Developing Bonus Systems for Rewarding Corporate Recruiters

When times are good and recruiting is booming, invariably recruiters wonder why there is no bonus plan for internal corporate recruiters. The impetus for their proposal stems from the fact that external third-party recruiters routinely receive bonuses based on their performance.

In my experience, it is the incentive system that makes these recruiters superior to the typical corporate recruiter, just as the most successful sales professionals seek out opportunities with rewarding pay-at-risk models.

I certainly support the concept of pay for performance in nearly every function, but the increasing rarity of internal reward systems in recruiting sends a clear message that pulling it off and maintaining it over a long period is no easy task. Current estimates based on my observation place the percentage of organizations with a formal incentive program governing recruiting at less than 1:20.

Arguments for Rewarding Internal Recruiters

Some of the most common arguments for rewarding corporate recruiters with a bonus include:

1. It measurably increases recruiting performance.
2. Because you get what you reward, rewards can also increase tangential behaviors like customer service, cooperation, retention, and best-practice sharing.
3. It helps to attract some of the most aggressive and high-performing recruiters. If you don’t reward, you won’t attract or keep the best third-party people who prosper under the pay-for-performance model.
4. It makes it clear to all what is important (because it is rewarded) and what is less important.
5. Recruiting is like sales, and sales people routinely get bonuses. Recruiting processes “mirror” sales processes in that they involve identifying and assessing prospects, building relationships, identifying decision criteria, putting together a sales pitch, and closing the sale.
6. It sends a message to others that the recruiting function is business-like because most functions and all executives have some form of pay at risk.
7. The basic pay-for-performance model is relatively easy to develop (excluding the political element) because it can be copied from existing approaches used by third-party vendors.

Arguments Against Rewarding Recruiters

Some of the many arguments used against recruiting bonuses include:

1. People already get paid a salary for doing their job, so they shouldn?t need a bonus to do the right thing.
2. It makes other HR people with no bonuses jealous.
3. “Socialist types” in HR want to treat everyone equally, on the premise that differentiation harms teamwork.
4. There is no extra money for it or the money is better spent in other areas.
5. It takes a major effort to sell it to HR and senior management and the politics involved is always a major roadblock.
6. It always falls apart after its champion leaves recruiting management.
7. It’s hard to find a good corporate working model to benchmark against, because internal rewards systems for recruiting are so rare.
8. It takes a lot of time to develop and refine the process.
9. Some of the strongest resistors (i.e., whiners) to corporate bonus systems are third-party recruiters. I can only speculate as to why they get in such a lather but I presume, at least in part, there is a fear that bonuses might improve corporate recruiting enough that their services would be in less demand.

What Should You Reward?

The first things that should be rewarded are recruiting outputs or results:

• Reward the volume of hires.
• Reward based on the on-the job performance of new hires.
• Reward based on the retention rate or tenure of new hires.
• Reward manager satisfaction.
• Reward applicant and new hire satisfaction.
• Reward recruiting managers for great overall recruiting.
• Reward competitive intelligence gathering.

Behaviors to Consider Rewarding

In addition to rewarding outputs, it’s equally important to reward the way that recruiters do their job:

• Reward hiring in prioritized mission critical and hard to fill positions.
• Reward a short time to fill, if the quality of hire is there.
• Reward recruiters that successfully recruit from “targeted” or highly desirable firms.
• Reward recruiters that utilize the “best” sources that routinely produced high-quality hires. Some also vary the reward based on whether the source was an internal database or a more labor-intensive source like cold calling or networking.
• Consider varying the reward based on whether the recruit was an “active” candidate or more desirable currently employed (some call them passive) candidate.
• Reward recruiters that fill jobs without using expensive executive search or websites (Be careful of rewarding cost per hire, unless a quality of hire component is also included).
• Reward recruiters for processing and “championing” employee referrals, so they don?t ignore or discount them (a common problem).
• Reward high-quality name generation and candidate relationship building.
• Reward cooperation among the team and with other HR functions like compensation, relocation, and onboarding.
• Reward best-practice sharing between recruiters.
• Consider basing part of the reward based on recruiter responsiveness (i.e., responding to phone calls quickly, attending meetings, contributing to the improvement of the recruiting process).

Tips on Implementing a Bonus Program

• Pre-identify the potential resistors and involve them early in the process.
• Start with a simple process and a relatively small reward and then expand it after you get more experience.
• Be aware that because recruiters are a competitive group, some will attempt to “game” the process. It’s critical that you identify these individuals and exclude them from the bonus process until they learn to play fair.
• Reward recruiters so that they are involved in on-boarding and maintain a relationship with a new hire for their first six months.
• Make sure your system is transparent and distribute the results by recruiter on a monthly or quarterly basis. Post the metrics even if you can?t reward them.
• Include a performance reward for contract recruiters.
• Don?t forget to reward the recruiting support staff, based on overall departmental performance. Also consider rewarding sourcers on the quality of their applicants.
• Even if you don’t reward recruiting results, routinely measure and reward applicant, new hire, and manager satisfaction with the process. Never forget that praise and recognition are strong motivators.
• Without major incentives, expect any third-party recruiter you bring in-house to either become frustrated or turn into mush within a year. In contrast, incentives alone can not turn “paper pushing” type corporate recruiters into dynamos. (They must be sent off to benefits or released.)
• There is no standardized bonus percentage for internal recruiters when it is offered. As a general rule, I find that recruiters should have at least 10% of their compensation “at risk” based on the performance. I’ve seen a range of bonuses from a high of $2,000 per hire to a low of $50. Some firms offer bonuses as a percentage of salary while others have offered only prizes. Whatever you pay, make sure that the bonuses are paid either monthly or quarterly so that recruiters see immediate rewards for their efforts.
• Consider holding third-party recruiters to the same quality standards that you use internally. Although some agencies will “whine” that it’s unfair, a few will willingly very their bonus based on the performance and the retention of the hire.

Best Practices and Benchmark Firms

Bonus programs for recruiters come and go with changes in the economy and in recruiting leadership. As a result, it’s difficult to keep track of the best practice firms.

However, some firms that have in the past offered some form of recruiter rewards include FirstMerit Bank, Quicken Loans, PWC, Aspen Technology, the U.S. Army, Wachovia, and T-Mobile.

The most knowledgeable people I have met in this area are Michael Homula and Randall Birkwood, as well as anyone who has successfully managed executive search professionals. Because it’s difficult to find high-quality benchmark examples within corporate recruiting, I recommend that you also benchmark against the more common but highly successful incentive programs that are found in the sales field. The lessons learned there are directly transferable to the recruiting profession.

Final Thoughts

The idea of offering rewards based on performance certainly isn’t new, but developing and implementing a successful process for corporate recruiters has been a challenge to everyone who has attempted it.

I found that the most important element in developing and maintaining a process for rewarding corporate recruiters is the courage and “backbone” of the recruiting leader. Because the recruiting profession is full of “that will never work” people, as well as those who fear competition, recruiting leaders need to go out of their way to discount or ignore these naysayers. Doing strategic things is, by definition, always hard, so learn to persevere!