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Why Doesn’t Corporate Talent Acquisition Change The Way They Pay Recruiters?

Jul 6

For the most part, Corporate Recruiters are paid a salary. That salary ranges widely from organization to organization, industry, function and location. I’ve seen corporate recruiters who make $40,000 and ones that make $150,000. The $150K corporate recruiters are overpaid, let me just throw that out there right off the bat!

Agency recruiters are usually paid some salary and a combination of commission and bonus. The average goal for an agency recruiter compensation model is 1/3 salary, and 2/3’s bonus and commission. So, if your base agency salary is $30K, the hope is you’ll get to $60K through commission and bonus. It takes some time to get to $90K-ish total, but it’s fairly common for agency recruiters to make six figures. Again, this depends on what kind of agency, location, commission structure, etc.

On average, you’ll see more six figure recruiters working on the agency side, then you’ll see on the corporate side, by a wide margin.

So, are agency recruiters worth more than corporate recruiters?

Worth is defined by those paying! What I’ll say to this question is agency recruiters are more likely to ‘prove’ their worth than you’ll see on the corporate side. Which begs the question why has corporate Talent Acquisition not adapted their pay structure to something similar to that of a recruitment agency?

I’ve run both corporate TA shops and agency shops. I can tell you, realistically, there is no reason, that makes sense, not to at least test different pay structures on the corporate side! My goal in was always how do I get my corporate recruiters to be 2/3’s salary and 1/3 bonus. I wanted to make sure there was some performance-based compensation as part of their total compensation.

Here are some reasons I ran into each time I changed the pay structure of corporate recruiters”

  • “If you change the pay structure the best recruiters will quit!”
  • “We can’t change the salary structure, it’s the law!”
  • “Paying bonuses to recruiters in a corporate setting isn’t fair to the other people in HR!”
  • “The executives will never agree to performance-based pay in a non-sales role!”
  • “We want our recruiters to be hiring manager focused and paying bonuses would change that!”

All of these excuses are complete B.S.!

I did have Recruiters quit everything I came into an organization, but not because of pay. They quit because I made them actually recruit for the first time in their life! They had to pick up a phone, they had hard measures and weekly and monthly goals, they quit because they weren’t recruiters, they were administrators. But, being paid like they were recruiters.

Corporate TA Leaders don’t change their pay structure because they don’t know what to change it to, and change is scary!

I get it. It was the first time I did it as well, but in the long run, we had higher performing recruiters, better hiring manager satisfaction and we flat out performed better as a department, as compared to what we did previously.  Here are some tips to making this change:

– Make sure your high performing recruiters can actually make more money in the new model.

– Make sure low performers make less in the new model.

– Set black and white measurable goals before changing pay, and work with these goals for a while before aligning them with compensation.

– Be flexible to change. The first time I did this I found major holes and had to make some immediate changes that were fair to the recruiters and the organization.

– Communicate with your team and executives through this process.

– Have written outcomes you want to see from this change and watch those metrics closely.

– Paying per hire is never a bad thing, just make sure the pay matches the effort of the hire. Don’t pay the same bonus for hiring an admin as you do to hire a Java Developer. I tried to equalize this by the time and effort it took to fill each position. If it took 1/10 the time and effort, the bonus was 1/10 the amount of a full effort position. Again, you’ll have to test and adjust this for your organization. Don’t write it down in stone, to start!

– You’ll never really have to have a performance management conversation again! Oh, you want to make more money….

Recruiting, even in a corporate setting, is a sales type role and should be paid as such. There is no reason why you can’t have a more effective pay structure in your corporate TA department.

Want some help in getting this off the ground?  Contact me!

 

 

18 Comment to “Why Doesn’t Corporate Talent Acquisition Change The Way They Pay Recruiters?”

  1. This post’s comments epitomize a blogger’s dilemma. How do you provide objective criticism about an industry as a whole without making your core audience all defensive?

    Almost by definition if you know who the hell Tim Sackett is and read his blog, you’re more than likely a badass recruiter.

    Again…great post Tim.

    Ken Gardner
    Jul 7, 2016
    • Thanks for the support Ken! 🙂

      I love the energy in the comments. What it shows me is there probably is room to test and try some different things. People don’t get worked up unless there’s some truth to the post.

      What I know is most executives on the corporate side, a majority, complain that their TA function is failing or not meeting expectations. If that’s the case, why is an idea like this a ‘bad’ idea? Why isn’t it worth some further thought?

      Does pay solve all of these issues? Nope. Can it be the fire starter to solve many of these issues? Yep.

      T

      Jul 7, 2016
  2. Is the objective to simply increase the number of six-figure salaries in corporate recruiting? While a noble pursuit, hardly a great lead slide on the business case presentation.

    Seems to me like change for the sake of change rather than having any compelling reason or rationale for the change. Is there a clear business case for taking a specific part of an employee population and leveraging “at risk” income? What about other segments of your employee population?
    Why not engineering? Hey, that design of yours didn’t pass reliability testing, too bad.
    How about help desk? How many trouble tickets did you close today? Ouch, car payment is gonna be tight next month.
    Marketing? What, no likes on the Facebook page? Too bad about that vacation you’re planning.

    In the context presented, a similarly constructed case could be made to change agency recruiting compensation model to salary only? What, you say tens of thousands of recruiting agency owners aren’t willing to put skin in the game? Yeah, I didn’t think so.

    Frank Zupan
    Jul 7, 2016
    • BINGO. The business case needs to lead here. Most of the recruiting budgets / spend that we re-configure is in excess of $10MM per year. 75% usually is towards in-house and out of house labor. The other is tech, marketing, etc. We have gone through “lets increase recruiter compensation” so many times that its hysterical. Last time around we reduced agency spend by $1.7MM annually, created 30 new jobs, gave current staff raises, and increased productivity by 30%. Oh – and in a cost neutral environment over 4 years. Maybe we could have given everyone who was already making $100,000 – $150,000 plus benefits more than that, but then 30 families have to get food elsewhere. How we compensate, how we make teams, and how we resource all have much larger downstream impacts.

      Jul 7, 2016
    • It’s getting hot in here, so take off all…

      Frank, Frank, Frank,

      I respect you and your knowledge within the industry, so I really want to validate your comments. I post isn’t about getting six figure recruiters. The post is about pay for performance, and what I believe is the main reason corporate recruiting doesn’t perform up to their capacity. I think 10,000+ agency owners would change in a heartbeat if paying salary to recruiters was the answer, but it’s not. I get the luxury of having spent time on both sides of the fence, I’m not making this recommendation on a whim, based on nothing but a hunch. This is twenty years of analyzing the performance and data in multiple industries in both corporate and agency recruitment.

      I view this as a way that corporate recruiting can get better, by making a change. It’s a simple suggestion. One that is out of the box, for that environment. It won’t work for everyone, but it just might work really well for some. Seems silly to just kick it under the bus without consideration.

      Thanks for your shots,

      T

      Jul 7, 2016
      • My name does seem to have a musical ring to it, doesn’t it? Almost like a Gregorian chant…
        Agree that it’s a topic worth discussion.
        In short, presenting the data from the “the performance and data in multiple industries in both corporate and agency recruitment” would have made the business case that I failed to initially grasp from the post, and likely would have made me keep my pie hole shut while moving quietly about my business. (a big win from your perspective, I’m sure).
        Hugs…

        Frank Zupan
        Jul 7, 2016
  3. Tim – I think this concept is deserving of more sophistication. Certainly your ideas have merit. However, one area that you are missing from your argument are the differences between outsourcing and value added services.

    The distinction on the agency side between the two has been a black box that is not talked about openly. Why? Because RPO and agencies produce margins transactionally at 25 to 75%. The game that both RPO and Agency play with Corporate is making sure margins stay as high as possible while delivering the appropriate amount of value.

    Outsourcing – sending a requisition out because the company could get it done but chooses not to is a different business decision that choosing a value added service.

    Choosing that value added service is hiring a provider to do what you can’t or should not do because pending process / results bear more risk.

    With margins being so variable, the re-investment in personnel for retention, maintaining service quality and so on is a different investment strategy in order to insulate the high range of the target margin.

    Moving corporate recruiting to a model that increases compensation really means aligning that organization to a different value proposition than filling requisitions fast and cheap. The value added services and deliverables shift. THAT IS THE HARD PART 🙂

    I am all for increasing the compensation model within recruiting and killing the BS separation that exists between headhunters, RPO, and corporate recruiters to say “who is better”. As for me, I have done it all. Closed and sold the big searches on the agency side, sold the big RPO deals, hunted for the weird stuff, ran the corporate, and now I run the date for them all. Fact is…a recruiter with value finds a place where they feel they are valued, and stays there because its enabling for them in their lives. Happy hunting.

    Jul 7, 2016
  4. The whole talent acquisition process is broken. Changing comp strategies may have a small impact. Poorly designed technology and a lack of clarity around accountabilities, outcomes and desired competencies have resulted in frustrated applicants and I filled positions. Adding to the problem is that the person in HR with the least amount of experience is deciding who moves through the hiring process. Let’s look at desired business outcomes and solve for root cause.

    Jul 6, 2016
  5. Tim,
    Stirring the pot again I see…

    There’s little question that recruiting should be judged and compensated on a performance basis, but the question is how. There are so many preconceived notions and perceptions that get in the way of making this feasible for existing TA organizations. Their structures and concepts from decades of embedded HR dogma make this change extremely unlikely.

    If applied to SMB’s or startups, crafting a TA program that takes advantage of great recruiting motivations – solving puzzles, selling ideas and closing great talent – can be more readily harnessed with a comp plan that rewards these motivators. Like baking a cake from scratch!

    As mentioned, many corporate roles have become laden with administrative functions that bog down a recruiter’s efforts. If one was to consider a “TA Renovation” project, one recipe might be to follow the recent trend of adding a corp sourcing function, and instead splitting recruiting into a Talent Attraction team and a Talent Processing team and pay the TA team a base & perf based plan and pay the TP team a more traditional base and set bonus % plan.

    Anyway you slice it – the issues go deeper than recruiting comp! Great post Tim.

    K.C. Donovan
    Jul 6, 2016
  6. @KennPeters – I hate to call you out, but you must not have any experience as an agency recruiter. The idea that there is no incentive to make sure there is a fit is so terribly off. Agency recruiters do not get paid to submit. They get paid to place people, so they have all the incentive they need. Are there lousy recruiters that just ‘spray and pray’? Certainly, but they tend to be very new or they don’t last very long.

    jasen
    Jul 6, 2016
  7. Unless your company is constantly hiring and never expects a decline in the number of requisitions open, this sounds like a horrible idea. What happens when your company slows down hiring, and now your recruiters are only making their base pay?

    The reason this works in an agency is because there’s no incentive for agency recruiters to make sure there’s an actual fit before throwing a candidate to a client; if this guy or gal doesn’t work out at company A, I’ll just pass him to company B. Working in house, your career will be short lived if you depend on blanket- throwing resumes to your hiring managers. When you work in-house, you are a business partner to the company at large. You’re providing this one and only company with a strategic advantage of finding, recruiting, and retaining top talent. That’s tough. That’s why you’re paid, not based on performance, but a steady salary; because if you’re doing your job well, you’re going to have months when you hire no one. If you’re doing your job badly, you’ll hire the wrong people because you’ll let anyone in the door just to make money. This model works in agency recruiting, and that’s why it’s done there. This is not a good model for corporate recruiters.

    Kenn Peters
    Jul 6, 2016
  8. I work within agency env, for rec2rec. I see various (as I perceive them) slightly burnt out agency recruiters, who want to move into in-house roles as I think they feel they can earn the same without the targets/metrics. Its seen as being an opportunity to work on Easy street… if I were a corperate in-house recruiter I’d want to have the chance to bump my salary based on results. I can see how there would be a great deal of resistance to this from some in-house recruiters.

    Catherine
    Jul 6, 2016
    • Catherine,

      Having run both corporate and agency shops, I think both environments have different pressures, but both have a lot of work. I think some folks get the preception corporate gigs can be easy street because there are so many non-recruiters who are in recruiting roles on the corporate side. If you are lucky enough to fake your way into a recruiting role, and get paid as such, then only post and pray your life away – well, that is easy street! 😉

      T

      Jul 6, 2016
  9. Tim,

    I see where your angle is here, and it makes some valid points. But some of us, (who are in the 6 figure range) left the agency side because of the uncertainty.When I was young and single, sure a shitty week meant nothing, as I had a 50k spread and would make it up next week. But with a wife and kids and mortgage, etc etc, that certainty becomes more important.

    I still have to meet metrics, I’m still judged on those for my performance review and my bonus. I don’t suck because I went to the corporate side. I don’t work less hard because I went to corporate. In fact, I feel like I work harder at selling my company and working with and training hiring managers than I EVER did on the agency side.

    As an agency recruiter, I just wanted to make the placement. The culture of that client and the nuances of the company meant way less to me than it does when I’m internal, invested in the company and have a stake (read:stock) in the company’s performance.

    I think that we sometimes use this pay-for-performance model to avoid just ID’ing and kicking out the dead weight that many recruiting teams have.

    Again, I see where you are going, but it’s a mass solution to a nuanced problem.

    Jul 6, 2016
    • Pete –

      I know there are great recruiters on the corporate side. I’ve worked with many, and awful recruiters on the agency side, the same thing, I’ve worked and ran into too many! I don’t think this works for all corporate environments, but I do think it could work for many and help broken shops, get unbroken!

      Thanks for your comments!

      T

      Jul 6, 2016
  10. “Recruiting, even in a corporate setting, is a sales type role and should be paid as such.”

    Recruiting on the agency side is absolutely a sales role and I couldn’t agree more that it should be paid as such. I’d even say that recruiting certain positions is harder than traditional B2B sales because of the needle in the haystack nature of some job requirements. Too often on the corporate side, the lines get blurred between true recruiting and other HR functions. Great post!

    Ken Gardner
    Jul 6, 2016
  11. AGREED!

    Michael Townsend
    Jul 6, 2016

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