Developing Bonus Systems for Rewarding Corporate Recruiters

When times are good and recruiting is booming, invariably recruiters wonder why there is no bonus plan for internal corporate recruiters. The impetus for their proposal stems from the fact that external third-party recruiters routinely receive bonuses based on their performance.

In my experience, it is the incentive system that makes these recruiters superior to the typical corporate recruiter, just as the most successful sales professionals seek out opportunities with rewarding pay-at-risk models.

I certainly support the concept of pay for performance in nearly every function, but the increasing rarity of internal reward systems in recruiting sends a clear message that pulling it off and maintaining it over a long period is no easy task. Current estimates based on my observation place the percentage of organizations with a formal incentive program governing recruiting at less than 1:20.

Arguments for Rewarding Internal Recruiters

Some of the most common arguments for rewarding corporate recruiters with a bonus include:

  1. It measurably increases recruiting performance.
  2. Because you get what you reward, rewards can also increase tangential behaviors like customer service, cooperation, retention, and best-practice sharing.
  3. It helps to attract some of the most aggressive and high-performing recruiters. If you don’t reward, you won’t attract or keep the best third-party people who prosper under the pay-for-performance model.
  4. It makes it clear to all what is important (because it is rewarded) and what is less important.
  5. Recruiting is like sales, and sales people routinely get bonuses. Recruiting processes “mirror” sales processes in that they involve identifying and assessing prospects, building relationships, identifying decision criteria, putting together a sales pitch, and closing the sale.
  6. It sends a message to others that the recruiting function is business-like because most functions and all executives have some form of pay at risk.
  7. The basic pay-for-performance model is relatively easy to develop (excluding the political element) because it can be copied from existing approaches used by third-party vendors.

Arguments Against Rewarding Recruiters

Some of the many arguments used against recruiting bonuses include:

  1. People already get paid a salary for doing their job, so they shouldn?t need a bonus to do the right thing.
  2. It makes other HR people with no bonuses jealous.
  3. “Socialist types” in HR want to treat everyone equally, on the premise that differentiation harms teamwork.
  4. There is no extra money for it or the money is better spent in other areas.
  5. It takes a major effort to sell it to HR and senior management and the politics involved is always a major roadblock.
  6. It always falls apart after its champion leaves recruiting management.
  7. It’s hard to find a good corporate working model to benchmark against, because internal rewards systems for recruiting are so rare.
  8. It takes a lot of time to develop and refine the process.
  9. Some of the strongest resistors (i.e., whiners) to corporate bonus systems are third-party recruiters. I can only speculate as to why they get in such a lather but I presume, at least in part, there is a fear that bonuses might improve corporate recruiting enough that their services would be in less demand.

What Should You Reward?

The first things that should be rewarded are recruiting outputs or results:

  • Reward the volume of hires.
  • Reward based on the on-the job performance of new hires.
  • Reward based on the retention rate or tenure of new hires.
  • Reward manager satisfaction.
  • Reward applicant and new hire satisfaction.
  • Reward recruiting managers for great overall recruiting.
  • Reward competitive intelligence gathering.

Behaviors to Consider Rewarding

In addition to rewarding outputs, it’s equally important to reward the way that recruiters do their job:

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  • Reward hiring in prioritized mission critical and hard to fill positions.
  • Reward a short time to fill, if the quality of hire is there.
  • Reward recruiters that successfully recruit from “targeted” or highly desirable firms.
  • Reward recruiters that utilize the “best” sources that routinely produced high-quality hires. Some also vary the reward based on whether the source was an internal database or a more labor-intensive source like cold calling or networking.
  • Consider varying the reward based on whether the recruit was an “active” candidate or more desirable currently employed (some call them passive) candidate.
  • Reward recruiters that fill jobs without using expensive executive search or websites (Be careful of rewarding cost per hire, unless a quality of hire component is also included).
  • Reward recruiters for processing and “championing” employee referrals, so they don?t ignore or discount them (a common problem).
  • Reward high-quality name generation and candidate relationship building.
  • Reward cooperation among the team and with other HR functions like compensation, relocation, and onboarding.
  • Reward best-practice sharing between recruiters.
  • Consider basing part of the reward based on recruiter responsiveness (i.e., responding to phone calls quickly, attending meetings, contributing to the improvement of the recruiting process).

Tips on Implementing a Bonus Program

  • Pre-identify the potential resistors and involve them early in the process.
  • Start with a simple process and a relatively small reward and then expand it after you get more experience.
  • Be aware that because recruiters are a competitive group, some will attempt to “game” the process. It’s critical that you identify these individuals and exclude them from the bonus process until they learn to play fair.
  • Reward recruiters so that they are involved in on-boarding and maintain a relationship with a new hire for their first six months.
  • Make sure your system is transparent and distribute the results by recruiter on a monthly or quarterly basis. Post the metrics even if you can?t reward them.
  • Include a performance reward for contract recruiters.
  • Don?t forget to reward the recruiting support staff, based on overall departmental performance. Also consider rewarding sourcers on the quality of their applicants.
  • Even if you don’t reward recruiting results, routinely measure and reward applicant, new hire, and manager satisfaction with the process. Never forget that praise and recognition are strong motivators.
  • Without major incentives, expect any third-party recruiter you bring in-house to either become frustrated or turn into mush within a year. In contrast, incentives alone can not turn “paper pushing” type corporate recruiters into dynamos. (They must be sent off to benefits or released.)
  • There is no standardized bonus percentage for internal recruiters when it is offered. As a general rule, I find that recruiters should have at least 10% of their compensation “at risk” based on the performance. I’ve seen a range of bonuses from a high of $2,000 per hire to a low of $50. Some firms offer bonuses as a percentage of salary while others have offered only prizes. Whatever you pay, make sure that the bonuses are paid either monthly or quarterly so that recruiters see immediate rewards for their efforts.
  • Consider holding third-party recruiters to the same quality standards that you use internally. Although some agencies will “whine” that it’s unfair, a few will willingly very their bonus based on the performance and the retention of the hire.

Best Practices and Benchmark Firms

Bonus programs for recruiters come and go with changes in the economy and in recruiting leadership. As a result, it’s difficult to keep track of the best practice firms.

However, some firms that have in the past offered some form of recruiter rewards include FirstMerit Bank, Quicken Loans, PWC, Aspen Technology, the U.S. Army, Wachovia, and T-Mobile.

The most knowledgeable people I have met in this area are Michael Homula and Randall Birkwood, as well as anyone who has successfully managed executive search professionals. Because it’s difficult to find high-quality benchmark examples within corporate recruiting, I recommend that you also benchmark against the more common but highly successful incentive programs that are found in the sales field. The lessons learned there are directly transferable to the recruiting profession.

Final Thoughts

The idea of offering rewards based on performance certainly isn’t new, but developing and implementing a successful process for corporate recruiters has been a challenge to everyone who has attempted it.

I found that the most important element in developing and maintaining a process for rewarding corporate recruiters is the courage and “backbone” of the recruiting leader. Because the recruiting profession is full of “that will never work” people, as well as those who fear competition, recruiting leaders need to go out of their way to discount or ignore these naysayers. Doing strategic things is, by definition, always hard, so learn to persevere!

Dr. John Sullivan, professor, author, corporate speaker, and advisor, is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high-business-impact talent management solutions.

He’s a prolific author with over 900 articles and 10 books covering all areas of talent management. He has written over a dozen white papers, conducted over 50 webinars, dozens of workshops, and he has been featured in over 35 videos. He is an engaging corporate speaker who has excited audiences at over 300 corporations/ organizations in 30 countries on all six continents. His ideas have appeared in every major business source including the Wall Street Journal, Fortune, BusinessWeek, Fast Company, CFO, Inc., NY Times, SmartMoney, USA Today, HBR, and the Financial Times. In addition, he writes for the WSJ Experts column. He has been interviewed on CNN and the CBS and ABC nightly news, NPR, as well many local TV and radio outlets. Fast Company called him the "Michael Jordan of Hiring," Staffing.org called him “the father of HR metrics,” and SHRM called him “One of the industry's most respected strategists." He was selected among HR’s “Top 10 Leading Thinkers” and he was ranked No. 8 among the top 25 online influencers in talent management. He served as the Chief Talent Officer of Agilent Technologies, the HP spinoff with 43,000 employees, and he was the CEO of the Business Development Center, a minority business consulting firm in Bakersfield, California. He is currently a Professor of Management at San Francisco State (1982 – present). His articles can be found all over the Internet and on his popular website www.drjohnsullivan.com and on staging.ere.net. He lives in Pacifica, California.

 

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12 Comments on “Developing Bonus Systems for Rewarding Corporate Recruiters

  1. I work for a firm that does offer a very lucrative bonus structure for our Corporate Recruiters. We initiated our plan in 2006 and we immediately saw an increase in jobs filled and a decrease in our time to fill. The Recruiters have become much more proactive on a day-to-day basis and our call volumes have dramatically increased. People have stated that they ‘can feel the energy when you walk by our department.’ We have been able to build an amazing amount of value and gain the trust and respect of hiring managers across the nation.

    Coming from a Third Party background I was refreshed to see this new implementation in my new corporate environment. There were a few bumps at first while we rolled out this new plan, but it has proven to be a great success. I am very proud to have the opportunity to work for an organization that recognizes how Recruiting affects the bottom line.

    I agree whole heartedly with Dr. Sullivan’s article and can only offer one small piece of advice for any company that decides to initiate a bonus plan for their Corporate Recruiters. Fortunately this is not a problem for our company, but it is a mistake that I have seen happen with other companies in our area…

    Pay a competitive salary! – A bonus plan can backfire if you can’t attract and retain top Recruiting talent. Just because your team has the potential to earn big, keep them motivated by letting them know that you are going to invest in their careers on the front end as well. There will inevitably be months when the scope of work is far less than others. While a strong month can be a great motivator to a money-minded Recruiting team; the slower months can have an adverse effect if there isn’t a solid foundation to keep them engaged. A 50/50 split, base to bonus, might be a great opportunity for a sales team, but realize that they have unlimited potential to develop their business. Recruiting processes mirror Sales Account Managers more directly and they can only sell what they have. In other words; no open jobs = no bonus.

  2. I seldom passionately agree or disagree with what Dr. Sullivan writes. However, I find Item 9, under ‘Arguments Against…’ offensive, and doubt that it was properly researched. My suspicion for the latter is that Sullivan states he ‘can only speculate as to why’ the ‘whiners’ would not want bonuses for corporate recruiters. If you were actually speaking with them, Dr. Sullivan, would it not occur to you to ask?

    As an owner of an agency for 13 years, and actively involved in a forum of several hundred owners, I have never, ever heard one voice of concern or fear of what would happen if corporate recruiters were bonused for their success. The overwhelming majority of corporate recruiters have little time for anything other than attending various forms of meetings, posting open positions on job boards, and slogging through the multitude of garbage resumes received from those postings, hoping to find the one nugget that might fit. If they were given the chance to actually recruit on a full-time basis, they would see why TPR’s are so ‘pushy’ about getting their candidate before an audience. They would also see why so many corporate recruiters are former TPR’s who left the salary+commission structure to go somewhere where they could get paid whether or not they had successful hires.

    Corporate recruiters should get bonuses for successful performance. I just don’t know how they would get the time to do the job that a full-time TPR has to do in order to earn his/her bonus.

  3. Dr. Sullivan, I must agree that it is extremely surprising to not see more bonus systems implemented for recruiters. If you’re a great recruiter, you’re a consultative salesperson at heart (first and foremost). Anybody can sit behind a desk and receive applications through a ‘career site’, setting up interviews with actively seeking candidates – but not everyone can contact a passive candidate out of the blue and recruit him/her into their organizations.

    This leads me to think . . . would a company benefit from having a f/t ‘headhunter’ on the team? Instead of a retained search firm, would the organization be better served to have a headhunter superstar on a salary + bonus incentive plan? If you don’t want to pay the entire recruiting team incentives, would it be applicable to have one or two true headhunting salespeople on the staff? Personally, I would be more than willing to trade off my total compensation as the head of a small search firm if it meant that I could pursue an arrangement like this; an arrangement that allowed me to network deeper in the organization than the typical TPR; an arrangement that allowed me to learn more about change management and organizational development, critical tools for any high-level executive.

    Being a PHD, I’m sure you recommend your students do their fair share of researching incentive systems within corporate America (most notably the Lincoln Electric HBR article) . . . so if anyone knows that incentive systems have caveats, it’s you. To Jeff’s point, the new incentive system has increased performance, which should lead to an increased ‘mean talent pool’ over time . . . and that’s the ultimate acid-test.

    However, it is worth noting that you are treading thin ice in the way you go about implementing this new plan. Let’s be honest: some corporations would hurt from having a whole team of Agency TPRs’ join their recruiting team because of the amount of ‘cut-throat-ism’ that is par for the course in the TPR community. You also don’t want to create a culture of Agency-ism by an improperly implemented incentive plan.

    My final assessment is that your article hopefully provides internal Talent Acquisition leaders some ‘food for thought’ about how they may be able to improve overall team performance through a modified incentive scheme. Kudos once again on an insightful and thought-provoking article.

  4. Interesting; So far we conclude that we can get major league players to play in the minors by paying them more, or less than they would get in the majors–but then — we don’t want them to play like they do in the majors when they reach the minors.

    A truly cunning plan.

    The most cost effective way for a corporation employing over 200 people to recruit is to use internal recruiters for low level – high turnover positions and use TPR’s for everything else. Recruiting is not a core business to anyone but TPRs, despite all the obfuscation of the talent war crowd.

    25% on success is lots cheaper than the wages, resources, management, real estate, benefits, etc, than companies waste on internal recruiting.

    Recruiting is the original–and perfect outsource function.

    Bill Wager
    Hunter Green
    40 Exchange Place
    New York, NY 10005 212-742-0990

  5. Bill,
    I quite agree with your formula of using internal recruiters for the high volume jobs and TPRs for the more unique positions. However, as the company size grows, that may change.

    You said ‘25% on success is lots cheaper than the wages, resources, management, real estate, benefits, etc, than companies waste on internal recruiting.’
    When I was asked to start recruiting pharmacists for my 5-hospital system, we were paying TPRs $20-25,000 per hire, approximately 10 hires per year. We no longer need TPR, but the cost of my salary, benefits, desk space, etc. comes nowhere near 200,000–250,000 a year! In addition, I work on 5-10 other hard to find job families on the same FTE.

  6. I must say that I am intrigued by Bill’s comment comparing Corporate Recruiting to ‘playing in the minors’. I think that the companies who are investing more in their corporate talent teams by adding a bonus structure should be praised. The truth is that a truly strong team of Corporate Recruiters aren’t as dependent on TPR?s and for some I’m sure that’s a threat.

    In this day and age corporate teams also build networks and candidate pools. They are no longer sitting on their thumbs waiting on the phone to ring after posting a bland add on the job boards. More often than not they are better equipped to fill the majority of their own internal openings. They not only have a stronger understanding of these open positions from working on a day to day basis with the hiring managers, but equally as important they better understand the intangibles that their company is looking for in a candidate.

    I applaud Bill for being so passionate about his industry, but there?s no need for yet another voice on this sight to consistently down-play the talents that exist in the Corporate Recruiting world. I?ve seen my share of Pop Warner players on both sides of the fence.

    Believe me, I know just how valuable the talents of strong Third Party Recruiters can be. We converted three internally last year!

  7. I like this article. As John says, it is not a new idea – paying people with ‘recruiting’ expertise to work inside and work similar magic that executive recruiters do to avoid costs, fees, and inject recruiting excellence.

    So – before you walk into Compensation or your VP of HR and say we need to reward our Recruiting staff using metrics suggested in this article, consider this (I commented on What You Should Reward):

    1. Rewarding on volume of hires can be dangerous, misleading, and by the way ? mean absolutely nothing to your organization.

    Hopefully somebody has actually figured out how much time, resource, and money is needed to execute all the positions that need to be filled in the organization. If that is the case, then the right amount of people are in place to fill the roles that do come open.

    Most managers with an open role expect it to be filled. So I am not convinced measuring ?how many you fill? makes any sense. Go tell your business unit leader ?My team last year filled every role that came open?. I am sure the response will simply be ?Good ? that is what you are supposed to do?.

    Besides goals on volume tend to draw on past performance, and do not account for new business conditions. What if the business launches new products, installs new technologies, gets bought, or so on. Goals would likely have to adjust in staffing.

    2. Rewarding on the job performance of new hires may be inappropriate – if your organization separates Recruiting from HR, then Recruiting recommends hires, but does not have the final say. They are rarely a part of building the goals and objectives of a new hire for the first 3, 6, and 12 months, and almost never get to manage or train someone’s performance after they are hired. Last time I checked, most companies don’t have recruiting comment on a person’s 6 month evaluation.

    3. Reward on retention rate – for HR Generalists who wear the recruiting hat only. See comments on number 2. This can work when Recruiting has control over the manager of the employee and can influence their management, coaching, performance development style, and so on. Organizations that combine HR generalist duties with Recruiting can look at this as an option, but it?s more difficult when Recruiting / Staffing is its own function.

    4. Reward manager satisfaction – ABSOLUTELY. In fact, I recommend extending that to also the candidate and HR. Recruiting gets high marks when Recruiting, Hiring Manager, Candidates / New Employees, and HR agree that all is well. You only need one of those parties to perceive a problem for there to be one.

    5. Reward applicant / new hire satisfaction ? Agree – see number 4.

    6. Great overall recruiting – No disrespect intented – but what is that anyway? Getting the job done? Using social networks and blogs?

    Simply focus on customer and applicant feedback plus the ability to stay in budget for the hire as a measure.

    Did you stay within the resources we have at our disposal, did you spend more than the budget we agreed to, and did you spend more or less time than you expected on the hire?

    7. Competitive Intelligence gathering – great idea but be cautious – hopefully the customers of Recruiting understand why you are doing that instead of filling the requisition. Each organization uses a percentage of strategy, execution, and management to make up each recruiting position. If the position has been designed to capture strategy, then go for it. But if it is designed to hammer the phones and boards for candidates, competitive intelligence will likely get some blank stares in the board room.

    Here is one of my own. It may work (and I truly mean ?may?) for your organization when considering how to design Reward programs for Recruiters:

    >> Reward differently for ?Staffing? activity than you do for ?Recruiting? activities. << Some of this job is simply processing what comes to the ATS, and some of it is finding people who did not apply. Figure out where your team has strengths, and if that matches with what your organization's needs in order to fill its open roles. Build metrics and goals around Recruiting (what is takes to make an non-employee an applicant - cold calling, sourcing, prospecting etc) and others around Staffing (making an applicant into a hire - candidate care, processing, hiring manager communication, etc) and then make your Reward program. Again ? nicely done by Dr. Sullivan, but there is much to consider here, and some of the Behaviors, Arguments, and Tips likely may not apply to your culture. You may want to simply start with this one question on a recruiting employee's value as you go down this road: With the external resources you partner with, the money your company spends on recruiting, and the time you allow them to work on a requisition, should they be making MORE or LESS than the people they place?

  8. Beverly:

    It would seem then, that pharmacists have become a high volume job in your hospitals. If you can get the volume you need, cheaper and faster, then it works for you.

    However, most situations are not as straightforward as yours–and yours may be less straightforward than you are cognizant of.

    Do you have useless co-workers? An empty suit manager who wanders about asking for endless reports? –did you go to that job fair? do you need a new computer?, subscribe to a job board?, —-and I’m not saying that this is the case with you, but those are the sort of questions one would ask when assessing the cost of internal recruiting. You, personally, may not cost 250,000 but the infrastructure that enables you to function may, in fact, cost more than it produces. I don’t know this without knowing the numbers but I offer this as speculation.

    I have a suspicion that many, many companies that have embraced the notion of internal recruiting are not getting the value that they thought they would when they started.

    Bill Wager
    Hunter Green
    40 Exchange Place
    New York, NY 10005 212-742-0990

  9. Jeff:

    Yes, successful TPRs long for large pay cuts and are easily converted when this incentive is offered.

    They also like multiple layers of management, dress codes and other policies that come from afar.

    Hell, if you threw in one of those neat little beige cubicles and a box of pushpins (so I can pin up the picture of the Porsche I’ll have someday) I?d take the job myself!

    Bill Wager
    Hunter Green
    40 Exchange Place
    New York, NY 10005 212-742-0990

  10. Bill,

    I’ll get you that cubicle, but due to a new corporate policy you’ll have to bring your own push pins. Also please note that any pictures, automobile or otherwise, not previously approved by management will be in direct violation of section b-3 in the employee handbook.

    But to get back to the point that was obviously missed in your last e-mail…

    The point was that there are great recruiters on both sides of the fence and that a corporation deciding to invest more in their internal Recruiting teams is a good thing. There will always be a need for TPR’s so don’t you worry. As a matter of fact our Receptionist is out this week. Can you help?

  11. Bill, could you name one of those companies? I assume your suspicion comes from somewhere and is not just something you pulled out of thin air? I do not need a study on this or specific metrics but one name would suffice?

    Cheers,
    Eamonn

  12. Jeff:

    You said:

    ‘The point was that there are great recruiters on both sides of the fence and that a corporation deciding to invest more in their internal Recruiting teams is a good thing. There will always be a need for TPR’s so don’t you worry. As a matter of fact our Receptionist is out this week. Can you help?’

    That’s a fabulous point–that it’s a good thing. Socrates couldn’t have made a better argument
    I just missed that completely, no doubt it’s somewhere in scripture.

    As to your receptionist being out–just have your calls forwarded to me–I’ll take care of everything.

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