Why tech companies are (increasingly) not paying recruiters

Momentum Works has been hiring aggressively lately. When I ask my friends where we should look for good people – the answer varies, but it’s never to engage external recruiters. They complain that the candidates given to them are not up to the mark. In some cases, the candidate’s profile does not even match what the hiring firms are looking for!

How about the candidates? None of my acquaintances I spoke to is confident that a recruiter could get them a job, let alone a good one. The general sentiments are: (i) good people can rely on their contacts to get a job; and (ii) job openings that go to recruiters are usually the difficult positions that a company can’t fill.

In short, candidates do not trust the recruiting firms’ capability to find them a good job.

Recruitment firms have become the recruitment tool of the last resort – for both the hiring company and the hiring candidate. Why is that so?

Momentum Works hustling at a networking event to get new recruits

The information gap between candidates and companies is closing – fast.

Recruiters previously thrived when there was imperfect information between hiring companies and candidates looking for a job. Its’ modus operandi was two tiers: (i) Sell a “great” company to the candidates, whilst keeping the company details hidden and (ii) Supply “suitable” candidates to the company for reviews. The information gap is closing fast.

The advancement of social media and online communication tools, more professionals from different companies are linking up and communicating much more than ever before.

Companies such as Linkedin are leveraging on its social platforms to link up companies with candidates. This makes the internal referral process easier and more transparent. When I internally refer someone, instead of trying to explain in detail what he has done, I just need to share his or her LinkedIn profile. This is particular useful for the tech industry recruitment where the experience of candidates can vary or are harder to describe in a predetermined CV format.

Even the Singapore government is getting involved. They have deployed significant resources over the last few years to revamp the national job portal – The Jobs Bank. I used it recently and it’s a pleasant surprise. Once you upload a job posting, the portal will recommend some suitable candidates – based on key words and background. I spoke with someone who was working on this project and he told me that the government is serious on helping to expand and improve the talent pool in Singapore. They even have tools to help candidates change careers as they see this as an increasing trend.

Recruiters are still stuck in the middle

Whilst the information gap between candidates and companies are closing fast, the information gap between recruiters vis-à-vis candidates and companies have not changed. Recruiters are still being fed information that companies and candidates want to tell them.

Companies’ instruction given to the recruiters for specialist hire will always remain vague. Unless a recruiter is expert enough to drill deeper into the possible career experiences that may be a good fit for the company, the recruiter would be shooting in the dark.

On the other hand, some candidates may see the recruiter as the free agent to do their biddings.

One recruiter told me that he has seen some candidates asking for a 30% pay rise from a potential company, even though his experience was very limited. When the recruiter tried to explain to him that it’s not reasonable the reply was “You are just the agent. Just do what I say”. Not a very smart thing to say, but this is what recruiters are faced with today as well.

To add on to this predicament, recruiters’ incentives are not changing. They are still remunerated only when they onboard a successful candidate. Also, the remuneration is a percentage of the successful candidate’s salary. This means that a recruiter will spend a lot of time cold calling and pushing candidates to interview with a company with the hope that one of these candidates will join the company.

Worse, in many firms, the people who are actually working their arse off making deals happen only make a small percentage (10%-20%) of the commission. The rest goes to the huge overhead and company profit. No wonder good recruiters either go on their own (which is perpetuating the same problem) or leave the industry altogether (which is a big pity).

I’ve had recruiters calling me asking whether I’d want to relocate,  lead a team, or move to a totally different role, without trying to find out more about what I was doing and what I wanted to do. Of course, I was put off and hung up the phone.

No difference from a desperate dating agency.

All is not lost

To continue the analogy of the dating agency, all is not lost. Whilst the online dating apps are taking away huge chunk of businesses away from the dating agents, there are still a handful of specialized firms catering for specific needs.

I expect the same to happen to recruitment firms. There are still a lot of opportunities out there for recruitment firms – but they need to identify that niche, and also evolve the dialogues that they are having with candidates and companies.

Actually we might have some ideas – if you are interesting in the same time, do drop us a note ([email protected]) and we shall talk!

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Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed in our blog, please drop us an email at [email protected] and let us know how we can help.