Recruitment: Save Yourself from the Insanity of Diminished Returns

Albert Einstein once said, “Insanity: doing the same thing over and over again and expecting different results.” Albert Einstein may call some of our approaches to recruiting top talent insane.

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Morunda is a leading Asia Pacific recruiting firm. One of its directors sat in a recruiting meeting at one of the leading European pharma companies in Tokyo. He was there with a dozen other recruiters who were listening to the challenges of finding a medical doctor to lead their clinical development team. The European pharma company’s strategy was to have 12 firms work on the role in the hope that this would fire the recruiters up, create a sense of urgency and competition, and fill the position before the hiring manager returned to Europe.

However, the recruiting meeting may have had the opposite effect. The law of diminishing returns states that in all productive processes, adding more of one factor of production (one more recruiting company will do the trick) while holding all others constant will at some point yield lower per-unit returns. There is an inverse relationship between returns of inputs (number of recruiters) and the cost of production (time that the position is open).

The control of information is of paramount importance for attracting top talent. With multiple agents representing a single search, it is difficult for the company to know what is being said to potential candidates; furthermore, if junior people are calling top candidates, the company may be missing the best and the brightest in the market.

When top candidates are contacted by multiple agents, they will choose to be represented by the agent who either introduced them first or with whom they have the longest and best relationship. Companies need to allow the most skilled recruiter deal with leading candidates, as a better recruiter will sell the company more effectively.

If a company chooses a multi-agent approach to an open position, there is a significantly lower probability that an agent will recruit a candidate, as agents know the position is open to many firms. When agents have the sole rights to introduce candidates, there is a higher probability of recruiting a candidate. Multi-listed searches get the least attention, especially from the better recruiters who will usually have plenty of clients willing to give them sole rights to work for their specific positions.

When candidates are contacted by multiple companies about the same position, this can lead the candidate to think the client is desperate or that there is something wrong with the position or company if they still haven’t filled the role. Simply stated, the multi-recruiter approach looks desperate, and, in a tough market when there are fewer potential candidates, chances are that you will be putting serious candidates off rather than attracting them!

Companies should aim to have the Pareto principle working in their favor. The Pareto principle states that 80 percent of the work is done by 20 percent of the recruiters. Your agent needs to be in the 20 percent, and if he or she makes a dedicated search, the search is more likely to be completed. Most companies work with the 80 percent hoping that the law of diminishing returns will not apply.

Companies may also be able to reduce their recruiting costs by choosing fewer recruiters to work with. Time and money will be saved in HR screening and interviewing, dealing with multiple agencies, and line managers screening inappropriate resumes. Many recruiting companies may reduce their fee to win an exclusive search—a smarter approach that actually costs less.

Morunda Asia

Talent Search

Morunda Blue

Retained Search

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