A Quick History of Recruiting Agencies

Seth Godin wrote an interesting post a few days ago, called Beyond Geography. It is applicable to many industries, but it definitely struck me when it comes to recruiting.

So, here are the 3 stages of recruiting.

Stage 1: Geography

I wasn’t around to witness it, but I’m assuming most recruiting agencies started this way. “I know all the direct marketers in Boston” and boom, you have a small firm ready to go. Information was scarce, and so procuring it provided an incredible amount of value. Your “direct marketers in Boston” directory was probably the best around, so you could easily take advantage of that. A bit ho-hum, but hey – its a business.

The candidates themselves were probably content but not ecstatic about the service, but then again – they didn’t really have much of a choice. Basically you were the equivalent of the local laundromat. No offense.

Enter the Internet….

We are currently at the later stage of what I call the Commodity Period of recruiting. This tumultuous stage is defined by extremely low barriers to entry, pissed off candidates, and more emails than a Sakawa operation.

Now anybody could type in “direct marketers” and geo target “Boston”, and voila – all that hard phone work that you tirelessly put in throughout most of the 1980s is gone. You can throw it out with your shoulder pads and hairspray. Your “directory” is no match for the ultimate directory, LinkedIn.

Suddenly everybody is a recruiter. Show me somebody with a pulse and sign me up to a LI Pro account, and I’ll show you a fresh recruiter!


In tandem with this information access, email basically drove the cost of reaching out to somebody to zero. InMails and mail merging especially ensured that candidates were getting hounded multiple times a day.

Suddenly our direct marketers from Boston were getting emails from people in India advertising a job in Kansas doing part time work. Again and again and again. And they become jaded, guarded, and cynical. “All recruiters are horrible” they say.

The Great Shakedown

As Godin says, “a commodity business always lives on the knife edge of cheaper”. And we are beginning to witness it now. An internal recruiter using tools like TalentBin, Greenhouse, and Linked In Recruiter, is consistently getting the job done at for less. More and more companies “don’t work with recruiters”. Like the switch from bows and arrows to guns, it may take a bit – but it will happen.

Stage 3: Community

Nowadays, the real value is not in the access to the candidate or having a huge database, but in earning the talent’s attention and trust. And that leads us to the final phase in our recruiting trilogy: the community. The agency of the future will create a group of like minded people who trust them – a tight knit talent pool that will time after time return to them whenever they plan on changing jobs. It will be narrow but go deep.  It will be the Shake Shack to the other firms’ McDonalds.

The Geography based recruiter makes placements by just being there. The Commodity recruiter makes placements because he’s sent the most emails. The Community recruiter makes placements because the candidates trust him.



Contingency Recruiting: A Model based on Distrust

I need to get a website built, so I got some designers together and made a proposal: “How about you each build me a site, I’ll pick the one I like the most and then pay the best designer”.

I was promptly chased out of the building.

Actually, that story is made up – but something very similar happens everyday in the world of recruiting. And for some reason, you don’t hear stories of recruiters banding together to chase out some stupid Corporate HR person.

They actually accept it. Its called contingency recruiting. Most recruiting is done “on success” which means that a recruiter only gets paid once a candidate has been placed and working for 90 days.

And it is one of the reasons why the industry is so messed up.

Contingency recruiting sounds sort of awesome on paper. Get a bunch of people working for you. Pay on results only! Nobody owes anybody anything. Hard to imagine a better situation. That said, all that wonderfulness belies hidden costs that hurt you, the recruiter, and all the candidates that go through your process.

The first thing to keep in mind is the subtext of a contingency recruiting relationship. What is the implied meaning here? Here is my crack at it:

I don’t monetarily value anything you bring to the table, except for a body who has been there for 3 months.

I don’t trust that you will do the work, so I will withhold paying you until I see a result.

So with that delightful working relationship as a base, you wonder why people complain so much about contingency recruiters.

Get what you pay for

What happens when you work with a contingency recruiter

  1. No plan: you could work with a recruiter to build up a list of top companies to poach from, your competitive advantage in each case, and a custom pitch. But you don’t.
  2. No thoughtfulness: recruiters are operating from such a high sense of uncertainty, that “spray and pray” becomes the modus operandi. Crappy canned emails and sloppy pitches ensue.
  3. No honesty: a recruiter will tell you that the candidate is “super pumped” when he’s not. Maybe there is some flaws in your process that could be corrected? Don’t expect the recruiter to be truthful – again, he just needs the body in there for 3 months.
  4. No perseverence: notice how recruiters just stop sending you candidates when the going gets tough? Emails stop getting responded to as quickly? That’s because you aren’t incentivizing them to.

Hidden costs 

Your employer brand

“Yo dawg! I got this incredible job, a hot opportunity. Its in PHP, or Git if you prefer. Its at this hot startup called (INSERT YOUR COMPANY). Just take an interview.”

Multiply this interaction by 1000, and you have a recipe for an employer marketing disaster in the making. No number of hackathons with free pizza will save you. You’ll be the butt of developer jokes. You’ll be the job of last resort.

Your time

When you pay for the Flash Pass at Six Flags, you are saying that you are willing to plunk some cash down to preserve your time. When you use a contingency recruiter, you are saying that your time is secondary compared to saving money. Since they are incentivized to get somebody, anybody, in your company, you’ll get tons of crap. Remember, when recruiters say “spray and pray”, they are aiming at you.


A recruiter is not bringing any value until I get a candidate, so I’m not going to pay him. Everything else is “cost of sales”.

Bullshit. I once had a client who was looking for a senior product manager type with eCommerce experience. I got him meetings with dozens of candidates from some of the most prominent players in the industry. He fine tuned his interviewing process to make in more efficient in light of all those interviews. He learned a ton about what needed to be done for the role and the company, and got a list of all the places where he could poach from.

I didn’t end up placing somebody there, so I got squat.

No hard feelings, that is the nature of the game. But you can hardly say that I didn’t add any value. In fact there is a company called Gerson Lehrman Group who charges a boat load of money for basically the same service.


Not all contingency recruiters are horrible. Some are actually awesome. But they would be 100 times more awesome if you paid them upfront. They are doing well IN SPITE of the shitty contingency setup.

One day I hope I will never have to accept a contingency offer again.