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Are commission structures in recruitment dead?

Staffing Stream

Are commission structures in recruitment dead?

Ann Swain
| July 2, 2024
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Commission Concept

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When APSCo first launched 25 years ago (under the Atsco brand), the commission-based reward structure was common practice in recruitment. The theory behind this approach was certainly sound at the time and, on paper, seemed logical.

Commission-based salary schemes should motivate recruiters to source high-quality candidates. They should encourage a focus on rigorous recruitment and top-notch candidate and client experience. Commission should incentivize consultants to continuously improve their skills and knowledge of the market.

The key here is the word should. The theory made sense when it was first introduced in the staffing sector; however, in reality it’s no longer viable for the modern world. Unfortunately, commission pay structures can lead to conflicts of interests that do not benefit end-clients or candidates. There’s the potential for consultants to prioritize filling positions that offer them higher commissions rather than those that are the best fit for all.

This practice obviously doesn’t help shirk the reputation of recruiters being akin to car salespeople. Perhaps more importantly, though, it also does little to aid talent attraction and retention in recruitment itself. We may be seeing more of a professionalization of the staffing sector, but this continued reliance on purely quantitative metrics like placements and revenue isn’t supporting career progression and skills development. It’s also completely misaligned with the expectations of the end-clients and candidates the recruiters serve.

Encouragingly, though, we are seeing more firms scrutinizing reward structures and the culture these are curating. In fact, at a recent APSCo Disrupt event, recruitment leaders came together to comprehensively analyze commission structures and analyze what action is required to enhance reward structures and drive excellence in recruitment.

Turning Commission on its Head

Needless to say, there was a broad agreement that the shortcomings of traditional structures need to be addressed. What was interesting to hear from those involved in the discussion, though, was the innovative solutions that some are already beginning to focus on. In fact, it would appear that some companies are already shifting to outcome-based incentives that align with long-term organizational goals, such as candidate retention, client satisfaction and diverse hiring.

We’re also beginning to see more attention on personalized career development plans tailored to each recruiter’s strengths, interests and aspirations. Real-time feedback and recognition programs are also being implemented to acknowledge and reinforce desired behaviors, cultivating a culture of continuous improvement and motivation.

This is all certainly promising, but the practicalities of implementing what will need to be a steep shift in mindsets are difficult. Here’s some of the core recommendations from those who are leading the way in optimizing reward structures:

Take a customized approach that focuses on behavioral incentives. There needs to be a balanced scorecard that looks at the full value that each individual brings to the business. For this to add real value, it must be tailored to the unique needs of each person. That includes considering what other incentives will motivate people beyond pay — flexible working or childcare vouchers, for example.

Promote transparency and communication. The best way to ensure reward structures are personalized is to encourage staff to engage in an honest dialogue with managers about what matters to them and, crucially, make sure leaders are listening.

Review and update accordingly. The pace of change in the modern world is significant. What is agreed on today could be irrelevant by the end of the year. Regular reviews will keep reward structures relevant.

Invest in training and development. Performance excellence requires skills and knowledge development, but recruitment businesses need to be the drivers of this for changes to stick.

Lead by example through collaboration. Finally, remember that success in the recruitment industry is often the result of collective effort rather than individual achievement. In order to get the whole business on side, management must lead by example and first change their approach.

Commission might not be dead yet, but it’s certainly on its last legs. Staffing firms that want to attract the best in the business need to lead the charge now and revamp their reward structures or risk losing their competitive edge in the very near future.