The Recruiting Industry Can be a Racket! Why “Culture Fit” is Critical

Check out this surprising perspective from the CEO of Zephyr Recruiting about the disconnect between the recruiting industry and the employers and job seekers it serves.

 

The recruiting industry can be such a racket. Yes, I actually meant to say that. I have seen first-hand how disconnected the recruiting industry can be from the employers and job seekers it serves. 

In order to understand why I make such a bold claim, you have to understand the basic business model of the industry. Now, to be fair, not all recruiting firms use this model—however, it is the basis for most firms out there. 

To start, most firms are contingency-based, which seems like a great idea on the surface for the employer because there is no fee unless you choose to hire the presented candidate. No risk, right?  

The second critical thing to know is recruiters are most often paid 100% commission on the roles they fill and are also responsible for “bringing in the business.” This is considered a hybrid sales/recruiter. They only get paid if they successfully find a client and fill the role.  

This combination can often times set up the recruiter to care about one main thing—filling the role as fast as possible; otherwise, it is famine for them. In fact, it is a very high-pressure job with a high burn-out rate and, ironically, a very high turn-over rate. Their motivation is not about finding the employer the best possible employee, but to fill it as fast as they can so they can feed themselves and their families.  

At the surface this may not seem that bad, so why do I think this is such a terrible approach? Because what this really does is it treats human beings, the job seekers, as commodities—putting profit before what is best for the humans involved. 

The other way in which the industry is a racket is the exorbitant fees charged by these firms. Typically, the fee is between 20% - 35% of the annual salary of the new hire. The reason for these fees is due to the high failure rate in which the losses have to be built into the fee.  

And again, since the recruiter needs to fill the role as fast as possible, they often spend no more than 15-30 minutes with the job seeker, only asking about skills and experience. They typically spend about the same amount of time with the employer, getting a basic understanding of the role, salary, and skills requirements.  

What is left out is culture fit, which is the number one predictor of successful retention of a new hire.  At Zephyr, we believe culture fit includes at least these main factors: 

Core values 
Personality 
Mindset and Attitude
Strengths
Weaknesses
Goals
Team Dynamics

I tried to locate data on the retention rate of employees hired through recruiting firms and have found nothing. Sometimes the absence of data is as profound as the data itself. My assumption is this information is not shared for a reason. What I can say is that every single one of our clients who have used a traditional recruiting firm have had no luck with the hires sticking around and working out. Often times, they have paid between $15,000 - $30,000 PER HIRE just to lose them within six months. Now THAT is a racket! 

I am actually not trying to paint a negative picture of the recruiters themselves. They are often victims to this model and rarely last. It is the standard industry business model I am questioning. 

Human beings are NOT commodities. They are partners, teammates, friends and THE only reason any business can provide its service or products to its customers. Without employees, a business cannot exist. 

Recruiting support from an outside source needs to be a service that balances the value of bringing on a RIGHT FIT™ employee with the time it takes to do this important work. Recruiting should be akin to matchmaking, finding the RIGHT FIT™ for both the job seeker and employer.  

RELATED: What is a RIGHT FIT employee?

Recruiters should not be paid only if they fill a role, but for the work they do. This will allow them to be committed to quality work, not quantity work. The pressure to fill roles fast should be removed, allowing the recruiter to cater to both the employer AND the job seeker. The recruiter can then focus on finding the right match while giving the job seeker the time, attention, and respect they deserve throughout the recruiting process. 

Recruiters should not be the salesperson, responsible for bringing in the revenue. This creates a conflict of interest no matter how you slice it. 

At Zephyr we created this framework because it is the right thing to do. We deeply believe everyone deserves to love their job and every employer deserves to love their team. 

Erin Longmoon is the CEO of Zephyr Recruiting, which she founded in response to her clients’ needs for help in with building effective and successful teams. Zephyr Recruiting serves the small business community—the mom and pop places that are the backbones of our communities and our economy.

 
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  • Next up: The Right Way to Hire and Retain Staff
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  • The Right Way to Hire and Retain Staff

    Perfect your hiring process.


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  • Next up: The Tangible Benefits of Workplace Wellness
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  • The Tangible Benefits of Workplace Wellness

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  • Next up: The Tangible Benefits of Workplace Wellness
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  • The Tangible Benefits of Workplace Wellness

    Healthy, engaged employees are more productive than those who aren’t. In this COSE WebEd Series webinar recap, Sunny Lurie of Advanced Performance, Inc., explains how to put wellness programs into action.

    Healthy, engaged employees are more productive than those who aren’t. In this COSE WebEd Series webinar recap, Sunny Lurie of Advanced Performance, Inc., explains how to put wellness programs into action.

    The data around the benefits of workplace wellbeing are clear. For instance, in a survey earlier this year by Virgin Pulse, 97% of the 620 business leaders surveyed indicated that wellbeing positively influences engagement. Separately, a recent survey done by The Economist, 84% of senior company leaders said unengaged employees is a top business threat.

    Do you see the connection here? During a recent COSE WebEd Series webinar titled “Creating a Healthy, High-Performing Workplace,” Sunny Klein Lurie, the CEO of Advanced Performance, Inc., said promoting workplace wellbeing can boost both morale and your workers’ performance. 

    There are more benefits as well, Lurie said. For example, medical costs fall by $3.27 per dollar spent on wellness program, according to a report by National Institutes of Health. And putting such a philosophy in place can also help in recruiting, as millennials tend to be more focused on purpose than paycheck.

    So, how do you achieve this state of wellbeing in the workplace? She pointed to engagement—that act of fostering a commitment to work, the company, customers and a genuine connection to co-workers—as being one potential route.

    Wellness in Action

    According to a 2015 American Wellbeing Report done by Gallup, Ohio ranks 47th in the United States in wellbeing. Lurie identified several ways to build engagement and promote wellness that might help to improve this ranking, including:

    • Distribute an engagement assessment to your staff, asking them if they feel have the opportunity to do what they want; if their associates are committed to work; if they receive adequate recognition; if they have friends in the workplace, etc.
    • Do a “FitBit Challenge” that encourages your staff to get up and move.
    • Add a treadmill to one corner of your office, with a sign-up sheet.
    • Hold stand-up meetings for shorter meetings of no longer than 15 or 20 minutes.
    • Add a “Growth Opportunity” day to your company’s calendar. This is a day when staff will be given the chance to work on projects that inspire them. This is a good way to play to your employees’ strengths, their particular blend of talent, skills and knowledge.
    • Institute reading groups, which can help with stress relief.

    For comments or questions, you can reach Sunny Lurie at lurie@FastFocusCareers.com or via phone at 216-397-9900. COSE’s WebEd webinars are just one aspect of the educational programming COSE provides. View a list of upcoming webinars and other events that will give you the resources you need to grow your business.

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  • Next up: The Top 10 HR Mistakes Employers Make
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  • The Top 10 HR Mistakes Employers Make

    Presented below are 10 big HR mistakes you’re going to want your company to avoid. And continue your education on this topic by attending the “Top 10 HR Mistakes Employers Make” panel at BizConCLE on Nov. 1 (scroll to the bottom of the article for more information about BizConCLE.)

    We all make mistakes; it’s a fact of life! Unfortunately, it’s a fact of business, too. While there’s something to be said for learning from your mistakes, most of us can agree we’d prefer to avoid making them in the first place. For employers, some of the easiest mistakes to make can result in the some of the most substantial penalties, costs, and headaches. A business’s HR policies and practices might be setting them up for a high risk for fines, legal actions, or worse!

    At BIG HR, we understand keeping up with HR functions can sometimes feel like one of the most stressful and complicated elements of running a business—even though it’s one of the most critical components to get right.

    With that in mind, here’s a quick guide highlighting the top 10 HR mistakes most employers are making today and how to fix them.

    HR mistake No. 10: Inaccurate job descriptions

    No state or federal law requires job descriptions. But job descriptions can be helpful tools for both practical and legal reasons, including:

    • as a useful communication tool;
    • to help identify the right employees for a job;
    • To help in the interactive process;
    • to describe legitimate minimum qualifications; and
    • to help justify an employee’s exempt status

    HR mistake No. 9:  Legal vs. illegal interview questions

    The Equal Employment Opportunity Commission (EEOC) enforces laws that make it illegal to discriminate against protected categories of candidates. Those include age, race, color, creed, national origin, gender, disability, and genetic characteristics (this does not include state specific protected categories!) Avoiding illegal interview questions means not asking for information in these areas.

    HR mistake No. 8:  Failing to properly address and document performance problems

    Performance management is the foundation of performance excellence. The process includes setting clear and specific performance expectations for each employee and providing periodic informal and formal feedback about employee performance relative to those stated goals. For most organizations in the United States, performance reviews are used to support decisions related to training and career development, compensation, transfers, promotions, and reductions-in-force or employment termination.

    HR mistake No. 7:  Failing to implement a termination policy and procedure

    Failure to have a termination policy and procedure (in conjunction with a performance review process) in place not only makes firing an employee more difficult, it also makes the organization susceptible to unwarranted unemployment claims and/or wrongful termination lawsuits (by way of discrimination, retaliation, etc.)

    HR mistake No. 6: Failing to maintain proper authorization records

    Proper maintenance of authorization records is critical to defending against employment-related litigation. This includes:

    • reference checking;
    • drug testing authorization;
    • background checking authorization;
    • credit report authorization; and
    • employment verification authorization.

    HR mistake No. 5: Misclassification of employees

    Misclassifying employees can cost an organization thousands in back or overtime pay and/or back taxes. The two most common misclassifications small employers make are misclassifying employees as 1099 independent contractors and misclassifying employees as salaried and exempt.

    HR mistake No. 4: Keeping poor employment records

    Numerous federal laws require employers to create and retain various forms of employment records. Many of these requirements are dependent on the number of employees a company has. The laws typically impose civil monetary penalties for failure to maintain statutory records. In some instances, there is individual liability and criminal liability.

    Proper maintenance of employment records is also critical to defending against employment-related litigation. Employers can be sued for wrongful destruction of employment records under the theory of spoliation of evidence.

    HR mistake No. 3: Offering employee benefits and not ensuring compliance

    Offering employee benefits comes with responsibilities for employers. Offering benefits without ensuring compliance can carry hefty fines/penalties as well as bring about employment law suits. The following state and federal mandates automatically come into play once an employer begins offering welfare benefits to employees:

    • benefit administration compliance (SBCs, PDAs, SRAs, HIPAA, etc.)
    • ERISA compliance;
    • COBRA/state continuation compliance;
    • ACA compliance (notices, mandates and reports); and
    • FMLA compliance (if applicable).

    HR mistake No. 2: Not having an on-boarding/orientation process

    There are disadvantages of having a poor employee orientation of on-boarding program (or no program at all, for that matter.) For instance, your employee might provide inadequate service to customers. If your staffer leaves because of dissatisfaction, they could go to a competitor—and take your valuable information with them. Similarly, your company could be harmed if the employee speaks badly of it to others.

    HR mistake No. 1: Not updating your employee handbook (or not having one at all)

    Some businesses view employee handbooks as a “necessary evil,” but they are much more than that. A well-crafted handbook can serve numerous purposes, such as:

    • clearly articulating your company’s HR policies;
    • providing a view of your workplace environment and culture;
    • offering a helpful guide for employees with questions or concerns about their jobs;
    • serve as important documentation in the event of an employment-related lawsuit.

    Want to know more about the ins and outs of HR? Stop by the “Top 10 HR Mistakes Employers Make” panel during BizConCLE this year on Nov. 1. Click here to learn more.

    Caroline Schwerko is a long-time leader in the administration department at BIG-HR, which focuses on HR consulting and outsourcing. You can learn more about the company by clicking here.

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  • Next up: Small Business Relationships: The Wrong One Can Ruin Your Status as a Small Business
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  • Small Business Relationships: The Wrong One Can Ruin Your Status as a Small Business

    Receiving a small business status can be valuable when it comes to federal contracts and other benefits. Make sure your small business status isn't in jeopardy as a result of your business relationships.

    In federal government contracting, small businesses that have been awarded the status by the federal government as a “small” business are eligible to receive federal government contracts that are specifically “set-aside” for small businesses and other benefits designed to help them grow and prosper.

    But, your status as a small business may be destroyed if your business “affiliates” with another business or even a person; and, that affiliation results in revenue and employees that exceed the small business size limits the government has set.Regulations give some definition around when the federal government considers a small business to be affiliated with another business or person. The definitions are not clear or actionable; but, instead are flexible and depend on a number of factors. When partnering, forming joint ventures or even bringing on new owners and leaders, a small business needs to be sure it does not create an “affiliation” and by doing so destroy its status as a small business.

    Generally, a small business is considered affiliated with another business when:

    • One of the businesses controls the other;
    • One of the businesses has the power to control the other; or
    • A third party controls or has the power to control the small business.

    Whether control is actually exercised does not matter for the purpose of defining an affiliate. Instead, the government looks to determine whether a business or person has the power or authority to control the small business. Affiliation may occur when control is either direct or indirect and, it does not matter if the entities are organized for profit or not.

    The definition of control includes the traditional notion of managing or otherwise controlling a business but it also includes “negative” control, which is the ability of a person or entity to prevent or limit an organization’s actions. For example, when by-laws afford a minority shareholder the right to block action, the shareholder has “negative” control.

    A small business will likely be considered an affiliate if one or more officers, directors, managing members, owners or partners of another business controls or manages the small business.

    Similarly, if a small business has the identical or substantially identical interests to another person or another business, the federal government will likely consider the entities to be affiliated. The interests may be either business interests or economic interests. For example, family members or investors with common interests in the success of the small business are considered to have an identity of interest. Also, businesses with common investments, contractual relationships or that are economically dependent on one another are considered to have common interests and therefore may be considered affiliates.

    The government may also determine a small business is affiliated with another business if another business or person owns or has the power to control 50% or more of a small business’ voting stock. Even if stock ownership is less than 50%, if a person or business owns or has the power to control a block of a small business’ voting stock, which is large compared to the control of other stock, the small business may be considered affiliated with those owning or controlling that block of stock.

    However, these arrangements do not mean that a small business is definitively considered an affiliate of another business as long as the businesses can clearly demonstrate that the two are separate and do not control one another.

    When a small business agrees to work with another business to pursue a defined venture by combining all or some of their effort, property, funds, skill, or knowledge they are considered a joint venture.

    Depending on the circumstances, the government may determine that a small business is affiliated with the other business in a joint venture and, if so, the small business will lose its status. For example, if any member in the joint venture seeks SBA financial assistance in connection with the joint venture, the entities in the joint venture are considered affiliates; and the small business may lose its status as a small business. A small business that is part of a joint venture may be considered an affiliate of the other business in the venture if the joint venture pursues more than three federal government contracts over a two-year period.

    On the other hand, joint venture members will generally not be considered affiliates if each member is a small business as defined by the size standard for the procurement the joint venture is pursuing. However, the government may look to the combined annual receipts or employees of small businesses that make up the joint venture to determine if the joint venture members meet the size standards for the procurement.

    A joint venture between a small business protégé and their approved mentor business does not result an affiliate relationship if the government approves the joint venture agreement prior to contract award and the joint venture has not reached certain dollar limits.

    As for merging with another company, the government, depending on the situation, may determine that the agreement to merge may establish affiliation.  However, agreements to negotiate the possibility of merger or an acquisition or stock sale that will occur at a later date are generally not considered affiliation.

    In the prime-subcontractor context, if a subcontractor performs vital aspects of a contract or task order or, if the prime contractor is unusually reliant on a subcontractor then, the two businesses may be considered joint venture partners, not a prime-subcontractor; and as a result, they may be affiliates.

    Since the federal government looks at the “totality of the circumstances” when determining whether two entities are affiliates, if you are a small business you should the circumstances of your relationships with other businesses, advisors and investors. Doing so, will help you assess whether the government will consider your business to be affiliated with another entity and thereby possibly destroying your small business status.

    For example, consider the following questions:

    • Do the owners of your small business also own or invest in other businesses?
    • Does your small business management team also manage other businesses?
    • Does your small business share key personnel or even employees with other businesses?
    • What is the nature of any contractual relationship your small business has with other entities or individuals: Joint venture? Subcontract? Advisors? Investors? Owners?
    • Does your small business share functions such as finance, contract management, HR, IT, or legal with another entity?
    • Does your small business share facilities or equipment with another entity?
    • If you are in a prime-subcontractor relationship, what is the percentage of work that each party is performing; how are administrative responsibilities like contract management and invoicing shared?
    • If pursuing an opportunity with a teaming partner or joint venture partner, what are the size standards for that particular pursuit?

    It’s important for a small business federal government contractor to think through its business relationships and the implications of those relationships.

    As the famous management consultant Peter Drucker once said: “[B]usinesses grow through alliances – all kinds of dangerous alliances. Joint ventures, and customer partnerings which, by the way, very few people understand.”  Peter Drucker, management consultant, author, educator.

    And remember, for a small federal government contractor, these alliances may be particularly dangerous because if your alliance results in what the government considers to be a misrepresentation of your status as a small business, the government proves Drucker’s statement on the dangers of alliances by pursuing:

    • Debarment and/or suspension of the business and individuals involved;
    • Civil False Claims Act violations, which include fines and penalties against the business and individuals involved; and
    • Criminal violations that include fines, penalties and incarceration.

    Maragret Cassidy is principal at Cassidy Law. Learn more about the firm’s capabilities by clicking here.

     

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