'Recruiting' sounds yucky.
I'm really proud of my work, I love what I do, and I often hear from companies and candidates super appreciative of our work. But, I seem to hesitate to tell friends and family that I’m a “recruiter.” Instead, I say, “I help small tech companies grow their teams.” Why do I feel the need to add a caveat - "Yes, I'm a recruiter, but the good kind." The recruiting industry has long been painted with a broad brush of negativity, am I right?
The main problem is the industry's traditional contingency recruiting model - the recruiter only gets paid when a candidate is successfully placed. This riddles the work with incentives that are not in the best interest of company or candidate. It also leaves large portions of recruitng work unpaid - encouraging corner cutting, bad candidate experiences, and inflated placement fees to compensate. You pay for the other roles that go unplaced.
The contingency recruiting model sucks - for everyone.
The Contingency Model: A Recipe for Mediocrity
For a long time, the contingency model has been core to the recruiting industry - the “we’ll pay you when you fill the role” approach. This feels straightfoward and fair, and it certainly makes it easier for companies to get on board. "Great, I only have to pay when/if I have my perfect hire!" But, this setup creates a series of problematic incentives and negative outcomes:
Speed Over Quality: When recruiters only get paid on placement, their focus shifts to filling the role as quickly as possible. Its a race against the clock to submit candidates, load the hiring manager, and hopefully have a candidate stick. It's easy for candidate quality to suffer.
For startups, a mis-hire is not just inconvenient. It slows product velocity, drains runway, and impacts morale - a lot. The margin for error is small.
Multiple Recruiters, Multiple Submissions: In many cases, several recruiters may be chasing the same role, each submitting the same active, readily available candidates. The result? The hiring manager is managing recruiters, and often left with the same active candidates that are shuffling to their next submission. Not neceassrily the right role - just the next place that they can get an interview.
Incomplete Scrutiny. When recruiters get paid only when a placement is made, it's increasingly important to get to a hire, and less important to uncover or share the deeper weaknesses and shortcomings of a candidate. There is less incentive to surface the hard truths about the role and team. There increases the chances of surprises and lower candidate performance, and when a candidate learns more about the tough parts of the role only after they are hired, retention risks increase.
Transactional, Not Transformational: The focus becomes transactional - get the placement, get paid. With little to no long-term investment from the recruiter, the hiring process is a numbers game rather than a strategic search for talent. The hiring manager, stacks up call after call with little opportunity or guidance to learn and improve - to make the next candidate BETTER. There is little opportunity, or incentive, to add criteria, add assessments, change the sourcing plan - to stop interviewing and interviewing, and instead to iterate and improve.
Poor Candidate Experience: Sure, there are great recruiters out there that treat people right. But the contingency model does not incentive a recruiter to kindly and thoughtful reject candidates. As soon as the candidate isn't a hire, they represent a sunken cost (unless they can be passed to the next employer). This impacts your brand.
The contingency model may seem efficient at first glance, but when quality, process and long-term fit are sacrificed, everyone loses.
The structure sounds low-risk. In reality, it distorts behavior and creates high effort with little return.
Hiring a recruiter on contingency is like hiring a contractor and only agreeing to pay them once the house is fully built.
Sounds good in theory - until no quality builder will take the job, corners get cut, and no one sticks around when things get hard.
Rethinking Recruiting: A Call for Change
Not every recruiter operates this way - many are driven by ethics, long-term relationships, and a genuine desire to match the right candidate with the right role. However, the prevailing contingency model has set a standard that rewards mediocrity. It’s time to re-examine the hiring process:
- Is quality prioritized as much as speed?
- Are we recognizing and addressing bottlenecks, and improving the process?
- Is the expertise of hiring manager and recruiter used wisely?
- Are we getting closer to a strong hire?
- How can we give the candidate an experience that reflects our values and brand, and increases referrals (employee and company referrals)?
The answers to these questions pave the way for a more strategic, effective approach to recruiting.
Actionable Steps for Tech and Startup Leaders
There are alternative models - retained search, embedded partnerships, structed RPO, Containers = to align incentives differently.
If you’re leading a tech or startup company, it's worth understanding the pitfalls of traditional contingency recruiting and consider other models.
A recruiter, even an external one, can be your strategic partner and secret power - not just a transactional vendor. Just as you'd bring in legal or marketing support on a project, you can bring in a recruiting partner. Collaborate closely and foster a partnership where your hiring managers are actively involved in the process, offering insights and feedback that can refine the search.
If this resonates, it may be time to rethink how your recruiting incentives are structured.