This month, the US Bureau of Labor Statistics reported more jobs than available workers, a first in the 20-year history of tracking these figures. This data confirms what many of us involved in hiring already knew, we’re in a job SEEKERS market, making the fight for talent that much more competitive. Can a company succeed without acquiring top talent? In this three-part series, we discuss talent acquisition’s importance in the workplace. We share inside tips on hiring the right type of recruiter for your business, identifying when your recruiting team is just not cutting it, and knowing the difference between a hiring problem versus a retention problem. Each hire changes our business either for the better or worse. What changes will your next hire bring?
Is your recruiter all wrong for your business?
“If you build it, they will come” is a great line for Hollywood movies, but a terrible methodology in business. You may have a great product or service, but success will likely depend on your go-to-market strategy and execution. Similarly, while you may have a great company, attracting and hiring top talent will often depend on your ability to identify and engage with qualified candidates. So, how do you find these candidates? Does it make sense to hire a recruiter? You have options and below I highlight some pros and cons to each, helping you decide the option best for your business.
The Hiring Manager as a Recruiter
Hard Cost: Low
Time: High (approximately 10+ hours per hire)
With employee engagement and culture being a top priority for companies these days, many companies are leaving recruiting to hiring managers. A method often used in smaller companies or early stage startups, not yet large enough or structured enough to justify an HR or Talent Acquisition team, this approach allows leaders full control over the growth of the business. This is just one reason Emily LaRusch, CEO and Founder of Back Office Betties, a virtual receptionist company serving law firms in the US and Canada, expects managers to continue recruiting and hiring for her company. Back Office Betties recruiting is done by the Team Manager who also manages the employee once hired. “It’s imperative they are able to work together” according to LaRusch, “this gives (the manager) buy in”. Because a hiring manager is rarely an expert in sourcing candidates, building talent pipelines, or even experienced in hiring, this can often be a burdensome, time-consuming solution. It may allow a manager more control, but a company will need to decide if it’s the best use of a manager’s time. Time spent sourcing and interviewing is time not spent on other projects. LaRusch, anticipates the manager spends approximately 10+ hours filling each open position (not including the two-weeks of onboarding following hire). Hiring an average of five people per year, Back Office Betties helps minimize time spent on recruiting by streamlining and automating the recruiting process.
+ Management controls entire hiring process
+ Minimal costs associated with recruiting
+ Management is motivated to fill the role
– Manager’s time is being spent on recruiting rather than business tasks
– Manager is unfamiliar with the “art” of talent acquisition
– Managers often make reactive hiring decisions rather than strategic
The Internal (Company) Recruiter
Hard Cost: High
Time: Medium (up to 40 hours/week if full-time)
In 2008, when unemployment was high and the number of jobs available were low, many recruiters were struggling. This month however, for the first time on record more jobs were reported than available workers to fill them. Less people are actively searching for jobs, forcing employers to be creative and target qualified candidates. Attracting and acquiring talent can be a highly valuable skill and therefore is one of the two top reasons companies may hire a full-time recruiter or recruiting team. As for the second reason, if you’ve ever been charged with filling a position, you know that the administrative burden can be taxing. I’ve yet to meet a hiring manager that loves the sourcing, phone screens, scheduling interviews, rejection letters, negotiations, and overall administrative burden that accompanies recruiting. Is there enough work to justify hiring a dedicated recruiter? Krisanne Elsner, owner of ElsnerHR, a premier recruiting firm specializing in HR and recruiting staffing tells us salaries range quite a bit based on region, industry, and experience. “A less experienced recruiter in a manufacturing environment might be paid $50 to $60k” in the Phoenix area whereas a more experienced Phoenix-employed recruiter in a corporate environment will be more in the range of $65K-$85K per year. Elsner cautions though – highly experienced recruiters with substantial connections and pipelines may have starting salaries of $85K and higher, not including benefits. Employers will need to assess the level of talent needed within their company to find and attract the right talent in their business.
+ Dedicated person(s) to find/attract talent & handle administrative tasks associated with recruiting
+ Internal recruiter is part of the team and likely more engaged in the company’s success
+ Background in recruiting, typically more strategic than relying on hiring manager’s unskilled approach to creative sourcing and targeting candidates
– Cost. Less experienced recruiters can have starting salaries of $50K per year but go as high as $85K+ (typically base salary although some companies offer smaller performance incentives).
– A company will need to determine keep performance indicators (KPIs) for the recruiting role. These metrics can be harder to meet in times of labor shortages or a lower-than-average candidate pool.
The External Recruiter (Headhunter/Staffing Agency)
Hard Cost: Medium-to-High
Is there a scenario you would pay a $16K for simply finding the person to fill an $80K per year role? Although fee structures for third-party recruiters may vary, we will focus on the most common of arrangements, contingency. With fees typically starting around 20% of the position’s annual salary, contingent recruiters are paid upon filling a desired role. Clearly not cheap, but in cases, a wise investment. According to Jennifer Rojas, CEO of NextJen Consulting, a recruiting company, employers will often engage a third-party to assist with filling a position when either time or expertise is an issue. For startups and small companies, “using a recruiting partner can decrease the time it takes to find candidates” allowing the company’s HR “to focus on the employee relations”. For specialized roles such as IT, a company may depend on a third-party’s expertise in recruiting within the industry. Once hired, should the person leave shortly thereafter, the recruiter or agency will usually refill the role at no additional cost. This coupled with the fact that most talent acquisition professionals work primarily (if not entirely) on commission should give employers some peace of mind that these professionals recruit to retain. Recruiters do not want to refill a role for free, just as employers do not want to hire a job-hopper. In addition to direct hire placements, staffing agencies may also help companies with temporary staffing needs. For hard-to-fill positions or short-handed companies, third-party recruiting can serve as a great option. Whether or not this is the best option will be for each company to determine.
+ Third-party recruiters specialize in attracting talent.
+ If an employee hired using a third-party recruiter leaves within a year of being hired, the third-party recruiter will often replace at no additional cost
+ Payment is contingent upon an employer hiring the recruited candidate.
+ Expertise. In addition to being experts in attracting talent, specialized recruiters are also well-versed in the roles and industries for which they fill. They can help sort the talent from the talentless.
– Cost. A 20% fee can add up quickly.
– Read the fine print. When hiring for one role, you may interview people that are better qualified for a different role. If introduced through a recruiter, the contingency fee may be applicable even if you hire the person for a different position. Discuss with your recruiter before going too far down this process to avoid any confusion, or unexpected costs.
There is not a one size fits all approach to attracting and hiring talent in business. It’s not uncommon for a company to use all three methods within their company based on the difficulty of filling the role itself. Assess each role to determine what method is best. Here are some questions to consider as you assess:
- Is this a specialized role or a niche industry?
- Is the hiring manager well-versed in the skills and requirements for the role?
- What is the cost to our business by not having this role filled (ie, loss in productivity, risks, impact to customers, etc)? How long until this cost exceeds potential costs in filling the role (external recruiter fees)?
- How much time is appropriate for a hiring manager to spend on filling the role?
When you fail to attract and retain top talent, you give competitors the opportunity to hire them. Identifying the right recruiting method an open role is the first step. Regardless of your approach, you’ll want to evaluate your technique. But, how do you know if your recruiter is a good one? Next week, in the second part of this series, “Is your recruiter killing it or killing your business?” we discuss identifying good from bad recruiters.
By Teresa Marzolph, People Strategist and Founder of Culture Engineered.
With 13 years of HR experience, Teresa Marzolph has helped both small businesses and large corporations attract, develop, and retain top industry talent. In 2017 she founded Culture Engineered, an HR and culture consulting company for mid-size businesses, believing valued employees produce valuable results.