A consultant with 10 years plus experience remarked that there is not one thing she does in the same way now as when she started in recruitment.Why when nearly everything else has changed, do we still remunerate and reward consultants the same way that we did 25 years ago when I joined the industry?For 360 degree recruiters, it is still expected that a good perm consultant will bill 3 x their salary before they qualify for commission and for a temp consultant this expectation is 4-5 times their salary.
The two core functions of a good remuneration model is to
a) ensure profitability for the company
b) motivate individuals to exceed their targets
According to the 2014 RIB report only 14% of recruitment companies reported an average gross profit of $3.00 per $1.00 invested in salaries. The remaining 86% of companies reported an average gross profit of $1.86 per $1.00 spent on salaries, which has had a severe impact on the profitability of recruitment companies. There is a generational shift happening in the recruiters from Generation X to Generation Y. Many recruiters have told me in the past 12-18 months that money does not motivate them, which is why they do not mind, if they do not make commission! What does motivate them? Making a contribution and doing a good job. It may be a contribution to the wider society through volunteering. Doing a good job is about recognition from their peers. Peers nowadays means the wider community, not just the colleagues they work with.
What are some of the reasons this remuneration model no longer serves the majority of companies?
1. The recruitment job for the 360 degree recruiter has evolved to include many more core activities e.g. headhunting, data analytics, using social media to increase their own and the company’s profile and dealing with a large number of applicants for any given job due to a ‘spray and pray’ attitude from applicants. This is in addition to the traditional 360 degree duties of business development, sourcing and placing candidates. Some companies have dealt with this by hiring resourcers or para consultants, which increases the salary spend on headcount, yet the KPI for the consultants is still the 3 x salary model.
2.The recruitment industry has traditionally rewarded on outcomes, which is billings. As the recruitment job has become more complex, rewarding the consultants on outcomes does not assist them to focus on what matters nor does it ensure quality service. Could we reward consultants for consistent quality behaviour that we know leads to repeat business and therefore high billings?
3. Every recruiter seems to be facing the same problem in that there are plenty of jobs, but not enough quality talent. If this is the case, do we need to consider a reward for identifying and attracting good talent? Some resourcers/paras receive commission or a spotter’s fee, but not to the extent that the market may warrant it.
4.With the advent of services like Airbnb and Uber disrupting the accommodation and taxi industries, they have managed not only to tap into a sharing economy, but also into the peer review system. Consider how Generation Z will not do anything without checking reviews on sites like Trip Advisor and Yelp. Like it or not, this is already an established buying behaviour for that generation, who before too long will be our clients. Gen Z also post all their activities online. For them nothing has happened until it is shared.
The conclusion being that a relevant remuneration system for our current and future consultants will need to have the following components:Reward for quality candidate care based on the number of referrals and online positive reviews from candidates. Reward for quality client service based on the number of referrals and online positive reviews from clients.The reviews need to be online, uncensored, volunteered from the reviewer and freely searchable for anyone. Much like Glassdoor.com.au is a peer reviewed site for employees searching for new employers, recruiters will need to be peer reviewed by clients and candidates to attract more clients and candidates. In which case it would make sense to tie the remuneration model to these reviews. This also achieves the objective of providing a forum for the recruiters to share and display their good work, which can be recognised by all and sundry.