Types of Physician Recruiters / Types of Physician Recruitment Firms / Three Different Schools of Physician Recruiting
by Bo Claypool
As a recruiting entity, if you shop around for a firm to work with, you will invariably encounter a myriad of firms, with a whole host of fee structures; some are quite simple, whereas some are outright bizarre and entirely convoluted. In general, however, most physician recruiters work for firms that can be lumped into one of three categories:
1)The retained physician search firm;
2)The contingency firm;
3)The hybrid physician search firm.
The retained physician search firm
Most of the time, people over generalize when referencing physician recruitment firms and whenever they encounter a firm that requires some sort of cash outlay for use of their services, they categorize them as “retained.” This makes descriptive sense, but for our purposes here, and why will become clear later, we will categorize those firms as “retained” firms if 100% of the expense for physician recruiter services is remitted irrespective of outcome or success of the firm. Most of the time, a retained arrangement involves a very high degree of exclusivity for the client so that they are assured that the physician recruiter has no other competing positions and therefore no conflict of interest is present.
So, as an example, retained search firm X is hired to find a Medical Director of a Major Healthcare delivery system, the fee for which is $100,000 (CMO searches are extremely difficult and while this fee is admittedly exorbitant, it is not unheard of in the world of retained physician search firms). The Client is invoiced for 1/3rd upon initiation of the contract, 1/3 upon 90 days of the search and the remaining third at 180 days. Regardless of whether 0 or 12 candidates are presented, and irrespective of whether a CMO is hired, the client’s total financial liability to the firm is $100,000.
Or, as another example, physician recruiter X is hired to find a family practitioner for a local multi-specialty group and this recruiter charges an hourly rate of $125. A physician recruiter who charges hourly will generally require that they be recompensed for a minimum number of hours and, sometimes but not normally, they will cap the amount of hours to limit their client’s potential financial liability. So, as an example, physician recruiter X spends 25 billable hours working on their client’s search, which leads to the successful recruitment of a candidate. This recruiter required a minimum of 80 hours of billable hours for this search, so the client’s total financial liability is $10,000, though it would have been that if a family practitioner had not been found.
Pros: The most obvious benefit of this sort of arrangement is that the client can expect an exceptionally high level of service, to include the physician recruiter even being part of the interview process. It is not uncommon within a retained search arrangement for a retained physician recruiter to conduct an “airport interview” of a candidate, which is generally a brief interview conducted at a place of mutual convenience for both candidate and recruiter. Furthermore, within most retained arrangements (especially in the first example) it is not unreasonable for the client to require a very high degree of exclusivity. So, for example, as present above, if the entity looking for a CMO is in the northeastern US, it would be a reasonable concession for the physician recruitment firm in question to not take on any other CMO searches in the northeastern US where the pay is within $50,000 of what is being offered.
Cons: The clearest downside within this model is that the financial liability for the client is the same irrespective of outcome, therefore a substantial cash outlay can be made with no result. Furthermore, there are many retained physician search firms out there that “over promise and under deliver” with respect to the level of service they provide. In fact, it is common knowledge within the physician recruitment industry that one of the largest physician search firms’ business model is predicated upon getting a sizeable retainer out of a client and then doing little to nothing with it. Be sure and check references when going with this sort of arrangement with a physician recruitment firm. Furthermore, just because a firm sends you a sheet of references, don’t assume they are necessarily good (this is a common tactic; to flood and overwhelm a prospective client with too many names to count so that the client, through laziness, merely assumes that all the names on the reference sheet speak the praises of the firm).
The Contingency Firm
A contingency firm or physician recruiters who work on a pure contingency basis are paid 100% of the fees earned solely contingent upon successful hire of a candidate, which is usually defined as upon mutual execution of an agreement for employment or professional service between a candidate referred and the hiring entity. The majority of physician recruitment firms fall within this model, with some estimates being upwards of 2/3rds of all firms. Physician recruiters often take this shape because there is a very low barrier for entry within becoming a contingency recruiter. You need only know how to post ads on job boards to call yourself a contingency recruiter.
As an example, contingency firm X charges a $25,000 contingency for the successful recruitment of a physician, so that the client’s total financial liability is $25,000 which is only realized in the event of a successful placement.
Or, as another example (one which predates contemporary standard), contingency firm X charges a contingency fee of 25% of the physician’s first year salary so that when the physician is hired with an annual salary of $150,000, then the contingency firm charges the client $37,500 (.25*$150,000). Of note, while contingency fees as a percentage of first year’s salary is very common within recruitment of other professionals, including even other healthcare professionals, it has become rather uncommon within the world of physician recruitment.
Pros: A contingency arrangement is very attractive of course because the hiring entity takes on no amount of risk since the contingency physician recruiter is only paid in the event they succeed. It is hard to compete with this upside, but as you will see there are some pretty severe drawbacks inherent within this model as far as the hiring entity is concerned.
Cons: The simplest explanation for why a pure contingency agreement is a poor decision is that you get what you pay for. Actually, in the event that the contingency recruiter is successful, you actually get less than what you pay for which is expounded upon below. The legitimate obligations to a pure contingency arrangement are so numerous they need to be sub-categorized.
All of the following objections rest upon this first, very basic concept that follows. The level of service you can expect from a contingency firm is necessarily less, and reasonably so, than you can expect from a reputable firm who is guaranteed at least some amount of compensation for their efforts. This is highly debated, but the simple math of it is that if a contingency recruiter puts in 40-60 hours of aggressive recruitment effort and expends a substantial amount of their own money in promoting a job opening through various mediums, and the hiring entity merely decides they are not longer interested in recruiting a physician, the contingency physician recruiter not only did not make money, but when you factor in the time-price involved, they actually lost money; the could have worked at McDonald’s for minimum wage and done better for themselves. Therefore, given this…
It is understandable why physician recruiters who work on a pure contingency basis take on anywhere from 5-7 times the number of openings than other physician recruiters. This is because contingency recruitment is a very volume driven and focused around candidate availability, rather than client need. The contingency physician recruiter is best served by finding a candidate who is highly qualified and highly motivated to relocate and then shopping that particular candidate around to which area(s) the candidate has a preference for. It is not uncommon for a contingency recruiter to have in excess of 5-10 agreements running concomitantly with various hiring entities in an area, and all of them based around the availability of a single candidate. The contingency recruiter gets as many agreements with as many appropriate hiring entities as they can in the candidate’s area of geographic preference, sends the CV to all of them, and then the recruiter crosses their fingers and hopes one of them hires the candidate. So therefore, given this…
A hiring entity can rest assured that one or both of two things will be true about the CV’s they get from a contingency recruiter: 1) the number of CV’s received will typically be very low and it is not uncommon for a hiring entity “working” with a contingency recruiter to receive only a single CV from the recruiter and that constitutes the totality of the relationship and 2) regardless of whether #1 holds true, it is typically the case that the candidate presented is either not up to the standards of the opportunity or not familiar with the job they are being presented to. Again, recall that it does not make any financial sense for a contingency recruiter to spend an exhaustive amount of time prequalifying a candidate and familiarizing the candidate with the specifics of the job. So, given this…
In most situations, the hiring entity receives a CV from the contingency recruiter that is either not up to snuff, or that of a candidate that is disinterested in the opportunity. In this case, the hiring entity has wasted their time involved in reviewing the contingency agreement the signed. However, on occasion, a contingency physician recruiter does come through with a viable candidate. So, in the event that this occurs…
More often than not, the hiring entity really takes on the job of the recruiter. True recruitment involves so much more than just referring a candidate or “pushing” a CV. For instance, a professional recruiter who is not working on a contingency basis can be expected to participate within contract negotiations, in familiarizing the spouse with the prospective community, sometimes assisting the spouse in finding employment in the prospective community, helping the prospective candidate find housing, etc. None of this can be reasonably expected from a contingency recruiter, again, for the same reason presented above. It doesn’t make financial sense for them to expend a lot of effort. That said, on occasion the referral of a candidate on a contingency basis does lead to successful hire. Congrats! You now owe a recruiter $18-30,000 for sending you a CV you probably could have gotten yourself. But more often than not there is no successful hire of a candidate referred by contingency recruiter, so therefore…
The hiring entity decides to try “working” with another contingency recruiter, and then another and another…what’s the harm of signing 20+ contingency agreements? There’s no financial obligation unless you hire someone. The harm may not be immediately obvious, but it is very real and prevalent. Since contingency recruiters work almost solely with those candidates who are openly on the job market, various contingency firms often cross paths when sourcing candidates and it is absolutely commonplace for a contingency recruiter to encounter a candidate who seems perfect for an opening and then when the candidate is contacted, it comes to bear than another contingency recruiter has already presented the candidate to the client. Now, the contingency recruiter’s incentive becomes different; they now not only have no incentive to have the particular physician take your position. They have incentive to dissuade them from your position. While doing so is considered unethical, please do not be so naive as to think this sort of thing doesn’t happen.
And the cycle continues…
Of note, it is well known that while there are a substantial number of candidates recruited each year on a contingency basis, it is generally accepted that those recruited through this method remain at their new place of work for substantially less time than those candidates recruited through other methods. In other words, contingency arrangements are not only problematic for recruitment but for retention as well.
It is also important to note that there are outliers and exceptions to every rule and this “con” section is admittedly a generalization that is unfair to the few contingency firms that do not operate in the manner outlined above. Unfortunately, they are in the minority when it comes to this sort of arrangement with a physician recruiter or physician recruitment firm.
The hybrid physician search firm
Both models presented above are obviously problematic. One puts you at risk for spending a lot of money for naught, the other puts you at risk for spending a lot of time for naught. Since time is money, is either really different or really worth it?
We feel there is a solution and it is as follows. The ideal arrangement for physician recruiters to work with their clients is under a hybrid model, which is exactly what the name implies; a hybrid that takes the best from both models above. There is a cash outlay that ensures that the recruitment firm is accountable to their client, has funding to market the opportunity through a number of vehicles for candidate sourcing and ensures that the firm is exclusive to the client to a reasonable extent. That said, the majority of the total monies remitted should be only once a candidate is successfully recruited. Conceptualize it as a contingency arrangement, whereby the firm is paid for at least their time and resources expended.
As an example, hybrid physician recruiter X charges a fee of $24,000 to recruitment a qualified physician candidate meeting a client’s needs. As such, the firm requires an initial cash outlay of $7,000 to fund the marketing efforts for the client and if, and only if, they are successful and refer a candidate that is hired, then they are paid the remaining $17,000.
Many of the Pros and Cons presented above remain to an extent; however, the Cons are mitigated substantially within this arrangement if you are using a reputable hybrid firm with a tried and true track record of excellence in physician recruitment. Check references!
What sort of arrangement do Integro Physician Recruiters work under?
As you can guess from the above, we strongly favor a hybrid model and the gross majority of our searches fall into this category. Some more difficult searches we do take on a pure retained basis. We almost never work on a pure contingency basis, lest the circumstance be exceptionally compelling and an iron-clad exclusivity arrangement exists between the client and our firm.
That said, every need for a physician recruiter or a team of physician recruiters is unique, so feel free to contact us by calling 312-83-4DOCS (3627) or filling out the form below in order to discuss your particular needs and which sort of arrangement we think is best for your situation.