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Kickbacks in Recruiting: Avoiding Corruption

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Corporate recruiting departments lack financial transparency and accountability needed to align agency hiring performance with authorized incentives.  In some cases, it’s designed that way, making “kickbacks” a sad yet common (and all too casual) practice resulting in unauthorized incentives and unsanctioned, preferential treatment.   I’ve heard the stories and detected the symptoms of kickback corruption too many times in recruiting structures and there is no protection in sight!  In the following, I will outline a common scenario and offer prevention strategies to help clue you into the corruption.

What ever happened to the rewards of wine and dine with traditional relationship building at ball games, happy hours, and special events?

Risks are especially high at startups and underdeveloped recruiting programs going into scaling mode.

If you are part of a recruiting department where recruiting processes aren’t outlined or prioritized, and leaders remain stuck on holding you accountable to vague and subjective criteria, you might find value in this article.

What is a kickback?  A payment made to someone who has facilitated a transaction or appointment, especially illicitly.

When does a kickback occur?  Kickbacks occur when the external recruiting agent (from the company that receives a hiring fee) and an internal recruiting manager (authorized with budget approval to pay out recruiting fees) agree on unauthorized incentives given to the recruiting manager in exchange for preferential treatment given to the recruiting vendor who represents candidates submitted for hire.

Why does it matter?  It is unlawful.  These back dealings create problematic loyalties between internal managers and external agents that isolate other recruiting partners.  It can motivate a recruiting manager to influence a hiring manager to hire the wrong candidate disrupting normal qualification and relationship building between recruiting managers, agencies, and subordinates.

How do I detect it?  Get to know your corporate recruiting manager(s) and the agents they prefer.  What is their rational for providing “exclusive” opportunities? Is the decision driven by performance data?  Prove it.  The wrong type of relationships tend to be more personal than professional.  When the agent visits a manager onsite, the meeting is private.  If you are part of the internal recruiting team, pay attention to patterns of recruiting managers and hiring manager who push for feedback on specific candidates who always happened to be owned by a specific agency.  That’s the smoking gun.  Again, prove that the relationship is based on performance data.  Here are examples of valid types of performance data.

There are a variety of ways for a recruiting manager to skim the recruiting budget if he or she is morality and ethically bankrupt.  Here is one of several recurring scenarios I’ve encountered and avoided in my recruiting travels:

Disclaimer: This applies to unauthorized dealings existing between relationships between corporate (full time) teams and agency contacts.  Does not apply to independents who are in business for themselves unless contractually obligated to refrain from referral fee practices.

THE PLAYERS

Customer
-internal company (buyer) that pays recruiting fee to external vendor (supplier) for supplying a candidate who is hired.

Customer Recruiting Manager
-internal agent sanctioned by company executives to manage all recruiting affairs
-internal manager authorized to manage recruiting team and department KPI’s.

Recruiting Vendor
-external company authorized by internal recruiting manager to recruit and submit candidates for hire to company
-receives success fee calculated as a percentage of represented candidates salary, if hired

Recruiting Agent
-external company contact who has a relationship with the recruiting manager
-receives commission of success fee if represented candidate is hired by customer

The Pass Off Kickback
It begins when an authorized recruiting manager gains access to a separately sourced candidate database of desirable candidates.  If you recently hired a recruiting manager, he or she may have exported their former employers resume database, acquiring it through former coworkers or directly stealing it upon exit.  After all, recruiting managers are usually the only one with access, knowledge, or desire to export the list.  The legal and moral approach is to NOT take anything after leaving your former employer, but some prefer to take the intellectual property and use it during ramp up at the new employer.  Instead of passing on the illicit list to internal sourcing/recruiting resources at the new gig, the list might be “passed off” to a former agency relationship stemming from a recruiting agency partner who is now on-boarded as the newest recruiting vendor supporting the new employer.   After all, the newly hired recruiting manager gets to decide which agencies can support.  The authorized manager passes off the unauthorized list to an external vendor set up to receive a percentage of the success fee for hiring, who in turn, kicks back part of the fee to the recruiting manager.  It happens under the table after the official fee is paid out to the recruiting vendor.

It’s a huge loophole that lacks accountability and transparency, allowing corporate recruiting managers to steal directly from their own budget, break the law, and pad their salaries, creating all types of performance blockers.

Internal departments implode while corrupt leaders attempt to cover their tracks, conceal the truth, and protect their unauthorized dealings.  Ladies and gentlemen, it’s real and it’s happening more than you know.

How can you prevent this from happening? 

1. Ask your corporate recruiting manager if they took their former employers recruiting database without authorization.  Their answer, facial expressions, and body language will guide you to the next line of questions for further examination.

2. Remove all contacts and candidates attached to the digital paper trail.  Notify the former employer to make them aware of the situation.  Protect your credibility as an employer and protector of private information.

3. Contact me if you want help diagnosing suspicious situations to help kickback-proofing your recruiting environment.  There are security issues to consider and private candidate information is unlawfully shared through this process.  You don’t want to have access to information about candidates that was never given to you.  There are observable symptoms and mitigation strategies to create transparency and circumvent these kind of situations with prevention tactics.

4. If you find that your leadership team looks the other way – Distance yourself and detach from the organization.  Then, Blow your whistle if you have evidence to support the corruption!
Creating transparency isn’t an easy challenge, however, the good news is that we are working on software that will help prevent these situations from happening.  Click here for more information.

ABOUT THE AUTHOR:

James Chmielinski is a second generation recruiting veteran, former athlete, and founder of Veruca.io, the first ever recruiting innovations lab.  His company is built from two generations of sales and recruiting experience resting on the backbone of post-millennial technology.  An industry-leading, hub-spot for consulting, technology, and recruiting process design.  Veruca.io aims to make life easier for professional sourcing and recruiting teams.  Mr. Chmielinski’s inaugural software attracted 178 active users in 114 cities from 17 countries.

11 Reasons Why Corporate Recruiting Managers Fail

As your passionate recruiting manager, I give everything I’ve got to find and keep the people we hire and grow your company in a way that makes people proud to do work here.  You respond by telling me I am not hiring fast enough, yet I work overtime…I work weekends…I am typically the first person in the office to smile at candidates and I’m the last person to leave after our interviews are over for the day.  I’m your candidate experience cheerleader and I manage the haystack of relationships circling your revolving door of rejected candidates.

“Make sure they all have the same candidate experience!”

You continue to bark at me, excusing your behavior with excuses like “our investors and board of directors are pressuring our executive team to meet head count objectives!”   You ask me in a passive-aggressive manner:

“Why are we behind schedule with hiring? Why aren’t we hiring fast enough! You ARE the expert, aren’t YOU?”

I get it.  You need to build your product.  You need to deliver happiness in the form of features to your growing user base.  We need to hit hiring goals and build toward revenue targets to maximize shareholder value.  We need to keep everyone happy and employed.  Well, maybe not happy.

You may think I am failing you as a recruiting manager but what do you know about recruiting?  I am the expert….remember? Oh, you’ve interviewed a bunch of candidates in this skill-set, so that makes you an expert in supply chain, candidate marketing, candidate engagement, sourcing, recruiting, and human relationship management?  Riiiiiiiiight.  Well, Mr and Mrs. C-Level…

Recruiting has become more than, “Can they do the job, will they do the job, are they a culture fit?”

Please allow me to educate you in the world of demanding people, messed up processes, and silly recruiting tools…We call it recruiting…….and if you pay attention….there might even be an actionable insight you can take away.

11 reasons why corporate recruiting managers fail…

 

1. Root Cause IdentificationThere isn’t a data-driven method to pinpoint the root cause of a recruiting problem on internal / external recruiting teams.

2. Best Practices: Applicant Tracking Systems (ATS) are focused on workflow and tracking, capturing data related to hiring a candidate but not nearly focused enough on “how best to hire a candidate” or “how best to recruit.”

If you need help in these areas, go here.

3. Planning: Your recruiting team responsible for sourcing, recruiting, and hiring is impacted daily with necessary updates that influence a job opening that they never get or get too late. Here is an idea – develop a plan and build out your KPI’s before you open the new job, so you know what and why you are hiring.  Recruiters need visibility and transparency behind the motives of “why are we hiring for a new role” because it directly impacts the hiring success or failure.  Otherwise recruiters look stupid when candidates and coworkers ask “why?”  Talk about credibility problems. Involve your recruiters, please.

4. Communication:  When you do pass on information to your recruiting leader, you tell him/her recruiting manager but he/she is inundated with meetings and hiring manager counsel sessions.  By the time information is passed onto the people actually doing the recruiting, it is no longer important information because a new update supersedes the importance of the old one.  Good luck with that.

5. Engagement not tied to Incentives:  We might spend between 1M – 200M on our talent acquisition program annually, yet we don’t have access to a streamlined program that tracks and manages recruiting performance in a programmatic fashion.  There is no method, whether it is customizable or predefined, to help evaluate and manage performance of internal and external recruiting teams.  We can’t inspire change, increase engagement, or collaborate with recruiting teams/recruiters in realtime.  

6. Key Performance Indicators (KPI): It’s a major problem that we only measure recruiting team performance on a case by “hire” case and it isn’t predictable, cost effective, or strategic.  This reactive approach neglects benchmarking and it prevents optimization in cost, speed, quality, forecasting and of course, performance.  Performance based hiring is legit.

7. Inaccurate Data: When neglecting performance data, we don’t have a real-time strategy with pivoting power to understand who our top performing recruiting teams/recruiters are in the areas that we find most valuable at any given time.  Whether we want speed, cost, quality, specialities, or referrals.  We don’t know what we want or need.  We can’t predict.  We can’t recognize performance over fluke. We can’t anticipate problems. We don’t know which agencies we should enlist help from because we have zero-quality data and we are too busy reacting to fire drills.   Emotional hiring managers are running behind schedule pressuring us while we continue to recruit in the dark.

8. Bureaucracy and PoliticsRecruiting managers can’t communicate changes to everyone involved in the change in a timely, centralized fashion, and this impacts internal and external recruiting teams’ efforts.  As your recruiting manager, we don’t have a fast method to reach everyone impacted.  There is no way to broadcast conversation related to feedback, candidate updates, interview notes, req updates, or other program details impacting the internal and external recruiting team success.  There is no forum to provide feedback or clarify without causing email bottlenecks, confusion, and constant chasing.  Recruiting leaders forget or give up on providing essential updates impacting hiring decisions.

9. (Lack of) Information Sharing:  Changes happen hourly and it impacts recruiting teams ability to match and qualify talent.  Some of these changes aren’t restricted from recruiting teams.  Sourcing, recruiting, and candidates are dependent on the dissemination of the information contained within these changes.  Share more information with the reason behind the change.

10. Process or Technology: Recruiting processes built around existing software fail as a conduit system between hiring managers and candidates communication.  It takes way too long for updates, notifications, and alerts to reach their destination.  This causes hiring teams to miss offer and decision deadlines, impacting candidate experience, partner relationships, loyalty, and hiring success.

11. Burnout, Lack of Recognition: Burnout is a huge problem in the recruiting industry.  After dealing with constant pressure from executive leaders and hiring managers who want to hire faster and don’t care how….recruiting leaders quickly run out of positive ways to inspire recruitment performance in recruiting teams.   Positive reinforcement quickly turns into subdued threats.  Fear-based methods lead to escalations, increased turnover, and reduced morale.  Recruiting managers end up micromanaging or neglecting “un-coachable” recruiters with counterproductive effects on performance.  What is earned on Friday isn’t praised and forgotten on Monday.  Recruiting departments can be miserable places to manage recruiters and an even worse place for those subordinates trapped under yours truly, your clueless, underperforming, not-hiring-fast-enough recruiting manager.  Bless your heart.

The good news is there are efforts to correct these massive problems.

Connect with us and learn more: https://angel.co/recruiting-scorecard 

ABOUT THE AUTHOR:

James Chmielinski is a second generation recruiting veteran, former athlete, and founder of Veruca.io, the first ever recruiting innovations lab.  His company is built from two generations of sales and recruiting experience resting on the backbone of post-millennial technology.  An industry-leading, hub-spot for consulting, technology, and recruiting process design.  Veruca.io aims to make life easier for professional sourcing and recruiting teams.  Mr. Chmielinski’s inaugural software attracted 178 active users in 114 cities from 17 countries.