People@Work

Commission-based recruitment system drives wrong behaviour: David Windley, CEO, IQTalent Partners

Chitra Narayanan | Updated on January 02, 2020 Published on January 02, 2020

A professional services model serves needs better, says top HR professional

During the last decade, the recruitment industry has got disrupted in a myriad ways. For instance, the advent of social media and platforms like LinkedIn have forced search firms to reinvent themselves. New business models have emerged. In the US, IQTalent Partners is attempting to disrupt the space through a new fee model. In a freewheeling discussion, David Windley, CEO, IQTalent Partners, who is also Board Chair for the Society for Human Resource Management (SHRM), and a former CHRO at Yahoo!, talks on recruitment trends and more.

What was the thought behind setting up IQTalent Partners?

The idea was to bring a professional services model to recruitment that does away with the traditional commission model. Our model is a bit like the McKinsey or other consulting firms model. The traditional commission-based recruitment system drives wrong behaviour as it is very transactional. Our idea was to change the model, and not chase the commission, but be a partner and augment in-house talent recruitment teams in companies.

More and more companies are moving recruitment in-house. Why is that happening and how does that impact search firms?

This trend happened in technology firms first where the belief is that talent is a core competency for a company. It is a critical asset.

The second point is that the economics makes better sense to hire a recruiter as an employee rather than pay an agency. If you do some quick math, traditional firms charge 33 per cent of a person’s annual pay as commission.

It takes them just three hires to make as much as the person they place in a company. It makes no sense for a company to pay so much. Microsoft, Yahoo, all the tech companies I was at, built in-house executive search teams.

But these big tech companies have volumes. Can a small company afford to build an in-house team?

That’s where our company comes in. The idea is, if you are a smaller company and don’t have big volumes of hires, you can rent an executive search service at an hourly rate.

But if the time taken for finding a candidate is long, wouldn’t an hourly rate be more expensive?

A typical executive search takes about 90 days. If I break down the hourly rate, it is still a lot cheaper — it will be a third of what the commission-based model would cost. Besides, the time taken for a hire is now shrinking. With big data and AI, partners are finding matches early. Although AI-based models are still young and data is not big enough, over time, it holds big promise.

What are the other big changes and disruptions in recruitment?

I see demand for diversity in the workplace increasing. The way it impacts is, we need to provide good supply of diversity in our candidates. In the US, it is right now women and ethnic minorities. But every market has its own unique diversity requirements. A big challenge in recruiting is that the skill gap is tremendous and widening. It is getting harder to find people.

So, as a recruiter, how are you addressing that challenge?

First we would look at people who have got the skillsets and experience. Then we look at adjacencies. To give an example. A data scientist is the most sought after candidate and fastest growing job category. Ten years ago, there was no such thing as a data scientist. Since it is tough to find an experienced candidate, we look at what it take to be a good data scientist and then look for those competencies. We look at people who have majored in maths or have a STEM background.

The other way we are looking at finding the right candidate is by increasing the geography of search. We tell tech companies in the Bay area to look at Austin, Texas, Nashville, Salt Lake City, Chicago and other places.

What are the other ways you are expanding the labour pool?

Wearing my SHRM hat, in the US, we are advocating widening the labour pool by looking at people who have been incarcerated. There are a number of people who have been to prison as drug use got criminalised. This set of people are not in the employment system as an incarceration record immediately disqualifies them. At SHRM, we believe that people deserve a second chance. They were in jail because of a dependency problem and not because they were bad. And we have been advocating with employers to look at this pool. With tight labour markets, there is a need to open new pools of talent. And looking at veterans (defence personnel) is another big effort with SHRM.

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Published on January 02, 2020
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