Why is the recruiting industry the way it is?
- The high demand and low supply for tech talent creates a very lucrative market for recruiters. Many technologists might not be aware of this, but successful recruiters probably all make over 100K (some earn much more) and as a commission-based business your compensation has no maximum.
- Recruiting is an easy field to enter. No formal training is required, although you will need some sales training and tech knowledge to truly make an impact. One can easily start with a computer, a phone line, and a basic website.
So we have an industry that can be very lucrative (for some much more lucrative than the tech industry itself) with almost no barriers to entry. Of course an industry with these characteristics will draw both talented, ethical professionals as well as carpetbaggers and bottom-feeders just as the gold rush did.
What are the biggest complaints about recruiters (and how can we solve them)?
First, complaints from candidates (tech pros):
- Too many cold calls. POSSIBLE SOLUTION: Without some widespread changes from all three parties (candidates, hiring firms, and recruiters) in the industry, this one is probably impossible to solve. Simply mentioning that you do not wish to hear from recruiters is no guarantee that they won’t contact you, but if I see on a LinkedIn page that someone specifically doesn’t want to hear from recruiters I won’t contact them as it is clear they do not value the services I provide.
- Dishonesty about the job description or salary. POSSIBLE SOLUTION: What if companies gave recruiters some form of ‘verified job spec‘ to share with candidates? Salary range, job description, location, whatever else might be helpful. A candidate could request this from the recruiter before agreeing to an interview.
- Being marketed/used without their knowledge. POSSIBLE SOLUTION: Companies could require a ‘right to represent‘ email giving a recruiter permission to submit his/her resume for any or all positions, which would at least eliminate some of this. Of course, recruiters will still send blinded resumes (contact info removed) to client prospects. A better idea may be for candidates to have a document that they ask recruiters to sign – a contract where the recruiter agrees not to send their resume in any form to any company without the express written consent (the ‘right to represent’) of the candidate. I’m not a lawyer, but I assume there could be some financial penalties/restitution allowed if you were to break that trust, as you may damage the candidate’s career. As a rule, if I want to market a candidate to a client, I always get their permission first.
- No feedback or follow-up. POSSIBLE SOLUTION: Unfortunately there is little value that a company gets by providing specific feedback about a candidate, and it actually exposes them to substantial risk (ageism, racism, etc.). Likewise, taking time to give rejected candidates details provides nothing to the recruiter except goodwill with the candidate. This one is difficult to solve, but probably not as big an issue as the other problems.
And complaints from hiring firms:
- Too many resumes. POSSIBLE SOLUTION: If you provide a very good requirement to a good recruiter, he/she should be able and very willing to limit the resumes. Telling your recruiter that you want to see the best five available candidates should encourage them to limit submissions.
- Unqualified candidates. POSSIBLE SOLUTION: Same as above.
- Misrepresenting a candidate’s background. POSSIBLE SOLUTION: Well for starters, stop working with the recruiter and that agency entirely. If you want to make a positive change for the recruiting industry, contact the recruiter’s manager and tell your side of the story. Having liars in an industry is bad for everyone except the liars and those that profit off of them.
- Marketing cold calls. POSSIBLE SOLUTION: If you truly will not use recruiters for your searches, list that on your job specifications both on your website and the jobs you post publicly. I would rather not waste my time if a company has a policy against using recruiters, and if your policy changes perhaps you will be calling me. I will not call a company that specifically lists that they do not want to hear from recruiters, as it is clear they do not value the service I provide.
- Price gouging. POSSIBLE SOLUTION: This could be when recruiting agencies mark-up their candidates’ hourly rates well beyond what is a reasonable margin, or when recruiters who receive permanent placement fees tied to salary will stretch every penny from the hiring company. Flat transparent fees work very well for both of these problems (a flat hourly mark-up on contractors and a flat fee for permanent placements), although recruiters would particularly hate a flat fee structure for contractors. The recruiter’s ‘sale’ to a contractor is, “If I can get you $300/hr, do you care if I make $2/hr or $100/hr?“. The answer is usually ‘no’, which is all fine until the contractor finds out that you are billing your client $300/hr and only paying the him/her maybe $50/hr. That is rare, but that is when things get ugly. Flat and transparent rates exposed to all three parties involved will solve that problem, but don’t expect recruiters to go for it.
To all the technology pros who claim they really want to disrupt the industry, I have one simple question.
Would you be willing to hire, and pay for, an agent?
I’ve heard the argument from some engineers that they would like recruiters to care more about the engineer’s career and not treat them like a commodity. Recruiters are traditionally paid for by the hiring companies, but only if they can both find the proper talent and get that talent to take the job (contingency recruiting). This can lead to a recruiter treating candidates like some homogenized commodity that all have similar value.
If engineers want true representation of their best interests, having representation from a sole agent would be one obvious choice. As your agent, I could provide career advice at various times during the year, making suggestions on technologies that you may want to explore or giving inside information on which companies might have interest in you. You might come to me to discuss any thoughts on changing jobs, how to apply for promotion, or how to ask for a salary increase (which I could negotiate for you directly with your manager). When you do decide to explore new opportunities, the agent would help put together your resume, set a job search strategy, and possibly market your background to some hiring companies. As the agent is making his living by charging a fee to the candidates, the agent could charge a much smaller fee (or potentially even no fee) to the hiring company, which would make hiring you much less expensive than hiring through a traditional recruiter.
If you were contacted by a recruiter from an agency or a hiring company, you would simply refer them to me for the first discussions and I would share the information with you (if appropriate) at a convenient time. You could even list my name on your LinkedIn, GitHub, and Twitter accounts. “If you are interested in hiring me, contact Dave at Fecak.com“ How good would that feel? How good would it feel to tell your friends that you have an agent?
All of this assumes your agent would have some high degree of knowledge about the industry, the players, market rates, and a host of other things. Many recruiters don’t have this expertise, but some certainly do. An agent could probably represent and manage the career of perhaps 50-100 candidates very comfortably and make a good living doing it.
Would you be willing to pay a percentage of your salary or a flat annual rate to an agent who provides you with these services?
If the answer is ‘yes’, look me up and I’d be happy to discuss it with you further. But I’m guessing for many the answer is ‘no’ (or ‘yes, depending on the price’).
My business model
Most recruiters are contingency based, which means they only get a fee if they make a placement. If they search for months and don’t find a proper candidate, they just wasted months for no payment. This places 100% of the risk of a search on the recruiter and 100% of the control with the hiring company. Even if the recruiter finds a great fit, the company can walk away without making a hire. Contingency recruiting is cut-throat and causes desperation to make a placement, and this is where most of the problems arise for candidates. This is the ‘numbers game’ that tech pros talk about, where the recruiter’s main incentive is to get resumes and bodies in front of clients and see what sticks.
Some recruiters are retained search, which means that basically all their fees are guaranteed up front regardless of their results. This is great for the recruiter but places 100% of the risk on the hiring company. The recruiter is working this search to save his/her reputation, which is obviously very important in getting future searches. This is not cut-throat, because it is not a competitive industry – recruiters have exclusive deals with a retained client for that particular job.
The model I use combines contingency and retained search. I charge clients a relatively small flat fee upfront to initiate the search, which is non-refundable. When a placement is made, I charge my clients another flat fee (not tied to salary). When you combine the two fees, the percentage of salary is often about half what contingency recruiters would get for the same placement.
So you think I’m an idiot for charging much less than my competition. Perhaps. I see it as creating a true partnership with companies that continue to come back with additional searches and repeat business, often referring me to their friends and partners. When a company gives you a fee upfront, they are putting their money where their mouth is and you can be sure they are serious about hiring. It takes some degree of trust on behalf of the hiring company, but once you have been in the business for a while the references are there and chances are we have some business connections in common.
So far this model has worked well, with happy clients and lots of repeat business. I have already met my goal for 2012, and I’m hoping to double it in the coming months.
What else do I do differently?
- I give it away (sometimes) – information, resume and interview advice, and any other kind of help you can think of are requested of me, and I rarely refuse a reasonable request. If I can’t help you find a job, I can at least take a look at your resume or evaluate how your applications look. I have known some engineers for over ten years without ever having made .05 in fees, and have helped them make career decisions for free. I’ll often introduce candidates to start-ups or one-man firms with limited budgets who may end up hiring without using my services, with the hopes that they will use me for future searches.
- I run a users’ group – I’ve run the local Java Users’ Group for almost 13 years. It is a volunteer job with no compensation, but it helps me stay in touch with the tech community and it also adds some credibility to my name. It is a lot of effort at times, but the success of the group is something that I’m quite proud of. I don’t recruit out of the group, but most of the group are aware of my services and come to me for my services when necessary.
- I specialize – Historically I focused both geographically and on one technology (Philadelphia Java market). I’ve opened that up a bit as many of those Java pros are now doing mobile, RoR, and alternative JVM lang work, and I’m a bit more regional now. Staying specialized in one geography and one technology forces a recruiter to be very careful about his/her reputation, as the degrees of Kevin Bacon are always low.
- Flat fees – A flat fee lets the company know that my goal is to fill the position and how much you pay the candidate is irrelevant. I inform candidates of this relationship so they are aware that my goal is to get them an offer that they will accept, and my client companies know that if I say I need $5K more in salary to close the deal that I am not trying to line my pockets.
Don’t expect my model to be adopted by any other firms, but I wanted to share it with readers as at least one alternative to the traditional contingency model that seems to be the biggest complaint for both candidates and hiring firms. And I believe the agent model would work quite nicely for all parties involved if anyone would like to inquire. If you truly want to disrupt the industry, let’s talk.
Reference: How To Disrupt Technical Recruiting – Hire an Agent from our JCG partner Dave Fecak at the Job Tips For Geeks blog.