I had this idea a while back, and I’m writing about it now to get some feed back. Is this a terrible idea? It might be! So I’m hoping some people in the industry will give it a look and let me know.

We’re going to focus on the two areas where I think there are perverse incentives at the moment: the recruiter-business relationship, and the recruiter-candidate relationship.

The Recruiter-Business Relationship

I know not all recruiters are like this, but I’ve been contacted by quite a few who see a job posting and reach out to say “Maybe I’ve got someone who would be good for you.” This interaction doesn’t really seem like a partner, it seems like someone who is inserting themselves in the middle of a transaction, not unlike scalpers buying up PS5s and then selling them at a premium. 

(When you think about it, this recruiter is incentivized to tell their job-hunting clients that the market is terrible and they shouldn’t look, so that the client doesn’t find something and exclude them. Or they’re incentivized to find someone who is already in another position and not looking and convince them to look which … also seems odd)

If they do connect you with someone, they make significant money if the person stays for a relatively short amount of time — maybe a few months, on the outside, and a few months is hardly enough time to know if someone is a good long term fit.

Here is the proposed change:

Decrease the recruiter fee %, but lengthen it and make it a monthly payment that stops if the person leaves the position. Let’s use the example of a programmer making $100 000 a year. A typical recruiter would get maybe 20% of that a few months after filling the position ($20 000).

Most tech employees stay in a role for 1.5 – 2 years, so what if we spread that out over 1.5 years on a monthly basis. Let’s say 1.5% of the annual salary a month for 18 months. That would come out to $27 000 after 18 months, a slight premium BUT it’s a premium for someone you know is a good fit because they’ve stuck around. If they only last six months, the recruiter only gets $9000. If they make it one month, the recruiter gets just $1500.

I feel like this aligns the incentives better. The recruiter is incentivized to find the right person for the job long term (as opposed to someone who can last three months and then leaves so the recruiter can place them somewhere else for another three months), which is what the business wants. The business would pay more since the hit is spread out, and they know the amount they pay is directly related to the quality of candidate.

It makes the recruiter and the business partners — both invested in the long term success of the candidate, which brings us to part two:

The recruiter-candidate relationship

Right now the relationship, again, can be fairly limited and short term. They may reach out to see if a candidate is interested in new positions, work with them until they place them, then tell them to reach out if they want something new (and probably keep in touch with them by sending an email every few months).

They ARE incentivized to get the candidate as much money as possible (this is one area where incentives already align), but other than that they’re not particularly invested in the candidates success. As mentioned above, there is a bit of a perverse incentive in that they make more money the more people job-hop.

Here is the proposed recruiter-candidate relationship change:

The recruiter acts more like a career counselor/mentor. They meet with the candidate to discuss their long term goals. They help create a plan for study to achieve these goals. They may even provide free study materials (either online or by supplying books) to help the candidate achieve certifications or build skills that will help their marketability and earning potential — this obviously benefits both the recruiter and candidate.

Furthermore, the recruiter should continue meeting and advising the candidate on a monthly basis even after they’ve been placed. It’s rare to find an organization with really good mentoring and instruction, so providing that will help candidates stay in an organization longer. Or if the organization is crappy, it will help the recruiter know sooner that they should help the candidate look for a new job — not for a new payday (because they’ll continue getting the same monthly pay if they place them somewhere else) but because it genuinely isn’t a good fit. This is probably good for both the business and the candidate.

After the 18 months the recruiter can know the candidate is somewhere they want to be longer term so they can drop off the mentoring (but remain in touch with them periodically, more like a traditional recruiter, and if the candidate wants they can continue helping them build skills to earn promotions or additional opportunities elsewhere — speaking of which, the employment agreement should stipulate that the monthly payment is 1.5% of the annual salary that month, not the starting annual salary).

A focus on long term partnerships

If a company has a good experience ideally they’d want to continue working with the recruiter for a lot of positions in the future. If the candidate has a good experience they would stick with that recruiter throughout their career, earning the recruiter higher fees every time they switch jobs for a career advancement.

Is this even reasonable?

The average salary in all of IT, according to Payscale, is $88 000 a year. Let’s just assume everyone the recruiter places makes that. That’s $1320 per candidate, per month. If the recruiters goal is to make … let’s say $100 000 a year (who doesn’t love that nice round number?) and we include benefits (for a total of $150 000) they probably need to have about 10 placed candidates at all times.

If you place two per month, that would probably keep you above that number. Is this reasonable for a recruiter? I don’t know .

(a google search says most recruiters place around 4 per month, or 50 per year — which may imply that our more intense load per candidate/business is doable).

If you have 10 at all times that you’re meeting with monthly that accounts for 10-20 hours of work per month (depending on how much time it takes to prep for each meeting). How many candidates would you need to be meeting with in order to place two per month? Again, I don’t know, though a recruiter might.

(A google search says a recruiter should provide 3-5 candidates per position, although I’m sure there’s overlap with one person being put forward for multiple positions, but these numbers would seem to indicate that if you want to place 2 candidates a month, you should be regularly meeting with 6-10 candidates who are in the market at least)

I think you can read the numbers both optimistically or pessimistically, but I do think this method aligns incentives with recruiter, candidate and business better. I also think there’s other revenue opportunities in here that I’m not going to talk about now because this post is already too long. If you got to the end, though, thank you so much for reading this. Especially if you’re a recruiter. Do you think this idea has merit? Has it already been tried somewhere? Are you yourself ALREADY DOING ALL THIS AND I’M WAY BEHIND? Let me know!