for my hiring managers, but ultimately they make the decision, even if influenced by my preferences. And even then, it's their success or their failure. And if my gut says "no......but I can't seem to put my finger on why I feel it's a no because they appear potentially to be the best hire of the year", I voice my concerns to my management team and if I'm still a credible partner, they continue to listen and either pass, or take the risk/chance.

There is no science to any of what we do. Duh! However, if we stay stuck in our instincts, and go the extra mile (due diligence) on the "I'm just not certain" hires, we can avoid SOME of the pain on the back end. Usually!

Great topic. Love it!

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Permalink Reply by pam claughton on July 8, 2009 at 2:37pm

Rayanne,

Sorry, I just didn't understand what you meant here, particularly the second half of your comment, and was just looking for clarification.

Rayanne said:

Doesn't a guarantee speak to retention?

pam claughton said:
Rayanne,

I've never heard of a TPR not having some kind of guarantee, ever. So, I don't really understand what you are saying here?

Rayanne said:
I guess I should not be surprised that this is still an issue. I have never placed a candidate, as a third-party recruiter, where a guarantee was not attached. Recruiters, TPRs or In-House, are responsible for retention. It needs to be one of the primary objective during the recruitment process.

Yes, the client is responsible for the hire they think best, which also means they may not think YOU, as the recruiter, are best the next time there is a TPR requirement. Consider it part of your OWN retention efforts.

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Permalink Reply by Jerry Albright on July 8, 2009 at 3:22pm

Guarantees from agency recruiters? Of course. I've never thought for a moment we should not be prepared to replace or refund as the case may be - but only for at a max 90 days or so. My guarantee is only in place to cover a mismatch from the beginning or the possibility the candidate may still be considering other offers, etc.

We (agency) have absolutely ZERO involvement with retention. Are you kidding me? Other than a few "how's it going?" phone calls and a semi-standard lunch a few days after the start I'm not involved.

Responsibilty for retention? No way. I have no input, direct or indirect, into a client's ability to engage and motivate. I'd like to see a recruiter that thinks they do. (Cuz they don't.....)

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Permalink Reply by Claudia Faust on July 8, 2009 at 7:18pm

Karen, Karen... just like it takes a village to raise a child, it takes a whole company (hiring managers, interviewers, recruiters, business reputation, and all) to hire and keep great employees. (Jerry, I can hear you shaking your head about all of this psychobabble all the way down here in Florida, and I hope you know I'm smiling as I'm writing it ).

Everyone is affected by the quality of new employees and their tenure with the company. Turnover costs a business dearly in terms of revenue, expense, market share, employee productivity, and burnout that can lead to even more turnover. Everyone has a vested interest in hiring well. So how is it possible that you think the recruiter has no influence? To me this perpetuates the stereotypes of renegade HMs and transactional recruiters – ego centric, short-sighted, mercenaries, bastards without a conscience (alright, so I exaggerated a bit here). When I was recruiting in a corporate setting, my job was to select, screen, and present the slate of candidates, and then work with all parties to get someone hired; mostly I worked with HMs who trusted my judgment explicitly, but even when working with difficult HMs I still had plenty of opportunities to influence the outcome.

One effective way to eliminate bad behavior is to reward good behavior. If turnover is a problem, a retention strategy should reward every single person in the hiring cycle for getting it right – and further provide training and support for a healthy relationship between the employee and the manager (consistently one of the top 3 reasons why people choose to leave a job) .

And if TPRs are part of that hiring cycle for the company, their connection to both hiring AND retention should be an active part of the reward (payment) system. My .02.

KarenM said:

I wonder how an Inhouse recruiter is held responsible for retention as well.. especially if the hiring manager makes the final decision... They too have no personal impact over the hiring manager and his management style - or what is going on in that area of the business..

a whole year - wow, that is a business really taking advantage of a recruiter.. in many ways!

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Permalink Reply by Thomas Patrick Chuna on July 9, 2009 at 8:12am

Sandra - excellent points, all.

Claudia - Of course it's in the interest of corporate recruiters to take responsibility to aid in candidate retention...they still have to deal with their hiring managers everyday. The effect of a moonbat getting past them would linger and create lasting consequences, correct?

That's why in house recruiters are stricken with paralysis every time they get a resume.. they reflexively reject anything that might get them yelled at by a superior. there's a company policy against the underling using one's own judgment, and by god, there's penalties for anyone involved in anything that isn't 100% successful.

(drags out soapbox)

company policies that financially penalize in house recruiters for actions they can't REALLY control are abusive.

I can see a penalty for measurable things like incomplete reference checking or the like, but holding someone financially responsible ( who doesn't have final hiring authority anyway) for what comes down to a "chemistry" and "fit" issue seems like a policy designed by someone educated beyond their intelligence. That's not a knock on you college folk, but we all know degreed desk jockeys who don't live in reality.

That's why working for a corporation can suck - other people's decisions and actions create consequences that roll downhill. being independent means I can weed out the idiots on both sides of the equation, and create mutually beneficial transactions.

Reality check - relationships between third party recruiters and hiring companies are at their core, transactional. any way we slice it, it comes up peanuts. Companies only deal with us when and if we have what they want...if we serve well, then we'll be allowed to participate in more transactions.

Trying to impose "the way" of corporate recruiters onto TPR's kind of flies in the face of why we're TPR's to begin with.. to have autonomy to control what we can, and not be hamstrung by the things we can't.

And presenting ourselves ( TPR's) as having some special process or magical ability to make hires work out long term for our clients is a bit egotistical..none of us is that good..and offering to penalize ourselves for the inability to control everything is just dumb.

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Permalink Reply by Peter Ceccarelli on July 9, 2009 at 1:45pm

Nice! Very well stated my dear!

Sandra McCartt said:

Ok Cat Herder,
Lest you think i am one of those egocentric, rat bastards that Claudia was talking about, i got a deal for you.
Since it sounds like you really want TPR's to work on the same retention metric as your internal recruiters, here's the deal. You pay me a monthly retainer equal to your most experienced recruiter for a year, plus another allowance to equal the % of that retainer that equates to the benefits your internals receive, plus matching my 401K contribution at the same % as your internals. In addition you pay my phone bill, my office rent, the cost of any advertising i do for your positions, job board costs, furnish me a computer, internet costs, ats, tech support, two to three weeks paid vacation, overtime after 5:00 and weekends or no overtime if your internals are exempt. Oh, and you pay half my self employment tax on that retainer. That should level the playing field with your internals on base comp package.

In addition i will need full access to all your hiring managers without having to go through one of your internals, a listing for every job you have for the year, be included in all recruiting meetings, strategy sessions, planning sessions, make me aware of every potential termination in advance and every promotion so i have a little lead time to be on top of it when the HM is ready to backfill. I get to be involved in the onboarding, have access to the new employee during training and orientation. And of course since i'm new you won't expect me to produce much for the first 30 to 60 days until i get up to speed on the company , people and culture.

Now about that bonus for retention on top of all the comp and conditions that will make me as a TPR equal to your internals ...sure, you betcha, i'm in, onboard, let's roll. Go buy the gold watches. What's my bonus potential for retention???

If that is not acceptable then maybe since i don't cost you anything until i produce a better candidate than your internals can identify or find one they can't and your HM's hire them and they stay 90 days or i do it all over again at no cost to you ,plus if i want to continue to recruit for you my referrals that you hire need to perform above average ...maybe i have earned my fee when my candidate is hired and completes the guarantee period.

Not to mention that if i don't produce and my hired candidates don't stay put you don't have to fire me, you just don't call or write or send flowers, you can just hit delete and i'm gone. No severence, no pool, no pets, no tickee, no washee, no wrongful firing, no unemployment claims. Let's face it , i'm a cheap date and i never have a headache.

Now really, i perform a service just like the priest who married you. Would you expect to tie his fee for service to the fact that you and your spouse got a divorce in the first year or two after you were married. Would you expect to only pay your lawyer if you got the settlement you wanted.

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Permalink Reply by Jerry Albright on July 9, 2009 at 4:00pm

Uh, hope you don't mind but I'd like to offere just one smidge of clarification.

Our fees are not "Employment" expenses. Sorry. They are professional services - at least that's the category I use for any outside consulting services.