The recruitment market has been operating for many years similarly. Admittedly, new tools and channels for acquiring candidates appear, and the power parity between the employee and the employer’s market changes depending on the economic situation. However, there are certain elements of this puzzle that have been painfully unchanged for years – one of them is the way in which companies cooperate and relationships with recruitment agencies.
A company comes to an agency but only when there is no other choice
Recruitment agencies are entities that enjoy a bad reputation among employers. Among the most common accusations that companies face are too high prices, poor quality of the recommendations provided, and even sudden termination of contact when the chances of profitable completion of the project decline. This, in turn, translates directly into a decline in employers’ confidence in external HR service providers.
As a result, companies often prefer to make the effort of building an internal recruitment team that will understand the organization and its needs better than to outsource recruitment to another external partner. And this creates new challenges for employers, including:
- Costs of employing specialists. Only a few companies, especially at the initial stage of growth, decide to go to large expenses. Recruitment is therefore carried out by less experienced HR specialists, managers or even board members. The apparent savings, however, translate into a decrease in quality and extension of the process.
- Recruitment to various areas – internal recruitment teams often specialize in acquiring candidates for a specific area of the company. This applies especially to companies in the area of IT and software houses. Problems in the recruitment market arise when you need to quickly recruit a new employee for the marketing or administration department, and the current HR team lacks broader recruitment experience.
- Scalability of recruitment – companies in the phase of intensive growth often face the challenge of suddenly enlarging their team. Especially if they use the support of investors who expect the project to scale quickly. And yes, HR teams that previously recruited 2-5 candidates a month must suddenly hire 100 people at the same time. And this turns out to be impossible.
- Lack of knowledge and experience in recruitment – especially in young companies, the level of knowledge about effective recruitment, onboarding and employee retention is low. Unfortunately, this increases the risk of candidate mismatch or high employee turnover, which in turn translates into financial losses.
Despite these challenges, recruitment agencies find themselves at the end of the recruitment food chain, and employers decide to support them only when they find themselves in a difficult situation. Below, I analyze and look at the most common objections that are made to agencies.
Why is recruitment outsourcing so expensive?
When deciding to outsourcing recruitment, the company must of course conduct a cost analysis. And this often gives a clear answer – a one-time recruitment project with the participation of an external HR company may be more expensive than the monthly salary of a lower-level specialist (!). And here the circle closes – deciding to save, the company returns to the concept of internal recruitment and gives up the benefits that could be obtained from working with an experienced partner.
Why are recruiting outsourcing costs so high? This is mainly due to the model most agencies work in, popularly known as the “success fee”. In a literal translation, “reward for success” consists in paying the fee for the recruitment project only after employment. So it can be said that this is a security gap for both parties – you pay only for the results of the agency’s work or you pay nothing if the services turned out to be ineffective.
Such a model seems to be very advantageous for employers (I don’t pay until I get the results), but it is the reason behind such high recruitment costs. Agencies carry out most of the projects “on credit” , not being 100% sure that they will receive remuneration for them – the project may fail, may not be profitable or the employer may not accept any candidate. Therefore, agencies, by increasing the costs of commission for employment, somehow secure their budgets and finance recruitment failures.
Candidate acquired internally vs. recruited by the agency
What about the quality of recruited candidates? Many companies believe that an external partner will not be able to recruit a suitably matched, loyal or motivated employee. And it’s hard to convince them that a proper understanding of the company’s profile and a well-implemented behavioral interview allow for a really accurate verification of candidates.
Another negative argument is that recruitment agencies often work on ready-made candidate databases. This increases the risk that a candidate with a given profile is simply not in the database or that the number of suitable people is too small. In such a situation, the agency faces the question of the profitability of the project and decides whether and on what scale to start acquiring new candidates through other channels. As a result, when costs and the risk of recruitment failure increase, it is often more profitable for external recruiting providers to give up the project.
Recruitment outsourcing regardless of the company’s size
So why are we talking about recruiting 2.0 right now? In 2020, Talent Place decided to open its activities to companies in the area of SMEs and startups. Until now, our offer has been dedicated mainly to large corporations, and our clients include companies such as ABB, Shell, and Microsoft. Today, however, we can see that crowdstaffing subscription recruitment and cooperation with the community of professional recruiters allow us to really change the face of recruitment. Recruitment Outsourcing provides value to more and more companies – regardless of their size and profile.