The other day Dark Horse saved a client nearly $25,000 using an oddball recruiting model… and I’m about to tell you exactly how we did it.
Of course, before we delve into the strange and unusual, let’s get a clear understanding of what a plain vanilla recruiting model looks like. If you’ve ever partnered with a traditional recruiting firm you know that nearly all operate via contingency agreements. Contingency means that the recruiting firm works without any compensation up front. They locate candidates for free and then, upon hiring one of the firm’s candidates, the client agrees to pay a percentage (usually upwards of 20%) of the new hire’s first year salary. This model often appeals to clients because it’s sold as a no-risk approach. Employers don’t have to pay anything until they make a hire and they can enlist multiple agencies at one time to maximize their reach. One would think this is an ideal scenario, right?
Not exactly. The contingency model is problematic for lots of reasons but mainly because it sets the stage for too many competing interests. Instead of all parties working together to achieve a quality hire at a fair rate of pay, the employer, recruiting firms, and candidates all end up in competition, vying for their own interests, which can make for some particularly dicey negotiations at the offer stage.
Clients also fail to realize that this model is extremely expensive in the end. If an employer’s true goal is to hire and not just interview lots of candidates, then they must inevitably accept that they’re going to pay tens of thousands of dollars for a service initially presented as free.
On the other hand, under the hourly model clients pays a fixed hourly rate, interests are aligned, and there is no additional fee upon hire. Clients who use their billable time wisely usually end up getting far more personal attention and pay thousands less in recruiting fees. Indeed, this was the case with the client I mentioned above.
So, why haven’t you heard of the hourly recruiting model before? It’s because hourly is an unorthodox business model that isn’t offered by big search firms. As a solo practitioner, it makes a lot sense for me to bill hourly. It doesn’t make sense for big firms with lots of overhead and multiple layers of management. Their hourly rates would need to be astronomical to cover their costs… which is why they work for free at first and charge a boatload on the backend so that they can recoup their expenses.
Not as ideal as you first thought, huh?
Chances are that if you’ve read this far you’re at least moderately interested in giving the hourly model a try. So, here are few tips to keep in mind if you decide to take the plunge. My recent client implemented all 3 of these strategies and saved nearly $25,000 in contingent recruiting fees!
3 Tips For Conducting a Successful Hourly Search
1) PREPARE IN ADVANCE
The more you do in advance, the less you’ll pay. Consider preparing the following information prior to engaging your hourly recruiting partner.
Write a detailed job description or a list of requirements and responsibilities
Prepare a written overview of your company, team, environment, mission, benefits, and perks
Set a realistic salary range
Engage in an honest evaluation of your obstacles and have a plan to overcome them (e.g., If the location of the work is undesirable, can you compensate by offering flexible hours or a partially remote option? If your benefits aren’t as attractive as your competitors, are you able to offer equity?)
2) COMMUNICATION IS KEY
The hourly model can result in huge savings, but only if you use your billable hours wisely. Let’s say your team starts out looking for a senior-level candidate but later decides to hire a junior. You can wait a week to inform your contingency recruiters of this change with minimal effect, but you’ll need to adjust your thinking when opting for the hourly model. If you wait a week to tell your hourly recruiting partner of changes, you’ll rack up hours of misdirected billable time. Remember, time is money when engaging an hourly recruiting partner, so your goal should be to maximize the potential of each hour. This necessitates prompt and effective communication. For this reason I recommend that your recruiting partner work directly with the hiring managers. Eliminating links in the chain of communication almost always results in a shorter time-to-hire and, therefore, a lower fee.
3) KEEP IT MOVING
It’s a competitive market and the balance of power has largely shifted in favor of workers. Your candidates are being bombarded by opportunities and they aren’t inclined to wait around long. You must streamline your interview process in order to keep talent engaged long enough for your team to make a hiring decision. For those in the tech industry this means:
Regular communication with candidates
No more than 1 phone interview
No more than 2 in-person interviews
Each conversation should last no longer than 1 hour
The entire process should take no longer than 7-10 calendar days
Coding challenges should be completed during the interview(s)
Absolutely no takehome challenges
If you’re not completely convinced that someone is a fit for your team after spending 3 hours with them, they are not a fit and you should not hire them
So, there you have it. If you think that an hourly recruiting model might be right for you, get in touch! You can request a free corporate services consultation here.
Happy hiring, friends!