Recruiting Firms: 4 Reasons Why Small Business Owners Hate Using Them

During my Vistage meeting last week (a membership organization catered to small to medium sized business CEOs), the subject came up of having to write large checks to recruiting firms that averaged 20-30% of the employee’s annual salary. This led to a discussion about why CEOs feel such disdain for recruiters. Was it just the high fees, or was there more to it? 

Here I’ll address some of the reasons why recruiting firms are unpopular with small businesses and my solutions to help you better understand and manage these firms and drive your bottom line profitability. 

Reason #1: There is a misunderstanding about what the recruiting job truly is. 

Most people believe that recruiting top talent is about finding potential candidates and many recruiting firms will try to convince you that this is a difficult task. But in reality, it is actually pretty easy to find candidates, if you know what you’re doing. Time consuming: yes; difficult: NO. The difficult part is knowing if the person sitting in front of you is truly the right person for the job, and most people don’t fully understand how to do this.

Solution: Spend more time up front defining exactly what you are seeking in the role. Saying that you need a high performing salesperson is simply not enough. Obtain complete clarity about every aspect of the role. Understanding the requirements of a role is based on defining the specific tasks, results or success measures, specific knowledge and skills to execute those tasks and results, and what the ideal and/or required personality traits are. Once these are all known, finding potential candidates who match the specifics of what you are seeking becomes fairly easy.

At Excelsior, we developed a tool called the Peak Performance Profile (P3) that helps you determine exactly what is required to succeed in the role. Read our free e-book, The Peak Performance Profile: The Job Description of the Future, which includes a P3 template and learn how to hire top talent.

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Reason #2:Writing BIG CHECKS 

paying high recruitment fees

As mentioned earlier, this is one of the biggest reasons small businesses hate recruiting firms. No one likes writing a check for $15,000-$30,000 for anything.

Solution: Good recruiting firms should offer several payment options for clients to choose from that

will accommodate their budgetary needs. Find a firm that is more flexible, that offers a monthly payment plan where clients can spread the cost over an extended period, making it easy for companies to manage the expense.

Reason #3: The Contingency Fee Model

The part of this model that almost everyone likes is that there is the NO RISK up front for the client. It is all on the recruiting firm.  

This is why you are writing such big checks. If the recruiting firm is taking all the risk and fronting all of the costs, which go way beyond the cost of posting job ads, they want to get a bigger reward at the end. How would you like to work on a project for several months for free, only to find out your client used someone else to complete the job and then NEVER paid you for what you did? These firms have to juggle the very real fact of its efforts going to waste and the possibility of not being compensated. And because they only get paid when jobs are filled, many contingency firms also tend to accept only jobs that they believe they can fill easily.

Another reason this type of fee structure is problematic is that these firms do not typically do what is necessary to fully screen candidates. They end up short cutting the process and placing the first semi-qualified person they can find. Most don't utilize the highly effective assessment tools available due to the upfront costs and the fact that these tools can narrow the pool of candidates they present to you. You think they are doing a good job because they are sending you a lot of resumes when in fact, if they are doing their job properly, they should only be sending you a handful of fully qualified candidates.

Solution: Don’t agree to large contingency fees. Negotiate smaller fees with a small retainer fee that will cover some of their costs or find a firm that will spread the payments out over time. Hire recruiters whose fee model does not entice this short cut behavior and who are going way beyond what you can do on your own to source and thoroughly assess candidates.

Reason #4: There is a lack of synergy and expertise in the hiring process.

If you’re like most companies, each of your managers probably has their own approach to interviewing and screening candidates and most of them have never had any formal training on how to do this properly. This can result in you missing out on a potential candidate who actually was a great fit. Yet, when things don't work out with a candiate, you are quick to blame the recruiting firm, when in fact, it may be that your managers are equally to blame.

Solution: Form a partnership with a highly skilled recruiting firm that will help you to implement and train your hiring managers on an effective hiring and on-boarding process. As part of our standard recruiting fees, we offer a three hour workshop to ensure that we are all working off of the same script and have a standardized hiring process in place, so we can work as an effective team in finding the right people for your team.

To help you implement a highly effective recruiting process, read our free e-book, 12 Steps to Successful Hiring. 

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