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Coach Mike: Draw Versus Salary

Hi Coach Mike! What are your thoughts on draw versus salary plus commission for recruiters. It is very hard for me to justify paying a commission after someone has blanked for two months. If the person was on a draw, I know the money would be going back into the company.   ~Chris, Florida 

 

ANSWER: This is a common problem in the way most recruiting firm owners think. They think about “placements”! Unfortunately, we cannot make placements, we can however manage the ACTIVITY that leads to placements! Having said that, let me ask you: What is your metric system? What is your accountability system? What is your expectation system? If they blank for two months, and they arrange 27 interviews, I do not care because they are due for probably three placements. If they blank two months and they arranged two interviews in two months, that is harder to say. You are asking a question that I probably cannot answer because I have had some of my biggest billers and some of my best coaching clients, go two or three months blanking invoice wise, but the activity was there and the first time interview number told me they were DUE!  

Let us say you have an 8 to 1 first time interview to placement ratio and you arrange 32 interviews, but all of those interviews blow up. If you just quit and fire that person, of course, you are not going to see anything. But if that person goes 33, 34, 35, 36, 37, 38, 39, 40, my experience is in the subsequent first time interviews more of those are going to turn into placements. At the worst point in my career, I went 4 months and 54 interviews without making a placement.  I have got to tell you it was probably one of the most productive periods in my career and I was seriously questioning if this was the right business for me.  

I was tracking metrics and my ratio was higher back then - it was 11 to 1. Yet I remembered everything I had been taught and knew that I was due for 5 placements. Metrics never lie, because 7 or 8 out of the next 12 first time interviews became placements and I caught right back up to $150,000 in a 2 month period. What if I worked for you? Would you have fired me before I hit that vein of gold? 

That could be the case here Chris, I do not know. Another reason why they could be they blank across the board meaning is that they are simply not doing the work. In that case, why would you wait 2 months to confront that? 

My whole philosophy on salary versus draw is when it is done the right way, you have an accountability system in place where you know what success looks like at the activity level, not the placement level. I can confront that the day after, or worst case the week after there is low productivity.  

I believe in paying a salary and a lower commission rate. That is one of the things I teach in my program.  I have a salary and 5%, 10%, and 15% brackets up to my 35% bracket so that in effect I get the salary back when they produce. In selling the opportunity to new recruiters, they do not want to go home to their spouse, or parents and say that they have a draw versus commission job. A draw pay structure screams straight commission, unsophisticated, not a career. You are going to lose some good talent because their outside influencers are going to ask if they really want that type of job.  

I am not saying it does not work, I am just saying the cost structure is identical with a salary. Actually a salary structure is less expensive because if you hire a new recruiter on salary, have a quota system, and they blanked for 2 months and have not hit their numbers, I get the money back anyway. You still get the salary back in a salary system versus a draw system.  

If you do not have an activity-based accountability system, that is something you need to implement right away. Regardless, you want to be able to confront low productivity week one. You do not want to wait until month two of blanking to confront performance.  At the end of month two the person is already having far harsher conversations in their mind with themselves than you could ever have with them. I found to be the most effective influencer with them as a coach is to confront a drop in productivity, meaning job orders, send outs, and presentation, the week it happened.  

Great question.  Thank you.

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