Recruiter Incentives: Balance Rewards to Sustain Performance, Quality

Performance-based incentives for in-house recruiting professionals improve recruiters’ performance—in most cases—except when the incentives produce detrimental behaviors.

That was the conclusion of a heated discussion among senior recruiting managers that took place during a September 2012 conference in the U.K., according to a brief published by Oasis HR, a U.K.-based recruiting firm that helped facilitate the debate.

Despite divergent opinions on the topic, Oasis founder Jeremy Thornton said common ground was reached. Generally, it was agreed that internal recruiters should receive incentive bonus, but only if the bonus is based on measures that evaluate quality of candidates and hires, as well as speed (that is, time to fill) and quantity (for example, percentage of fills).

Safariland Vice President of HR Adam Goldman understands why recruiter incentives trigger contentious debates. Goldman, whose company is a Jacksonville, Fla.-based provider of law enforcement and security products and services with approximately 1,700 employees, has experienced difficulties in the past when using incentives with staff recruiters. He reported that some performance incentives resulted in speedier, but lower-quality hires.

“Be careful what you measure,” warned Goldman, who subsequently revamped his approach to evaluating his recruiting staff’s performance. Today, he measures their performance on multiple factors, including cost-per-hire, time-to-fill and quality of hire. To evaluate quality, Goldman said, he tracks turnover in the first 90 days, as well as in the first year; he also evaluates the 30-, 60- and 90-day performance reviews of new hires.

A Clash of Cultures

The use of incentives marks a common recruiting-staff consideration, because many recruiters are hired into companies—and into the HR functions within companies—from external recruiting or staffing agencies.

Recruiting agencies tend to foster a “very different set of behaviors” and organizational cultures that are “intensely focused on sales and sales performance,” noted Thornton. Understandably so; after all, organizations and their on-staff recruiting managers hire recruiting agencies to produce results. When motivating external recruiters to produce better results, however, “many employers think there is only one incentive that works—jacking up the fee,” explained Michael Hard, CEO of BountyJobs, a New York-based online vendor management system and marketplace.

Although Hard and Thornton agree that the “sales performance” mindset prevails at many traditional recruiting agencies, Hard cautions that there are better ways to motivate external recruiters.

Traditional HR functions operate with a different mindset. “HR tends to be a relatively quiet environment,” said Thornton. “People have their heads down and frequently communicate via e-mail. If you put a newly hired recruiter from an agency in there, this highly energized individual who sometimes stands up at his desk and yells is going to stick out like a sore thumb. It’s quite often a clash of cultures.”

This poses a dilemma for many HR managers. How can newly hired recruiters accustomed to performance incentives based on the speed and quantity of their hires be integrated into an HR function and its existing compensation structure without losing their competitive edge?

Some larger companies address this challenge by placing the recruiting function outside HR (reporting to a chief operating officer, for example) and applying a more sales-based incentive compensation program to the recruiting professionals, Thornton noted.

Many companies use recruiter incentives, which should be managed and monitored carefully. When recruiting incentives are mismanaged, noted PricewaterhouseCoopers Director Steven Slutsky, one or more of the following side effects may occur:

• Recruiters generate and/or push through marginally qualified candidates to get incentive pay.
• Recruiters may ignore key administrative or other duties to focus solely on the placements.
• Recruiters create a culture of competition that fosters negative behaviors.

For example, Thornton said he has seen situations in which internal recruiters disrupt the work of line managers by constantly pressuring them to hire their candidates.

Behavioral Balance

To avoid these pitfalls, Slutsky recommends that HR and recruiting managers consider two leading practices when putting in place recruiter incentives:

• Requiring otherwise acceptable performance in all job responsibilities before making payouts for production.
• Instituting a quality factor on production, such as candidate hires (for candidate-generation metrics) or hires that remain employed for at least a specified time (for hiring metrics).

These steps are important, agrees Goldman, who also points out that in-house recruiters should not become mere “traffic managers” for external recruiting agencies. “They need to have some responsibility and ownership over quality, cost and delivery,” he asserted.

One way for internal recruiting managers to improve the quality, cost and speed of delivery when working with external headhunters is to rethink the notion that higher fees represent a cure-all.

“First, set a fee that’s in line with the market—no higher, no lower,” advised Hard.

Second, be crystal clear on your timing needs. “‘ASAP’ is not much guidance, especially when you know there’s a week turnaround between your phone screen and the hiring manager interview,” Hard noted.

Third, be responsive. “Great candidates are a precious and rapidly vanishing resource for an agency, and yours isn’t the only job they’re working,” Hard added. “If you take three to four days to give them feedback or reject candidates without guidance, why are they going to invest time working on your job?”

While money, in the form of performance incentives, can help motivate all recruiters, these incentives should be applied in a balanced manner that produces ethical behaviors with minimal side effects.

Goldman stressed that his recruiter incentives are not “direct, one-to-one measures and rewards.” Instead, Safariland recruiters earn merit increases and performance bonuses based on a blend of performance measures. This approach helps keep the incentive debate civil and productive.

Eric Krell is a freelance writer based in Austin, Texas.​