As an industry insider, I’ve tracked trends and practices within the recruitment industry pretty closely. I remember the mid-nineties when various and sundry pundits pronounced the advent of the internet and job boards to be the death knell of the recruitment industry. I’ve applauded the trend towards hiring more professionally designated people into the industry, especially CPAs, in the finance and accounting market. And of course the biggest change in the recruitment industry in recent years has been the introduction of LinkedIn and other social media platforms as recruitment tools.
Sales vs Service
As much as the recruitment industry has changed, it essentially operates the same way it did when I entered the industry in 1979. Back in the day, selling the service was the lifeblood of the business and actually delivering the service was a secondary consideration. Fast forward to 2016 and sales remains the lifeblood of the placement agency industry and with a very few exceptions, the actual delivery of the service is a hit or miss proposition.
But you wouldn’t know that by perusing the websites of the various placement agencies occupying the middle market of finance and accounting. All of them talk about finding “exceptional talent for exceptional companies” or “the right fit” or some variation on that theme. Virtually all of the marketing material put out by placement agencies take great pains to paint themselves as service organizations.
Centred on Service? Prove it!
But the proof, as they say, is in the pudding. If placement agencies were actually service organizations, their management practices and metrics would centre on service. However, in almost every placement agency of any size that I’ve encountered, the metrics of success are not centred on service, they’re centred on sales. Like any sales organization, placement agencies are concerned about the numbers; cold calls dialed, meetings arranged and deals closed. Any sales person will tell you that sales are all about percentages and so will any recruiter. They’ll happily share with you how many cold calls it takes to get a meeting and they’ll tell you how many meetings it takes to get a new client order. However, there’s a number the recruiter won’t share with you – their fill ratio number – and this is the number that you, the client, should actually care about.
What’s a Fill Ratio?
A placement agency’s fill ratio number refers to the percentage of “job orders” that result in a hire.
Contrary to what their marketing material would suggest, placement agencies don’t fill every assignment they take on. In fact, most placement agencies don’t fill the majority of the assignments they undertake. LinkedIn did a survey of their placement agency clients and reported that the average fill ratio was less than 40%. Of course, it depends on the firm, but I would suggest that the fill number of smaller placement agencies is on the high end of that spectrum and the fill rate for larger placement agencies is probably closer to 25%.
One in Four
Whenever I cite these numbers to someone who has used placement agencies in the past, they always express great surprise. But if you know how the placement industry works, it makes perfect sense. Placement agencies work on a contingency basis and often on a non-exclusive contingency basis. If there are two or three recruitment firms working on the same search and the client is also posting the job online, you’d only expect a placement agency to be successful in one out of every three or four assignments they undertake.
If you’re the recruiter and you know that you only have a 25% or 33% chance of getting paid, how hard are you going to work on any one search? Are you going to spend hours and hours on research and recruitment to come up with the perfect candidate, or are you going to try the fill the position with the best candidates you happen to have on hand?
The Expedient Short List
Obviously, from a purely economic point of view, the expedient ‘on hand’ short list is superior to labour intensive, ‘best possible candidate’ short list. And since the recruiter doesn’t know which of the three jobs they’re working on that they’re going to fill, all three clients get the expedient short list. Sometimes the expedient candidate does happen to be the best possible candidate but most of the time they’re not.
Demand Value for Money
And it’s not like the expedient candidate is less expensive than the best possible candidate – you’re going to pay them both pretty much the same. Think of it this way: If Toyota decided for some implausible reason to offer Camrys and Lexus’s for sale at the same price, I don’t think you’d buy a Camry just because you happened to know someone at the Toyota dealer. You’d march into the Lexus dealer and buy the best car you could for the money.