02 May 2011

‘Sorry, they are already on our database’: The lazy corporate rip-off

A couple of weeks ago I received an email from a consultant (thanks, Ben) which perfectly summarises one of the dilemmas that is increasingly being faced by agency recruiters everywhere.

Ben wrote:

‘Recently clients have been increasingly insisting that if a candidate is on their system - whether they been there for 6 months or 6 years they have ownership of the candidate. There have been a number of times recently when I have sent through a candidate that is on their system and they refuse to pay the recruitment fee. I would like to walk away from these clients but they are some of the biggest in the industry and I can't afford to.'  

Frankly, I think what Ben describes is outrageous client behaviour, although sadly all too common.  

It's a lazy rip-off. And that's being kind. 

The client is attempting to null the recruiters' terms of business simply by saying ‘we have that candidate registered with us so your referral of that candidate doesn't count'. 

Here's the client thinking implicit in this attitude: 

a.    It doesn't matter if we haven't spoken to the candidate about this job

b.    It doesn't matter if we haven't ever spoken to the candidate

c.    It doesn't matter how long ago the candidate's details were registered on our database

d.    It doesn't matter how we acquired the candidate's details

e.    You cannot view my database to check what I am saying is true

f.     I don't care how much effort you invested and skill you displayed to find this candidate or get them interested in our job, they are already on our database! 

Your chance of generating a profitable stream of fee income from these sorts of clients is low. If you do manage to generate a fee it's unlikely to be a fee that makes up for all the work you have done to refer all the other candidates that the client has subsequently claimed as ‘theirs'. 

The biggest problem, apart from the lack of adequate financial return for your skill and effort, is that there is no incentive for the client to do anything different. 

Just imagine it for a minute; the client has an urgent vacancy but a shortage of time and a poorly constructed or inadequately maintained database of candidates collected over the years. They also have a recruitment budget that is inadequate for the consistent payment of agency fees.  

What is the client tempted to do? 

I am guessing something like this goes through the mind of the client: 

'I'll email out this job spec to five agencies who I know have good databases and invoice on a success-only basis. I'll tell them it's urgent and I need a shortlist of three candidates within 24 hours.
Knowing how agencies always send one or two extra candidates, I should get about 20 resumes by the end of tomorrow. I'll match them against our database and claim all those candidates who I can find on our database as our candidates.
I'll then interview the best 3 or 4 of ‘our' candidates and hopefully find a candidate worth hiring.
You beauty! Minimum time investment by me, I fill the job quickly and no recruitment fee. I cannot believe recruitment agencies do all this for free!
And if any agency complains then I'll just threaten to never use them again. That should put them back in their box.'
Now that's doing a disservice to the many reputable and ethical corporate recruiters out there but unfortunately there are many corporate recruiters, for whatever reason, who decide to take the easy option and proceed down the path that has frustrated Ben, and many other recruiters like him. 

One thing's for sure - nothing will change unless you take a stand.  

Clearly, the corporate recruiter is on a very good thing at the moment and is highly unlikely to give up their free-loading behavior of their own volition.

Here are some suggestions about how you might tackle this issue with any client who is refusing to acknowledge payment of a fee due to the ‘they're on our database' defence:  

1.    Sack them as a client and spend your time finding more ethical and profitable clients
2.    Insert a clause into your organisation's terms of business to explicitly state that the ‘on our database' defence in no way negates the obligation to pay your agency a fee for any ethically referred candidate who is hired by the client.
3.     Ask the client to confirm (ideally in writing) that they have already considered all their ‘internal database' candidates and as a result any candidate you refer who is then hired, triggers a fee regardless of whether they are subsequently ‘found' on the client's database after being referred.
4.    Include in your terms of business a special clause noting that all candidates that you refer are subject to a ‘service' (not placement) fee of, say, $10,000 plus GST that is applicable if a referred candidate is subsequently ‘claimed' by the client as ‘theirs' and hired. No guarantee applies to this fee.
5.    Go over the head of your client and write a letter/email to your client's direct boss (or even the CEO) stating your concern and dissatisfaction about that type of practice and ask for their intervention to put a stop to the ‘they're on our database' defence being used by representatives of their organisation.
Number 5 above, would obviously be your last roll of the dice because in the (strong) likelihood that you fail to receive the outcome you are seeking then your client is going to know about your ‘going over their head' approach and dump you.  

But at that point what have you really got to lose? 

Just don't do nothing This only perpetuates and normalises this increasingly common corporate behavior that I find unethical and a lazy rip-off.

What are you going to do about it?

20 comments:

  1. Voice of Reason2/5/11 11:58 AM

    There is no shortage of scurrilous ex-agency internal recruiters out there waiting to re-cycle all the dirty tricks played on them. Watch out for them contacting your candidates directly on LinkedIn too. Take a leaf out of the OPEC book. If you want to raise your average ROI from a client then restrict supply while this practise prevails. There is nothing to gain from loading up their database further except a reputation as a naiive fool. Above all, remember that no-one remains friends after litigation so if you draw your sword, be prepared to spill blood.

    ReplyDelete
  2. I have received this from fellow recruitment companies themselves, particularly the Sales recruiters. I once interviewed a fantastic sales person with specialist skills, knowledge and contacts in a certain sector, and he was interested in getting into recruitment. I determined he had all the right attributes and then presented him to a recrutiment company looking to grow their Sales Recruitment team.

    The response: They had the candidate on their database as a Sales candidate, so wouldn't pay a fee for me referring him, even though they had failed to approach their own registered sales candidates about recruitment opportunities.

    As a result I only ever refer experienced recruiters to this firm now and they miss out on some sales people with excellent potential as recruiters.

    ReplyDelete
  3. Ross another great blog post.

    As work with a lot of internal recruiters as you know and I hear these stories from time to time in how they treat agency recruiters in this situation.

    I certainly think it's not ethical and don't support this in any way but can I put a slightly different slant on this.

    Firstly I agree with your approach in tightening the conditions of engagement but is there another issue here?

    I would suggest if the internal recruiter or corporate is doing this then this doesn't seem like the ideal client/relationship. I see on both sides there is a lot of talk about partnership, extension of your business but often the words are not supported by the actions (on both sides) so maybe the real issue here is this is not a valued relationship hence it's up to the parties (this is key for the agency recruiter) to clearly Devine the working relationship and what's expected of all parties.

    Surely if it's a valued relationship then this would never happen?

    ReplyDelete
  4. Yes MR client, they are on your database, and mine too - as are quite a few people we both know - have a nice day

    ReplyDelete
  5. I used to get this problem a lot in London. This is what I now do.

    I a) confirm with candidate that they have not previously been referred to the client within the previous 12 months prior to sending and b) do not supply the candidates name (only a candidate reference number) until the client requests an interview (and never contact details until offer). I also have my terms to reflect this.

    If the candidate was on their database and if they had done their job they would have already requested to interview him directly. As my terms reflect, that by interviewing via me they are liable for a fee for a successful placement, whether candidate in on their database or not.

    Don't have this problem now.

    ReplyDelete
  6. Hi Ross,

    Great post. I think it is all too easy to get angry at the client and try to do almost anything to make them pay.

    I strongly believe that in these situations, your approach is in direct proportion to your "relationship" with the client.

    If it is a client that you make several placements with every quarter and every once in a while you lose a candidate because the candidate had an internal person referring them or was on their database do you really want to fight with the client?

    If however it is a new client and all the signs point toward the client lying or simply a client that pulls the dirty trick on you too often I think rather than trying to dance with them you have to come out clean (not rude, simply professional) and tell them you do this for a living and there are only certain candidates in that area of practice and the chances are they will have them on the database anyway and that they need to negotiate or if the negotiation doesn't pay off you will need to proceed to legal action.

    I have said this before. Finding a candidate or having them on the database is the most simplest part of the recruitment process. It is making sure that the candidate is suitable and convincing the candidate to sign up with the new company that is 90% of the process.

    ReplyDelete
  7. Interesting article...

    I would say that if the client has briefed you on a role then they have indeed engaged you on service and cannot therefore claim 'ownership'. I think even 6 months is too much - maybe 1-4 weeks to give them time to review their own advert responses but no more.

    The problem lies when you send ongoing candidates and they claim ownership - you haven't been specifically briefed on a role so they can argue that it's unsolicited (of sorts).

    Furthermore if they hired the person I think you are in your rights to send a service fee as you mention below because they did engage you, your worked (for free) and end of the day they have no legal right to ownership of any candidate on their database.

    When we signed up with IBM they told us this clause - i.e. any database candidate is ours. I spoke to procurement and told them they have no legal right to ownership with 'no time limit' and we would send an invoice should I be engaged on a role and fill it regardless of their database.

    Firstly they told me no other agency had EVER questioned them on this! Secondly they changed it to representation on that specific job order - so should I send a candidate that has not been specifically represented and/or attached to that job code then this would be our candidate. I guess just clarifying your stance with the client is a good start - set expectations at the beginning!

    ReplyDelete
  8. I work in an internal recruitment role and work with recruitment agencies to resource our roles too

    Most recruitment agencies have a clause in their TOBs saying that if I engage a candidate within 12 months on them submitting that candidate then I have to pay a fee, so why am I not able to say that I received a CV direct within the last 12 months?

    If this happens, and it has in the last few months, I email the recruiter instantly advising them that they have been received direct, the date received and via what route.

    I think if you have a relationship with your recruiter that this relationship should be mutually beneficial not favouring one party over the other

    I know candidates lie about whether they applied to companies or not, but if the recruiter has done their job properly they should be aware of where that candidate has already applied

    ReplyDelete
  9. Nick - the point I am making is that in the interests of fairness and ethics a client needs to do the candidate search and contact work on their database FIRST before contacting an agency recruiter.

    The approach I rail against in this blog is where clients DO NOT do this work first and then simply 'piggyback' off the work of the external recruiter and pay $0 fee to the recruiter who has done the work to identify and activate the candidate.

    ReplyDelete
  10. There's two points here.

    1. An internal recruiter is typically competition for agents. That old saying, don't pitch the bitch, holds true.
    2. A candidate will always deal with a client directly if the client indicates that this is a preference. My advice is to have them sign a representation agreement which does not allow them to "withdraw their representation" and also indicates the absolute amount they are liable to pay you if they secure employment with the client. In this way, suing them for loss is easy.

    Finally, and a point a noted on shortlist but or some reason failed to appear, is that LinkedIN is a major problem in the market at the moment. Most people do not realise that internal corporate recruiters are able to purchase the corporate solution which gives them unlimited access to every registered user on linkedin. Many APS providers were extracting the details without LinkedIN approval and now hold internal databases of every single candidate that is registered on LinkedIN. This corporate solution however, is not available to recruiters. Instead, we are only allowed to contact and see candidates that are already in our network. Somewhat like a premium account on LinkedIN. As far as I am concerned, this is as good as LinkedIN declaring war on the recruitment agency industry.

    ReplyDelete
  11. James Waters11/5/11 11:22 AM

    I don't seem to have this problem with the recruitment agencies I work with.

    Most corporate recruitment software requires agencies to log a candidate on the corporate recruitment system. You cannot submit a candidate that is already on the database.

    I do not accept speculative resumes or resumes delivered by e-mail to avoid the problem of a recruiter sending a candidate that is already on our database. My opinion is also that if a recruiter has submitted a candidate to us, part of their role is to keep track of the candidates they have submitted and alert me within the 12 month period if they feel a candidate is suitable for another role. I will go back to a recruiter if we want to hire a candidate they have submitted within 12 months.

    How do we draw the line though? Are we as a client, paying for introductions or the art of matching a candidate to a role? What if a candidate that is submitted applies directly to another role? There would be numerous other grey areas.

    Ross, as far as I can read into what you are proposing, it would seem that you are suggesting a perpetual clause in relation to the referring of candidates, which would mean once you have referred a candidate, you “own” that referral for life. I don’t think that’s plausible. What would happen in a situation where your competitor has speculatively sent a resume to a client and 2 years later you submit the same candidate to a similar role? Whose service fee / work would you pay for then? In my mind, that arrangement encourages the spamming of resumes even further and does not foster competition or the effort for recruitment consultancies to differentiate themselves and develop relationships with candidates.

    I do think that you provide a valid suggestion though. I think the recruitment landscape has changed somewhat and recruitment consultancies need to review how they want to make money and define their Terms of Business accordingly.

    This may actually create some real differentiation in the recruitment consultancy sector and be a way for the industry to re-define its value proposition.

    ReplyDelete
  12. @JamesWaters - I am not suggesting a perpetual referral fee be available. The important point to make is that agency recruiters refer candidates in good faith for open vacancies and the %fee charged for a successful placement is a reflection of that service.

    The ongoing retention by the client of unsuccessful candidate resumes, separate to potentially hiring one or more of these other candidates, was never part of the original service agreement and, hence, is not covered by any fee.

    Maybe agencies need to incorporate a specific clause, and associated charge, in their terms of business addressing this practice of 'resume retention'.

    ReplyDelete
  13. I think Navid has a good point here. It's just part of the process these days and frankly, some you win, some you don't. I work with a number of clients with internal databases, but that hasn't stopped me from making placements with them. If they are a good client, you'll always want to continue working with them.

    ReplyDelete
  14. I had a situation this month where a new 'client' asked us to arrange an interview for a candidate we referred and then cancelled it because they found his details 'on their system' from 3 YEARS AGO.

    They then asked us to arrange an interview for the next candidate that we referred and then proceeded to call us when the candidate was ACTUALLY AT THE INTERVIEW IN THEIR OFFICE to say that they had in fact found his application 'on their system' and he had applied to them the day before we referred him and would not be accepting him through our agency.

    I had a conversation with them and clarified their recruitment / candidate ownership process but if a company has that little respect for you and is that focussed on trying to claim candidate ownership and get out of paying a fee, there is no way you can trust them or have any kind of meaningful working relationship.

    Move on and spend your time working with ethical and honest companies who actually value the work you do and want to work with you, not against you – there are plenty out there!

    ReplyDelete
  15. Agencies are needed when there are a lot of employers and shortage of employees. When the situation is opposite (like it's now) - there is no need in recruitment agencies.

    ReplyDelete
  16. Even though I can appreciate where you are coming from, recruiters need to open up to the reality. The general perception on the value add done by recruiters amongst both clients and candidates seems to be quite pathetic. Please also see: http://linkd.in/marQgC

    ReplyDelete
  17. I believe the point that Ross is making here is that on the occasion the client does "overlook" the particular candidate that is on their database and it isn't until the Recruiter brings that "forgotten" candidate to the client's attention do they decide to move forward to interview, often cutting the Recruiter out of the process suggesting that the candidate is already on their database. The argument I have here is that would the client moved forward with the candidate had you not bought them to their attention??

    ReplyDelete
  18. We are currently taking a big corporate client to court for this weak and slimy practice..............Adam.

    ReplyDelete
  19. I think that it is fair to pay for candidates that are put forward when an agency has been formally engaged, even if the candidate is already in our system. As the managers of an internal recruitment function within a large business, I would never disrespect my agencies by claiming ownership after asking them to work on a role HOWEVER I do have a problem with an agency that I have not formally engaged to work on a role, forward marketing a candidate resume/s and then trying to seek ownership when this candidate applies directly through the internal recruitment function.

    ReplyDelete
  20. @Anonymous - I agree. Where there is no service agreement in place or authorisation to recruit then sending candidates 'on spec' and trying to claim a fee for a subsequent direct hire is not a practice I would encourage or think is sustainable in terms of building a client relationship.

    ReplyDelete