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Take Care with Recruiter Data in Compensation Planning


Just a few weeks back, one of our clients called us in, well, not quite a panic, but certainly with a bit of concern.  The subject?  The cost of hiring new accounting graduates was expected to increase nearly 5% for the spring of 2016. “Were we able to confirm this?” For accounting firms, this is a big deal, of course, as their new “class” of graduates represents their future, and there is an obvious ripple effect throughout the rest of the workforce if starting salaries increase dramatically. Using the magic of the internet, we traced this back, through article after article, each citing each other, until we found the one, and I repeat ONE, source of this “projection” – the “hiring guide” for a major recruiting firm.

Since this “projection” didn’t really tally with any other data we could find, and was somewhat in conflict with some college graduate starting salary data from a national association of colleges and universities, the next thought was to check their methodology. They must have surveyed firms to get a handle on what they would pay their new graduates, right?  Nope.  Turns out, and this should really come as no surprise, there was no use of actual survey data – no controlled study of employers to determine what they projected would happen, but to put it in the parlance of the rest of us – it’s a W.A.G. (and I don’t mean “wives and girlfriends”) based on their “experience and expertise from thousands of assignments.”  Please don’t get me wrong – I know they put a lot of work into their “projections” – but when all is said and done, those projections are completely self-serving.  If I get paid based on how much someone’s starting salary is, I want that salary to be as high as possible, and knowing that is the motivation, you have to be careful.

This is one of the reasons why you need REAL data when doing your compensation planning.  No projections based on expertise, no “proprietary algorithms,” no “input in your salary and we’ll show you how underpaid you are” free internet websites. This recruiter was able to actually create a change in the expectations of the market, to the point that the industry repeated the projections over and over so many times that they became “fact.”  You know what they say, repeat something enough times and it will come true.

Rewind a few more months, another client had called in a controlled panic.  “My recruiter says we can’t hire a family practice physician for less than $200,000, and in the last four months they haven’t been able to bring us one for less.” Well, we have another client – same business model, type of operation, etc., same distance to the nearest big city, almost even the same latitude.  So I asked them how they hired their last family practice physician.  Didn’t use a recruiter, just placed ads, had plenty of applicants, and hired their first choice for $175,000.  Went to this recruiter’s website to get their “hiring guide” and to no surprise, the projected rate for a family practice physician was $198,000.

Look – recruiters have a business model, and like all people on commission, there is a desire to make the best possible commission.  I have nothing against recruiters, I even have friends who are recruiters.  Just remember that you should never, ever, rely on data from anyone who has an interest in the results.