Understanding Back Door Hires For Employees Replacements

It was the summer of 2011 when I first noticed the surge in Back Door Hire Placements. At first, I thought it was a simple cycle or fad that I had seen from time to time over the last 25 years of collecting Staffing and Recruiting Debt. In the ‘90s, it was a surge in IT Placements that gave me a heads up about the approaching .com implosion. In the Mid 2000s, it was a surge in Construction Companies that were being placed for collections that gave me a heads up before the Real Estate Crash.

Then again, who could forget 2008 and 2009? In 2009 alone, we had over 4 Community Banks per week, on average, being placed for collections. In 2009, I knew when the Banks had run out of money; it was going to be a very scary year for everyone. Last year, we saw a surge in Oil Companies placed for collections, and a year later gas was cheaper than it had been in decades.

I have learned over the years to listen to what the market is doing. It is not that I am all that smart, it is more because of the nature of our business that we typically see a crisis or downturn within industries before Main Street or The Media reports them. In my mind, it feels like the old movies when the Indian would lay his head on the ground and listen for vibrations to track buffalo. If you take a moment to listen, you will hear all you need to know about what business shift is heading your way.

What new cycle or business shift was going on? I asked my staff to pull the numbers on all Backdoor Hire type accounts that were placed for collections over the last 12 months. To my surprise, we had a 289% increase in Backdoor Hires over the year. Hmm… like I said, I am not that smart. The fact is if I had been the Indian putting my head to the ground, I would have been stampeded by buffalo before I could get up to tell you about my great hunting abilities.

There it was in black and white. A former business partner of mine once told me that math never lies. I was a little in shock as I dove into the data because, in 25 years of tracking surges I had never seen one like this. It covered all industries and all sizes of companies: Fortune 500 Companies, Mom and Pops, and all the way down to Startups. It included hospitals, nursing homes, car dealerships, tech companies, banks, and manufacturing. Not a single industry was immune. The numbers were huge. One of the larger recruiting firms alone had placed over $1,000,000 in Backdoor Hire fees.

Why was this new cycle running through the industry? The first thought I had was, “OMG! This is because of the last recession! Everyone is out of money, and this is how they are going to reduce cost,” but then I then looked at the companies that had been placed for collections, and most of these companies did not fit the “I am broke and surviving profile.” In fact, the opposite was true; most of these companies had great credit reports and did not have many of economic challenges. This made the puzzle even more confusing because in past cycles that I had watched tough economics had been the one common denominator; the industry was out of cash and in decline. This epidemic was unique though because it was not being driven by economic decline.

For the first time in 25 years, I had witnessed a surge in Backdoor Hire placements that did not have an economic theme. Initially, the only economic theme I saw in 2014 was a 23% increase of our company’s revenues. This was good news for us, but it was also good news for our clients because at least we were collecting on the

debt that came in this new collection wave. That was a plus because, in some of the cycles, this was not the case. For example: in the 1990s, the .com companies were more than likely out of business when they were placed for collections. This is similar to the community banks in 2009 when over half of the banks were taken over by the Feds within 30 days of being placed for collections. So, this surge of collections was unique in a positive way as well because our clients were getting paid when they placed their former clients for collections. This was a positive effect, but it also made it more confusing.

In 2011 and 2012 I started to dig a little deeper, and when new placements would come in I would ask our clients a few extra questions. I started calling the in-house attorneys at the large recruiting firms’ collections departments I had worked with for years, and they all noticed the same thing. Their increases in Backdoor Hires mirrored our numbers. We were now at a 410% increase over the last 24 months, and the rate was still increasing. I still could not find a common theme, but I wanted to warn the industry that I have serviced over the last 25 years. So in 2013, I wrote my first article about this “New Wave of Collections” that we were starting to see; I even taught a few webinars on the subject to try to give everyone a heads up.

The information I received did not make sense at first, but a common theme eventually did appear. It was scarier than I could have ever imagined, but when fully processed it was equally as exciting for me and for our clients. When I realized the common underlying theme, I was also faced with the reality that this “New cycle” or this “New Surge in collections” was not new. This issue had been in the Recruiting Industry as long as the Recruiting Industry had been around.

The rise in our Backdoor Hire epidemic matched the rise of companies like LinkedIn. So this would mean that in 2012, when I first noticed this upswing, I was not seeing anything new. What I was witnessing was technology finally catching up to the industry and it shined a light on what has been going on for years. That is, a certain percentage of your candidates were getting hired behind your back. It is ironic that a technology most said would make recruiters obsolete actually helps them collect millions of dollars they are owed in fees they would not have known existed otherwise.

Now, what can we do with any of this knowledge? I can tell you that the story does not end in 2012 when I noticed the obvious. In fact, 2012 is the beginning of this journey, and as you read the next chapters I hope to share with you the secret to catching Backdoor Hires and being prepared in order to get paid if you do find them.