The practice that gets recruiters in a rage

Printers’ complaints about recruitment consultancies are nothing new, but George Thompson of Harrison Scott Associates has a grievance of his own: the deceitful practice of the “phantom placement”

Most companies are happy with the standard of service they receive from recruitment agencies, but every now and then we get a customer airing a grievance. There are very few complaints a recruitment company can make about its clients in return, but there is one involving a very small minority.

This complaint concerns conduct of such a fraudulent and deceitful nature that other complaints pale into insignificance by comparison. It is commonly known as the “phantom placement”.

The phrase is used to describe a scenario in which a client hires a candidate without informing the recruitment company, in an attempt to avoid paying its fee. This extremely unethical conduct infuriates the industry, and we have grown wise to it. Fortunately, it doesn’t happen too often, but when it does, there is a typical pattern.

Telling signs

After sending the client a candidate’s CV together with its terms of business, the recruitment consultant will set up an interview between client and candidate. A few days later, either the client will call to say they’ve decided not to appoint anyone, or the candidate will phone to say they are no longer seeking a position. Then everything goes quiet.

In large firms such as Harrison Scott, where we have an effective research team, the phantom placement will inevitably be identified within a few months of the hiring taking place. Phantom placements are less acute in smaller agencies, presumably because the volume of business is more controllable and they rely less on sophisticated systems to monitor candidate take-up.

Once the case has been identified, the recruitment firm will send a diplomatic letter to the company, along the following lines: “Our research department has noted that candidate X, who was introduced by ourselves, has since commenced employment with your company. Can you confirm the salary arrangements so that we can accurately invoice you for the introduction fee in accordance with our terms of business.” Inevitably the client will try to wriggle his way out of the situation with one of several excuses, such as:

• Yes, we did interview him through yourselves, but we subsequently placed an advertisement in a national newspaper. Candidate X replied to that advertisement and was then hired by us.
• We decided not to hire the candidate at the time. The candidate phoned us four weeks later and we then hired him.
• When we interviewed the candidate through yourselves, it was for a sales executive position. We then decided not to hire anyone for this role and decided to look for a sales manager instead. Your candidate applied for this position and secured the job. As the position was different to the one we originally discussed with yourselves, we did not expect to pay a fee.
• We interviewed your candidate for the position at company Y and felt he was unsuitable. A few weeks later he was hired by our subsidiary company.
• We knew the candidate before you introduced him to us.
• The dog ate your terms of business.

However, we have yet to hear the ultimate excuse:

• Subsequent to our interview, the candidate met my daughter. They fell deeply in love and married four weeks later. The company now employs my son-in-law; you don’t expect me to pay for a member of my own family, do you?

Luckily, what these firms fail to realise is that most recruitment consultancies’ terms of business cover all these eventualities, and like ourselves, they have first-class administration. In the event of a case going to court, our weight of evidence is much greater than that of the company trying to avoid paying our fee. I am pleased to say that our success rate is 100%.

It’s interesting to note the extremely high fallout rate between client and candidate in a phantom placement situation. The client has shown a lack of integrity by colluding with the candidate, from the outset, and this has a negative impact on the relationship between employer and employee. If the company falls short of any promises made in the first few weeks of employment, the candidate will think it is not their style to keep promises and will look for another job.

I have friends in many other recruitment consultancies, serving a number of industries. Based on our conversations and research, we have come up with statistics on the percentage of overall placements in a year that turn out to be phantom hirings (see table).

The results do not surprise me, as the print and packaging industry is predominantly a very honourable one, and we enjoy dealing with people of such high, integrity. It is also a very tight network that makes getting away with a phantom placement virtually impossible. As Steve Hayden of Print Selection, who was recently awarded judgement in a phantom placement case says: “If the client does not think we are worthy of our fee, the simple solution is not to hire us.”

George Thompson is joint managing partner at Harrison Scott Associates.