Compensation Plans for Your Recruiting Firm

QUESTION: What do you recommend in regards to compensation plan when hiring associates?  How do we find associates, full desk recruiters? – Ann, IL

ANSWER: I will give you a framework for that compensation plan so that people on the call can benefit, like I said, from it too.

With you as the billing manager, if you hire search associates in the role of finding and identifying talent for the openings that you have,

I want to pay them a base salary, depending on where you are from $25,000 to $35,000, and 5% of the first $30,000 that they bill in a quarter, compounds, meaning if they have two $15,000 fees, that is . . .

5% of the first $15,000 and 5% of the next $15,000, and

10% of between $30,000 and $45,000, total fee, not split, and

15% over $45,000 in the quarter, and then there is a reset every quarter.

Their percentages are a little bit lower, but it is on the entire fee.  So if you double those and paid it on half, you would have 10%, 20%, and 30%.

You might say, why not split it out in half and call it a split?  I used to and I had a lot of resistance from my search associates, especially once their talent was engaged and they were good at what they did for a living, what would happen is they would whine to me that they felt they were doing more than half the effort, and bluntly, they were.  When they got good, they could really manage the whole process.

This really pivoted in 2002 and 2003 when we came out of the recession and I had just changed the compensation plan to be half the commission rate on the entire fee and that argument went away.  Psychologically I just think sales people want to get paid as much as possible on the full commission.  That does not apply if you have two 360-degree recruiters splitting something, but when you have the associate level, which I am going to train you guys on in depth on how to install that into your business, that is a framework to give you some ideas.

As for hiring full desk recruiters, you do not want to hire full desk recruiters.  No.  No.  That is a 7 to 10 to 1 success rate, meaning you have to hire 7 to 10 to keep 1.  The model I teach in my coaching programs is probably closer to 3 to 1 to keep somebody a year or more successfully, but you will not lose any money on the other 2.  I just have not seen it get much lower, but in effect, we are increasing the effectiveness over the norm in recruiting by 300%.  The interview process of on-boarding is all part of what you have invested in, and I am going to give it to you in a way so you do not get overwhelmed.QUESTION: I am going to take 2 to 3 months off during the summer and travel extensively.  How can I keep the business running and sustain the relationships with key clients?  What is your best advice?  – Lisa, San Francisco

ANSWER: This is one of the main reasons you want to build a recruiting firm.  Even a small one with a couple of associates.  I have a client in my Peak Performer Group that goes to Spain for a month.  I know she has a really good assistant, and she has a recruiting associate that recruits on her stuff and she introduces her to her client so that her interaction with the client while she away is minimal, but she builds up some openings for some people to work on.

In the absence of having this set up in your office, and I do not know if you do have, Lisa, because you do not mention if you do have anyone working for you.  If you are going to take off 3 months your business is not going to run as smoothly as when you are there, if you are going to truly be vacationing, or just being in another city for three months.  My question to you is even if you had really good clients who loved you, who called you every two weeks, you know if you have a portfolio with a handful of clients that called you and one of them would call every two weeks with an exclusive opening, how are you going to get candidates on those if you are traveling extensively?

So my advice to you would be if that is really a goal of yours, and I love that it is, then you need leverage in the form of that search associate role where you have somebody just recruiting on your openings.  There are ways to do that virtually now with the technology we have, and there are also ways to do that on a part-time basis as long as you put the right accountability system in place.