Rumpelstiltskin recruiting and the Queen Syndrome

In case you don’t know the fairytale of Rumpelstiltskin; there was a king who shut a miller’s daughter in a room full of straw. If she could turn it into gold, she would become a queen. If she didn’t, she would be executed.

A mysterious imp offers to do it on her behalf, for a contingency fee. If he can turn the straw into gold, and she becomes queen, she has to give him her first-born child.

Seeing no other way out, she agrees. Later when the imp comes to collect his bounty, the miller’s daughter is now a queen. She is powerful and happy with her newborn prince. She has cold feet about their bargain, and refuses to give her child up. The imp gives in and agrees to forgive the bounty if she can guess the imp’s name. His name is Rumpelstiltskin[1].

Conventional recruiting agencies[2] have a revenue model that charges 20–30% of an new hire’s first year salary for making a placement. This makes sense for the company when they don’t have a great flow of qualified applicants for an unfilled job. It often takes months to find the right person. The opportunity cost of having an unfilled position (or a bad hire) makes it easy to justify promising 3 months of the hire’s salary as a one-time finder’s fee.

But this cost only makes sense if every single hire made through an agency was perfect. This is rarely the case — and often it’s not even the agency’s fault.

So agencies try to guarantee their hires for a period of time — leading to the evolution of the “30–60–90” contingency contract for headhunters.

• Employer pays a fee of 20–30% of the first year salary on the day of hire
• If the new hire lasts less than 30 days, the agency refunds the employer, or offers a replacement hire
• If the new hire lasts less than 60 days, the agency refunds 2/3 of the fee to the employer
• If the new hire lasts less than 90 days, the agency refunds 1/3 of the fee
• If the new hire lasts 90 days or more, the agency keeps the full fee.

Most hiring managers are not dependent on agencies for every hire. In fact, a majority of hires come from direct outreach, referrals, and other sources. This often leads to the same “queen syndrome” when the time comes to pay up after the hire, which result in actions that may not be in the best interest of the company.

• Favoring applicants that don’t come through recruiters.
• Letting go of new hires on day 89.
• The hiring manager may claim that the recruiter is “not deserving” of full credit, if the applicant also approaches the company through other channels.[3] This causes undue stress, damages future results from that recruiter, and wastes energy.
• The hiring manager may be subconsciously biased against the new hire for costing the company (even though the cost of filling the position wouldn’t have been vastly different otherwise).

I’m not saying that contingency payments are always bad. Paying for results makes a lot of sense. But the Rumpelstiltskin model can have unintended consequences even when it’s a fair deal.

Every ❤ below helps this straw turn into gold. If you want to read more about recruiting, you can check out some of my other posts here, and follow me on twitter here.

[1] I sometimes wonder if ol’ Rump got ripped off big time

[2]Contingency is not the only model, neither are all recruiters imps.

[3] This cuts both ways — and there are also instances of agencies abusing the contract when they in fact do not deserve credit.