Fall In Love With Recruiting Again. On an Hourly Basis

The following idea doesn’t tend to sit well with most recruiter colleagues I’ve talked to. But as the talent war escalates, it makes sense.

It’s about our billing model. The vast majority of third party recruiters in the US operate on a contingent model. Fewer work on a retained basis. And a small, but growing minority have adopted an hourly model. I’m a big fan of the hourly approach. Following are three reasons it’s better for everyone involved.

1. It’s More Equitable

As recruiting projects get easier to find and harder to fulfill, the hourly model creates a far more equitable revenue model — customers pay for exactly what they get. It’s also more predictable revenue. As someone who started and grew a recruiting practice that began as contingent and moved to hourly, this saved me a lot of stress! And it often let me charge customers quite a bit less than what contingent billing would have amounted to, while still keeping me more profitable. It was better for my bottom line and theirs.

2. Allows Us to be Consultative

As we head into a time when it is exactly what our customers need, the hourly model allows and encourages recruiters to be far more consultative. We’ve all experienced customers and hiring managers who have unrealistic expectations, or make things a lot more difficult (time-consuming) than they have to be. The hourly model makes it very easy to explain, without any need for defensiveness, why any given expectation or practice doesn’t make sense.

You should probably reword this, but something like, “I’m happy to continue to spin my wheels on your behalf, for as long as you’d like, but here’s why I don’t think this is the best use of your budget, and what I’d suggest instead.”

3. Enables a Menu Approach to Services

The hourly model is a boon to a la carte recruiting services. This is a concept that doesn’t even make sense under a contingent model, and doesn’t work well under a retained model. I found this to ultimately be customers’ favorite thing about the model.

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For all the advantages, switching to an hourly model is a big change, and you can expect resistance. I remember one HR manager who looked at me incredulously and said, “So we have to pay you even if you don’t find us a candidate that we hire?!” The best way to overcome customer’s financial concerns is to point out that they have complete control over the cost. I would invite them to set a weekly cap, and/or an initial pool of hours, after which we could pause to discuss results to date.

Outlining the other benefits also helped dispel the initial pushback. There were two ideas that seemed to especially resonate with employers new to the idea. One, a la carte services tended to grow on them. In many cases, they wanted to manage final interviews and offers, for example. They also liked having more control over the process. In some cases, they wanted us to be very thorough in our screening (including in-person interviews, reference and background checks). In other cases they just wanted us to send a steady stream of roughly qualified candidates (based on just phone screens) their way.

Finally, candidly, the hourly model changed my feelings about my job as a recruiter. Think about what the contingent model incentivizes us to do. For example, to try to spend the minimal time on any given requisition that will lead to a successful placement. No matter how I responded to that incentive, it never felt right.

Switching to an hourly model made me fall back in love with being a recruiter.

Culture Strategy Director for The Good Jobs, George Blomgren helps employers define, refine and leverage their culture to attract and retain talent, through a unique, turnkey employment branding platform. Prior to joining The Good Jobs, George started a wildly successful recruiting practice serving MRA - The Management Association's 3,000+ Midwest members. Previously, George was on the leadership team at the country’s fastest growing network of local employment websites. George is a nationally syndicated podcaster and blogger, and a popular speaker on social media, talent acquisition and technology. Connect with him on LinkedIn today!

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2 Comments on “Fall In Love With Recruiting Again. On an Hourly Basis

  1. I’ve run a digital marketing firm for the last decade in addition to a full desk. I spent six years working in IT staffing, and I’m very well acquainted with the hourly model.

    It’s a terrible idea, as it turns recruiter work into a commodity. The 20-33 1/3 percent for contingency is not indicative of the work we do for one client, but is instead an average applied across all clients over years. Think of it like this. 5 hrs for client A, but 35 hours for client B equals 2 placements. Your average is 20 hours per placement. The 5 hours comes from 4 years of work – as the perfect candidate was in your rolodex after speaking to them over the last 4 years.

    Under the hourly model, you are reduced to 5 hours of billable time for a successful placement, with the second client allowing you 20 hours of time before cutting you off.

    Going hourly reduces your profit potential to the benefit of the client. It’s purpose is to pay you less, but pay you regularly. What happens over time is the client captures your high value, but doesn’t pay for your low value. And when your high value is exhausted, they move on.

    It’s no different than the staffing model that hires only experienced recruiters, primarily from Robert Half and TekSystems. Experienced recruiters often complain about RHI and Tek, but much of the training people receive comes from them. If they changed their model, where would tomorrow’s experienced recruiters come from?

    It’s the same with hourly. It’s a short-term billing gimmick that clients love because it enables them to capture your high value, but who pays for you to create that high value in the first place?

  2. The problem with hourly rates in any consulting field is that the moment you start trading time for money you are on a slippery slope. Our fees should be about the value we add and not how little an organisation can get away with paying us. Alan Weiss speaks and writes very clearly on this subject and much better than I ever will.

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