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CommodityQuant
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Posts: 218
Joined: July 5th, 2007, 6:16 am

Recruiter salary negotiations

May 17th, 2009, 3:06 pm

I had always assumed that recruiters get paid a percentage commission of the salary of new employees, and that therefore, the recruiter is a total ally salary-wise, determined to max the offer. But I've heard elsewhere that this isn't true -- that recruiters fight for the hiring company's interest and try and keep the salary low. Could someone enlighten me on this important issue?CommodityQuant
 
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KackToodles
Posts: 4100
Joined: August 28th, 2005, 10:46 pm

Recruiter salary negotiations

May 17th, 2009, 7:18 pm

recruiters are paid based on your salary. superficially, this may seem like they are allied with you. however, remember that a recruiting is volume business, and also a repeat business. Recruiters not only need to place you as quickly as possible so they can move on to the next guy, they also want to be on good terms with the corporations so they can do more business in the future. This means that recruiters have much stronger incentives to make the companies happy than to make you happy. Your one placement is worth peanuts to the recruiter who has to make many placements per year to survive.
Last edited by KackToodles on May 16th, 2009, 10:00 pm, edited 1 time in total.
 
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DominicConnor
Posts: 11684
Joined: July 14th, 2002, 3:00 am

Recruiter salary negotiations

May 18th, 2009, 8:21 am

To quote the words of Tim Rice "No one in your life is with you constantly... no one is completely on your side".I will be now exhibit the flagrant honesty for which I now apparently have a reputation.The field of economics is agency theory, which is in part the study of the difference between what you pay people to do, and what they actually do bsased upon their incentives.If you'd read my paper on regulatred bonuses, you'd know this already...I'm a headhunter, and I work for me, not you, not the employer, and you will find that most recuiters don't really see themselves as working for their employer either.KT is right, though I'd expand some points.Many recruiters get paid as some % of what your first year fixed pay is.This is the first conflict of interest.You have some preference between fixed and floating pay. Some managers take the view that if you are guaranteed an extra X$ you should give up F(X) where F(X) > XThe recruiter usually gets none of your variable bonus, so will always prefer guarantee and base salary over any variable bonus.A variant on this is where the recruiter is paid a flat fee. In that case he will find the number that gives the greatest probability of placing you.Whether he leans to the most the employer might pay, or the least you will accept is a function of the demand for your skills, and the other options you hold.Next, price discovery.You are a classic example of an illiquid asset. Your price is uncertain and there is never any good balance between buyers and sellers.However, the players in this game each have some idea of your price, and it follows that there are 3 prices here, each with a bit of uncertainty.In the majority of cases the recruiter is in some sort of competition with others to fill this position.Let's do a numerical example here.Imagine that the manager believes the "right" rate for you is 200K.If the recruiter pitches you at 180K he gives up 10% of his cut, and at 220 he gets 10% more.But the probability of placing you is not so symmetrical.Asking for too much increases the probability that this candidate won't be placed there, and of course may not be placed by that recruiter anywhere.This decrease in probability can be much greater than 10%, so the expectation is much lower.To get a given level of fixed pay the seller must convey that no lesser figure, and of course that may price you out of a given job.An extra factor is that firms often have "policies" that say given categories of worker cannot be given fixed pay of > X.Hit one of those barriers and you kill your chances of success.Those numbers are of course examples, and the process is not as precise as I describe, but the expectation function is true even if most recruiters only have an intuitive grasp rather than any notion of probability.There are other factors...The "employer" is a not a single entity, HR, the hiring manager and his management all have different agendas.Each has relationships with different HHs of widely different quality. The staff turnover at most recruitment firms is rather high, so the HH has strong incentives to maximise the quality of his personal relationships and personal income even when this has far greater costs to the relationships and reputation of this firm.This model neatly explains why recruitment firms where staff share ownership is low are widely seen as having "integrity issues". To quote a senior executve at one very large firm "they're fucking liars, they fucking lie to us, the fuckers fucking lie to the candidates and the fucking shit resumes they send us are fucking made up". After that he got quite rude.However this large recruitment firm is still a preferred supplier to this bank because they enjoy a relationship with the bank that hiring managers cannot spare the time and political capital to overcome. This means that a given recruiter cares relaIt is quite rare for a HH to place the same person twice, and since the oportunity for repeat business is quite low since the critical relationship is between his employer and the bank, he has weak incentives to treat candidates well.If the HH owns equity in the firm, then this game changes, and we find that the best clients are often those we've placed in their jobs. But the payback in this is measured in years not the months or a year that is the job change horizon of many non-equity owning HHs.
 
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QuantVader
Posts: 247
Joined: July 10th, 2008, 2:19 pm

Recruiter salary negotiations

May 18th, 2009, 8:34 am

If a HH places you, if/when you become a manager, you will be dealing with this HH again but from the other side of the table. It is also in their interest not to screw with you the first time
 
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deepvalue
Posts: 918
Joined: April 25th, 2007, 6:08 am

Recruiter salary negotiations

May 18th, 2009, 8:39 am

QuoteOriginally posted by: QuantVaderIf a HH places you, if/when you become a manager, you will be dealing with this HH again but from the other side of the table. odds here are small if you are an entry level person. first, only a small fraction of entry levels makes it to the point where they are calling HHs to hire people. second, it takes a looong time (at least 5 years) for the entry level to get to that point, and by that time, the HH has probably moved on; and third, you are just one of 100 managers the HH might deal with, so at most you just have a 1% effect on his life ever again.
 
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phil451
Posts: 83
Joined: December 7th, 2007, 8:21 am

Recruiter salary negotiations

May 18th, 2009, 1:38 pm

The amount of invective (vehment denunciation, railing accusation, vituperation) directed at HHs on this site never ceases to amaze me. When i've been in the job market, a good HH is one who gets me interviews. After that, the rest is up to me.
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