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.

Learn about SourcingTalent.Cloud – Contractor Job Marketplace for Recruiting, HR, and Sourcing Projects:

Sign up for our pilot here: http://ift.tt/2gQf0gW

Help us create the right functional categories and skill-sets by completing this 2 minute survey: http://ift.tt/2gWCrZY

 

ABOUT THE AUTHOR:

James Chmielinski is a second generation recruiting veteran, former baseball player, 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.  

Last year, Veruca.io: Find (Mr. Chmielinski’s inaugural software) attracted 178 active users in 114 cities from 17 countries.

This year, James created largest recruiting community on slack called "Recruiting Innovators", a hub-spot for recruiting jobs, networking, news, and best practices. 

His latest project, SourcingTalent.Cloud (http://ift.tt/2gQf0gW), is scheduled for a pilot program release within the quarter. Sign up for the pilot by emailing info@sourcingtalent.cloud.  Help us by taking this survey to make sure we include all work categories.

James aims to make life easier for sourcing and recruiting teams and hopes to achieve this by developing an innovation lab where teams convert the best ideas into products.

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December 4, 2016 at 08:32AM

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