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The problem with PSLs (Part II)

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If you read my last blog, you’ll recall I was waxing lyrical about the problems with Preferred Supplier Lists. Specifically, I made the point that too often these are simply a means to get recruitment companies to charge less.  In return, I suggested, the client runs the risk of getting an inferior service.  Essentially, if they are a means of reducing our income and putting us out of business so that in-house teams can rule the roost then that’s hardly an incentive to take part, yet too many recruiters are in thrall to procurement, pretending that they’ll provide the same high quality service as previously for less money. 

There are lot of very good in-house teams and they recognise that no-one has a monopoly on the recruitment solutions required to fill their vacancies.  The best ones work closely with a range of suppliers, from employer branding and creative agencies to recruitment firms such as ours. There should be no need for any battles between in-house recruiters and external agency teams: surely we should be on the same team, working together to achieve mutually beneficial objectives?

One of the issues is an in-house recruiter only has one company to offer candidates. Clearly, very few people actually stay in one place for their entire careers, so once they have been recruited all the in-house team can offer is career development and promotion.  But there are only so many promoted posts and internal development opportunities available, so people will look to head for pastures new, which is where good recruitment firms can play a vital role. 

Moreover, for a candidate, unless they specifically wish to work at the in-house team’s firm (and how many of you want to work only for one company beyond all others?), the in-house recruiter cannot offer them what they really want, which is choice.  A good recruitment firm, however, ought to be able to offer them choice and variety, plus the opportunity to move on when the candidate wants to explore pastures new. That’s where a great recruitment consultant earns his or her corn: not by (as some think we cynically do) encouraging their candidates to keep moving so as to get additional fees, but rather by taking a genuine interest in the candidate’s career, providing advice (e.g. don’t go there, they have just lost a contract/have a poor manager/don’t promote from within, etc.) and guidance (e.g. you really don’t want to be seen as someone who changes jobs every 18 months, there is a good company that will be expanding next year so bear with me, etc.).

This may seem very candidate-centric, but in fact there is a very good reason why our clients, the recruiting firms, ought to work harder to develop relationships with the best external rec-cons.  This is that if you consider the amount of effort, time and money it takes you to get rid of a poor hire, and then you put that same amount of effort, time and money into getting a good hire in the first place, you wouldn’t have to get rid of so many duds in the first place.  Win-win I believe sums it up.

Consider this: the Recruitment & Employment Confederation (REC) has calculated that the cost to a business of a poor hire at a £42K salary is £132K. This is accounted for by lost revenue, changes to the culture, people leaving because they don’t want to work with the new person, etc.

This brings me back to my previous blog and the problems with PSLs and, in particular, the fact that sometimes they appear to be designed as money-saving exercises rather than principally as a means to improve the quality of hires a firm makes. Reducing the money paid to a recruitment agency surely makes it more difficult for them to provide a quality service, so what can we do to change things?  Well, here is a suggestion. It’s no more than an idea just now, but I’d love a few procurement folks to consider it.

Companies need to motivate recruitment agencies to find and recruit great people. Rather than expect us to do this on a shoestring, the whole model needs to be looked at differently.  In fact, we need to change it all together. Don’t say that the starting point is 10% for first past the post.  Instead, pay us 5% for the start date but then pay us 15% once the candidate has stayed beyond, say, a year and a half. That extra 15% will be a lot less than the £132K it costs when things go wrong. In addition, it gives you, as the employer, time to get some ROI before paying the slightly larger recruitment fee. The other benefit here is the agencies consultants will hang around longer (there is a fair churn in the recruitment industry) to collect their “legacy commission,” so retention and therefore service/business continuity will also happen.

Alternatively, give your preferred recruiters a retainer and then pay them for future success and retention (and perhaps even for internal promotion for that candidate, which proves that he or she has made a real difference).

Recruitment is a good business sullied by some cowboys. They don’t do clients, candidates or other recruitment firms any good. This needs to be an industry that is not tainted by dubious working practices but instead is recognised for the quality service that most of its practitioners deliver.  That way, we won’t have to worry about PSLs, because quality service will be recognised and so will the price required to deliver it.

Chris Peace, MD, Peace Recruitment


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