The root cause for that friction is a lack of transparency, specifically around the fee structure in the industry and how it impacts the work being done for organizations.

For context, there are two primary fee structures in the recruiting industry:

1. Contingency fee: Recruiters typically get a percentage of the candidate’s first year of compensation. That percentage can be around 25-30%, sometimes up to 50% depending on the position.
2. Retainer fee: There is a flat fee to hire. Organizations will pay recruiters a retainer before the search services for professional placement have started, a second payment when a shortlist of viable candidates is provided and then a final payment once a candidate is hired.

On the surface, neither of these fee structures is inherently malign, but the lack of transparency around fees and the way they impact how a recruit interacts and works with an organization is definitely a problem.

Recruiters should share all their potential candidates with you, but that’s not in their best interest. Without significant transparency in who exactly recruiters are screening or even the scope of their work, there are a lot of questions as to what’s being done and what organizations are even paying for.

Candidate exclusivity is not always a guarantee either, and that can lead to major problems for organizations in highly competitive industries.

The reality is recruiters should be incentivized to send a candidate to the best culture, but they are more often incentivized to send a candidate to a company that pays higher, because that means they’ll retain a higher fee. The fee structure creates a domino effect of issues.

When recruiters only get paid for who they place in organizations, many take on more contracts or funnel more candidates to organizations without taking the necessary time to figure out whether the candidate is a perfect fit. And it goes without saying — bigger clients with bigger searches and bigger fees will prompt recruiters to put in more time and effort. It’s not always easy to find recruiters committed to your organization and committed to doing the best work.

But all this isn’t to say the fee structures need a complete overhaul or there is no place for recruitment firms and search agencies. It means organizations will have to demand better outcomes and see those outcomes are possible.

Working with recruitment firms

Partnering with a reputable recruitment firm should provide a company with more than just a resource for finding and vetting candidates. The right search firm should provide strategic, organizational and financial benefits to its clients — whether it’s direct competitive advantages, avoiding common pitfalls and missteps in hiring, providing counsel on onboarding and hiring processes, and lowering the costs of open positions within an organization.

The problem many organizations run into is knowing how to vet a recruitment firm to know whether it’s the right fit for the job.

First, ask the agency if it can and will share its process for defining and understanding the criteria for a perfect-fit candidate. If the agency doesn’t have a process, it is not the agency for you. How can you expect someone to help you find top talent if they don’t understand what exactly that means for the organization and what that will look like in potential candidates?

Second, ask the agency if it can and will share with your organization the work that is being done on a daily basis. Figure out how transparent it is willing to be about its process and the candidates it is working with. Ask the agency how often you’ll hear from it and even how many other searches it is working on within your industry. Knowing what questions to ask and determining how transparent your recruitment firm will be about its process will indicate whether you’ll see consistent results.

Read the full report here