Pros and Cons of Working with Recruitment Agencies
Outsourcing vs. In-House Recruitment When Scaling Your Business
If you're a hiring manager, you know selecting the right candidate is critical. But with unemployment rates driving a tight labour market, finding talent is challenging. If you're considering whether to partner with a recruitment firm, this article is for you. Especially if you already have an HR department or team that handles the hiring.
We understand the need to know when, why, and why not to work with a recruitment partner. Adding a team member is an investment in every sense of the word. Trusting that process to an outsider isn't a simple decision. Knowing when, and if, to support your team with recruitment requires some consideration.
At SRG, we offer recruitment services. But truthfully, third-party recruitment might not be the best choice for you, right now. In fact, in-house recruiting may be the way to go. What this article tries to do is take an honest look at the pros and cons of external recruitment services. Our aim is, by the end, to enable you to make the most informed choice for yourself.
We'll look at differences, list pros and cons, and suggest some guidelines to keep in mind. Let's dive in.
What are the differences between outsourcing and in-house recruitment?
Working with a Recruitment Firm
Outsourcing recruitment means handing the leg-work of hiring candidates to a third-party provider. Depending on the firm used, it means opening up hiring options to a much larger talent pool. A major benefit to you is the access to passive candidates.
Third party recruiters usually handle all the steps of recruitment. These are the activities leading up to the actual on-the-job training. The steps include job analysis, sourcing candidates, screening, interviewing, selection, and onboarding. The extent of their involvement with these steps depends on their role with your company.
Pros of working with a Recruitment Firm
Experts in the hiring process. Recruiters specialize in finding and attracting top talent. Years of networking and experience provide access to a deep pool of candidates. While hiring could be a new(ish) experience for you, it's their bread and butter.
Meritocracy. Recruiters are incentivized to put your interests first. The recruitment industry is a true meritocracy: only results count. This represents a massive benefit for companies using their services. The recruiter gets paid more for delivering more. Client satisfaction is critical to building a partnership and earning great compensation. Basically, they get paid more to help you more. Metrics that net them more include:
Sticking to the timeline. The faster they work, the more projects they complete.
Communicating well. Communication increases likelihood of future partnerships.
Presenting a great candidate that will impress (now and in 6 months). Recruiters learn to balance speed with accuracy. One without the other means clients won't come back.
Saving time. Outsourcing recruitment can save your business significant time. You can free up your team to focus on core business functions.
Reducing Costs. Save money on recruiting-related expenses, such as advertising, candidate assessments, and recruitment technology. If your business can hire without these recruiting expenses, you may not save money.
Flexibility in the hiring process. You don't have to work with recruitment agencies all the time. You can bring them on for a project-by-project basis or for ongoing recruitment needs. Because they can be a back-up resource, they can scale recruitment up or down as needed.
Recruitment Firm Cons
An added cost. Recruitment agencies charge fees for their services. Depending on the role, these can be significant for small and mid-sized businesses. (A useful question: what is the cost of not using a recruitment firm?)
Less control over the process. While recruiters gather information and follow your instructions, there is less direct oversight. Generally, this isn't an issue. But it's good to know if you have preferences around candidate sourcing.
Good communication depends on the recruiter. Effective communication is crucial to the recruitment process. This goes both ways. Lack of communication results in misunderstandings, misaligned expectations, and wasted time and resources. If communication breaks down, our team sets a "re-alignment meeting" to get things back on track.
Determining a culture fit. Outsourced recruiters won't have the same understanding of culture as internal recruiters. This is why the initial discovery phase is critical. Recruiters need to ask questions and learn about your culture and values. If a recruitment firm skips this step, watch out. Missing that conversation can result in mismatches.
Working with In-House Recruiters
In-house recruitment means handling all the above responsibilities with your company's HR team.
In-House Recruitment Pros
There are some clear benefits to in-house recruitment.
Allows you full control over the process. In-house recruitment allows hiring managers control over candidate sourcing, selection, and onboarding. If there are details or workflows that need direct oversight, it's easier to manage.
Deep understanding of company culture. In-house recruiters have a better understanding of the company's culture, values, and goals. Their gut-check will be natural for cultural fit.
Potential for cost savings. Relying on an internal team can be more cost-effective than outsourcing. This is particularly the case for companies with large and steady recruitment needs. Sometimes it's cheaper to pay a team and equip them with recruiting technology. That said, many of our client relationships are with companies that have recruiters. Hiring isn't often steady. In-house teams can get over-run with seasonal hiring changes. The larger the hiring demand fluctuation, the more third-party recruiters help.
Building a strong employer brand. In-house recruiters are well positioned to understand and communicate values. A strong employer brand is a long term game. Many organizations that invest in employer branding reap benefits for years. There is a cost to this investment. Companies with a strong brand (take Google for example) don't need to advertise to talent. Talent finds them. Additionally, in-house recruiters are set up to identify internal candidates to promote. Internal promotion is an effective way to build employer branding from the ground up.
Communication will likely be faster. (Especially when your HR team is just down the hallway). It can be easier to collaborate on the go. Our team commits to weekly updates, and is always available by email and phone. Not every recruiter is like this.
In-House Recruitment Cons
As mentioned above, recruitment is a drain on resources and time. When an HR department handles recruitment, they are drawn away from other tasks. This becomes more noticeable for large or unexpected hiring needs.
As we'll discuss below, in-house recruiters generally don't engage passive candidates. This represents a major drawback, as dedicated recruiters specialize in passive talent pools. Here are several issues that arise with in-house recruitment.
Recruiting can be resource intensive. In-house recruitment can be time-consuming and resource draining. Especially for small and medium-sized businesses without dedicated HR or recruitment teams.
Limited technology and channels. Recruitment agencies have more resources and access to recruitment technology. Many invest in advertising, job boards, premium Indeed and LinkedIn accounts, continued training, and other candidate facing resources. These enable them to recruit high volume and find exact skill sets for niche searches.
A lack of industry expertise. This is no hit against in-house recruiters. Some in-house recruiters are generalists by demand. They hire across several skillsets and have wide but shallow industry knowledge. Dedicated recruiters tend to specialize in niche industries or for hard-to-fill roles. These recruiters offer a rich niche understanding to benefit a search. Other in-house recruiters specialize in one niche type of role. In this case, external recruiters can assist them with searches outside their pervue.
Access to a limited network. In-house recruiters may not have access to the same network of candidates. Third party recruiters have access to passive candidates. They know how to find them and are able to persuade them to consider new opportunities.
Why are passive candidates so important?
Passive candidates are people who are currently employed. They aren't actively seeking new job opportunities. Yet, they are often open to a new role if the right opportunity presents itself.
The reason why these are valued individuals in the recruitment world is their experience and current skillset. They're already demonstrating a level of success in their current roles. These aspects aren't guaranteed with active candidates. Many are unemployed, between jobs, or haven't worked in years.
Passive candidates are difficult to access for many reasons. They aren't regularly checking for new job opportunities. This means they're difficult to connect with through job boards, Indeed, or Linkedin. Even with contact information, they're often hesitant to start a conversation about a new role. And most of all, passive candidates are selective with the roles they consider. This is for obvious reasons. They currently have a job so there aren't any pressures squeezing them to make a quick decision. It takes skill and tact to connect and persuade passive candidates to make a move. Often, some of the best hires come from this group.
Some estimates suggest passive candidates make up 70% of the workforce. To overlook them means to overlook the majority of talent in the market.
When is in-house recruitment a better choice?
There are times when in-house recruitment is the way to go. Not every hiring situation will need the expertise of a dedicated specialist. Here's when it can be wortwhile to recruit in-house:
When it will save you money. Let's be honest. The decision to use a recruiter or not is a business decision - will it help the bottom line? If your recruitment needs are low, or undemanding, it might make financial sense not to outsource.
When there isn't a timeline. As mentioned above, recruiters are incentivized to stick to a timeline. While you don't directly pay for their hours, the faster they find the right candidate, the faster they can work on another project. Their urgency is a benefit to you. If there is no urgency for the hire, it doesn't necessarily make sense to outsource. A notable exception is for niche or executive searches.
When you rely on internal referrals. Some teams have a preference for internal referrals. Certain industry cultures have tight-knit communities where employees have personal connections. These companies often incentivize team members to recommend potential candidates using reward systems. For culture based hires, in-house recruiters like to manage referrals and evaluation. This situation allows for savings on advertising and sourcing.
When you already have access to a solid network of hirable candidates. If your industry is flush with qualified candidates looking for work (or if your brand is so attractive candidates are lined up - that's not many of us, don't worry), it's in your best interest to use in-house recruitment. Google gets over 3 million applications per year. They might need help organizing resume stacks, but not attracting talent (for entry level roles, at least).
When is outsourcing a better choice?
Likewise, there are situations where outsourcing hiring is in your best interest.
High volume fluctuations. If your business has many open positions with urgent demand, outsourcing is efficient. Many clients find having a recruiting partner as a resource to be invaluable. It doesn't take much change to bog down an internal recruiter. Seasonal fluctuations can stress an already busy HR department. Because of our access to large candidate networks, we can make quick work of large volume demands.
Seasonal hiring fluctuations. Many industries ramp up at certain times of the year (e.g. retail, hospitality, agriculture, construction, tax, education, etc.). These fluctuations can put a major strain on internal hiring teams. Planning ahead with a third-party recruiter can mean they're able to line up hires in advance. This takes the stress out of the transition to full capacity.
Hiring in multiple locations. You may need to hire in another region for a variety of reasons. Expanding that serve customers in different locations may face challenges during hiring. For example scheduling interviews and managing communication with candidates is time consuming. Add in geographic factors and it's downright complicated. Finding qualified talent in each location can be difficult. This is especially the case for specialized roles and industries. Third-party recruiting firms often have national reach, with talent pools in other regions. They're able to use these connections to attract and hire local candidates.
When hiring for unique or specialized skillsets. Rare skillsets pose a recruitment challenge. There's a limited talent pool. They're often in high-demand. They're job description requires industry-specific terms. These factors are critical to make sure the right person is hired. Often, recruitment firms have dedicated recruiters who focus on one niche. This represents a massive benefit for your business. They'll have access to the talent pool and know the industry inside out.
When due diligence is a hiring factor. Certain recruitment needs are higher risk than others. In some situations, there’s no room for a bad hire. A company that fails to hire the right person for the job would incur real world consequences. In these cases, using a firm demonstrates and proves that not only was the organization willing to make an investment in the hire to increase likelihood of success, but that they also did their due diligence, in selecting a qualified, professional search service for the role.
The Bottom Line
Choosing whether to outsource recruitment is a give and take. What works best for business situation depends on what kind of hiring you're doing. Certain businesses will have an easy time deciding. For example, a small start-up with a lean team will choose recruitment services. This avoids the cost of a full-time recruiter. But, larger companies with internal recruitment teams will have more to consider. often, they'll combine the efforts of their in-house recruiters with a third-party resource. Partnering with a recruitment partner can save them time, money, and resources. Particularly in recruitment situations with large hiring fluctuations.
Hopefully, you're now equipped to consider whether outsourcing is right for your business, right now. If there are concerns or questions, we're interested in answering as we're able. Please don't hesitate to connect with us.