How to Get Recruiters To Sign a Contract NOT To Poach Your Employees…

Kris Dunn Always Be Closing, Recruiting, Sourcing

If I was a recruiter, I’d be like Jerry McGuire.  One candidate/customer, special attention galore… Here’s the voice mail I would leave to my candidate – "I will not rest until I have you holding a Coke, wearing your own shoe, playing a Sega game *featuring you*, while singing your own song in a new commercial, *starring you*, broadcast during the Superbowl, in a game that you are winning, and I will not *sleep* until that happens. I’ll give you fifteen minutes to call me back."

On second thought, I’d probably be like the rest of the biological world, moving to where the most foodJerry_m  opportunity is… Maybe even use that voice mail on my 50 candidate calls for the day…

One thing that has always amazed me about the recruiting business is this – most recruiters and employers alike work without an agreement.  The drama goes like this – employer needs help on one or more positions, and requests help from a couple of contingency recruiters, who go out and try to line up talent to present to the employer to fill the role in question. 

If anything gets hammered out, it’s the fee (usually a % of the first year’s salary).  Other issues abound – quality guarantees, parameters for how long the referred candidate is the search firm’s property in the Applicant Tracking System (which means how long they’ll be due a fee if the candidate isn’t hired now, but hired later) and the issue of referrals of search firms’ candidates to other firms, etc.  Most of the secondary issues are never hammered out before a search firm begins work on a vacancy.

The smart employers define the secondary issues and have their own agreement template ready to hand to search firms they’re working with for the first time.  That firms up the issues and ensures the search firm knows the expectations of the employer.

One unwritten rule from the employer’s perspective is this – if I pay you a fee, please don’t poach any of my talent for an unspecified time period, or there’s a high likelihood I won’t use you again.   While that’s the standard unwritten rule, I’ve never seen that in an employer-side agreement.  Until now…

Wachovia is including a non-poach clause in its employer-side search agreements.  On the plus side for recruiters, they’re increasing placement fees for those that play ball.  Here’s the rundown from Workforce:

"For certain recruiters, Richmond, Virginia-based Wachovia wants to increase the commission it pays to 10 percent of brokers’ previous years’ fees and commissions, almost doubling the industry norm of a 6 percent commission.

The agreement is surprising and almost unheard of, recruiters and brokerage executives say.

Of course, there’s a catch to get that extra commission. Recruiters have to sign a contract that prohibits them from moving St. Louis-based A.G. Edwards’ reps to other firms. The 10 percent commission would be for future recruiter business with Wachovia and would max out at $75,000.

Wachovia began offering recruiters the deal last month, and one recruiter who turned it down says he sees the offer as having two potential meanings.

“The increase in fees for recruiters confirms the war for talent,” says Danny Sarch, a recruiter in White Plains, New York. “It makes sense that firms have to pay more to get recruiters to pay attention to them.”

But the offer could also “speak to an element of fear that A.G. Edwards guys are at risk.”

OK, I’m an employer.  But I would have to be doing a LOT of business with Wachovia as a recruiter or want to get some Wachovia business pretty bad as a small recruiting shop to sign that agreement.  First up, if you sign the agreement, you’re locked out from representing and placing candidates from Wachovia.  They’ve got a big rep base, so that’s fertile recruiting ground that’s national in scope.

Just because you haven’t signed the agreement doesn’t mean you can’t make a placement.  Ever tried to tell a manager they can’t use the headhunter that has the candidate they want because they aren’t on the preferred vendor list?   Kind of a rough conversation, if you know what I mean.

More importantly, what’s 10% of 0?   Just because you sign the deal doesn’t mean you are going to do business with them.   Better to keep the universe open and recruit from all sources.  Just my take as an HR person.   Doubling placement fees seems like a drastic move, one that might signal reps are vulnerable over the coming years, especially if the cultures of Wachovia and AG Edwards, as reported, are dramatically different.   

Kris Dunn

Kris Dunn is a Partner and CHRO at Kinetix, a national RPO firm for growth companies headquartered in Atlanta. He’s also the founder Fistful of Talent (founded in 2008) and The HR Capitalist (2007) – and has written over 70 feature columns at Workforce Management magazine. Prior to his investment at Kinetix, Kris served in HR leadership roles at DAXKO, Charter and Cingular. In his spare time, KD hits the road as a speaker and gives the world what it needs – pop culture references linked to Human Capital street smarts.