I was at a cosy little launch party last night, tucked away upstairs at one of my favourite craft beer haunts. The company had started out sharing office space with my own business but had quickly outgrown the co-working concept and moved into their own digs. Speaking with the company owner, he told me how they were already running out of space again and had quickly grown to a team of nine, with more to come.
Don’t worry, readers, I didn’t let you down. After a decade of recruiting, I naturally asked him how he had found and hired so many so quickly. I was awaiting the familiar grimace, with mention of hordes of agencies firing CV’s at him and him making expensively confused hiring decisions based upon which agency pushed hardest.
But no. In fact he looked taken aback at the question, and said that they were all from recommendations from within the networks of existing staff members. As if that were the most normal and obvious source of hire with the best likely outcomes.
The thing is, he didn’t even realise how right he was. There’s been much said over recent years about the power of employee referrals and how they are far and away the top source of hire for companies. In this oft-referenced article from Dr John Sullivan, he reveals some compelling statistics that point to employee referrals being the number one source of hire for hiring volume, quality of hire, time to fill, and employee retention.
Great for HR and in-house recruitment teams.
Terrible for recruitment agencies, something not lost on Xero CEO Rod Drury. After experiencing two disastrous hires at an executive level recently, the Herald ran an article titled Xero changes recruitment tactics following departures:
“The mis-hires have prompted Xero to rely less on recruitment agencies for top executives and more on its own networks and shareholders…”
The article itself is actually quite disingenuous. Xero have long made it clear that they’d rather avoid using agencies and have offered their staff referral bonuses of agency-fee-proportions for recommending people from within their own networks. The stuff about recruitment only forms a lesser part of the overall article which is actually about their capital raising and impact foraying into the US market. But, as we all know, everyone likes to take a pop at recruiters, and nothing gets as many clicks as an article promising to take pot-shots at recruitment. And clicks are the lifeblood of The Herald, with print revenues plummeting daily.
But still, the message is clear, and it’s gathering in volume. I visited a corporate client last week who have had great success with one of their Sales Managers referring his mates into sales roles, but the well has run dry. In their own words, that particular channel had “run out of friends to refer” so they wanted the other Sales Managers to cotton on to it and behave the same way.
But what role should all of the agency recruiters out there take in this? As is clear from comments above, employee referrals are bad for agencies. They are the number one way that clients can avoid having to pay for agency fees. Whilst in-house recruiter performance is measured on metrics like time-to-hire and quality-of-hire, areas where employee referrals excel, agency recruiter performance is measured on revenue generation and fees billed. Yet the best recruiters out there spout rhetoric about wanting to partner with their clients, add real value to recruitment advice, provide a true consulting service.
Clearly, then, genuine advice should include consulting around the benefits of robust employee referral programmes. But with the prevalent business model in recruitment based around charging referral fees contingent on making a successful placement, on a no-win no-fee basis, there simply isn’t room for providing this kind of advice. Better to keep flicking off CV’s and hoping one will stick, while quickly changing the subject if clients start talking about employee referrals.
Or, perhaps, changing your model and charging for all consulting advice, not just when we get lucky with the right CV. Now there’s a thought.