The Commission-Based Recruiting Model Is Ready For Disruption

During the last decade, AI, social media, LinkedIn, and more have been disrupting the recruitment industry. Still, the commission-based, contingency model has been a stable and robust force despite the industry changing in so many other ways.

Until now.

IQTalent Partners offers a new look at recruiting services, one that is transparent, adaptable, and offers billing by the hour, in lieu of a huge one-time fee based on the candidate’s salary.

Who knows more about this disrupter than our own CEO David Windley? We decided to sit down with David and explore his unique perspective on the future of recruiting and why the old model of outsourced recruiting and executive search is ready for disruption.

What Was The Inspiration And Motivation In Founding IQTalent Partners And Creating A New Business Model?

The idea with our firm was to bring a professional services model to recruitment that does away with the traditional commission model. Our model is a bit like the McKinsey or other consulting firms’ model. The traditional commission-based recruitment system drives the wrong behavior as it is very transactional. Our idea was to change the model and not chase the commission but instead be a partner and augment in-house talent recruitment teams within organizations.

More And More Companies Are Moving Recruitment In-House. Why Is That Happening, And How Does That Impact Search Firms?

This trend happened in technology firms first, where the belief is that talent is a core competency for a company. It is a critical asset.

The second point is that the economics makes better sense to hire a recruiter as an employee rather than pay an agency. If you do some quick math, traditional firms charge 33% of a person’s annual pay as commission. It takes a traditional firm like this just three hires to make as much as the candidate they place in a company. It makes no sense for a company to pay so much. Building an in-house team is much more cost-efficient. Microsoft, Yahoo, all the tech companies where I worked all built in-house executive search teams.

But These Big Tech Companies Have Volumes Of Recruiting Resources. Can A Small Company Afford To Build An In-House Team That Can Handle That Level Of Hiring?

That’s where our company comes in. The idea is, if you are a smaller company and don’t have significant volumes of hires, you can rent an executive search service at an hourly rate.

The question we sometimes get asked with our model is: If the time taken for finding a candidate is long, wouldn’t an hourly rate be more expensive?

A typical executive search takes about 90 days. If we break down the hourly rate, the IQTalent Partners model is still significantly less expensive. Our fee will come to about a third of what the commission-based model would cost. Plus, the time needed for a hire is now shrinking. With big data and AI, partners are finding matches much earlier. Although AI-based models are still young and data is not yet big enough, over time, it holds big promise.

What Are The Other Significant Changes And Disruptions We Can Expect In Recruitment?

I see a demand for diversity in the workplace continues to increase. This demand impacts our firm in that we need to provide a good supply of diversity in our candidates, which means finding more interested and qualified candidates who are women and ethnic minorities. But, every market and every industry has its unique diversity requirements.

Another of the toughest challenges in recruiting is that the skills gap is tremendous and widening. It is getting harder to find truly qualified people.

So, As A Recruiter, How Are You Addressing That Challenge?

First, we look at people who have the skill sets and experience. Then, we check for competencies. For example, a data scientist is currently the most sought after candidate and the fastest-growing job category. Ten years ago, there was no such thing as a data scientist! Since it is tough to find an experienced candidate, we look at what it takes to be a good data scientist and then look for those competencies. We search for people who have majored in mathematics or have a STEM background.

Another way we are looking at finding the right candidate is by increasing the geography of the search. We tell tech companies in the Bay Area to look at Austin, Nashville, Salt Lake City, Chicago, and other places that are producing excellent talent.

What Are The Other Ways You Are Expanding The Labor Pool?

As the chair of SHRM, I am ensuring that we are advocating for widening the labor pool by looking at people who have been incarcerated. There are a number of people who have been to prison due to the criminalization of drug use. This set of people are not in the employment system as an incarceration record almost always immediately disqualifies them. At SHRM, we believe that people deserve a second chance. Many were in jail because of a dependency problem and not because they were bad. And we have been encouraging employers to look at this pool. With tight labor markets, there is a need to open new pools of talent.

Looking at our military veterans is another significant effort with SHRM. Thousands of great people retire from the military at a relatively young age every year. These people are looking for jobs, and they are usually willing to learn and make excellent, loyal employees.

This article was originally published on the IQTalent Partners blog.