A version of this post originally appeared on the Greenhouse Blog –
In any organization, hiring needs are constantly changing. Growth plans change, talent comes and goes, and critical roles need to be build. Pressure mounts, and more often than not, teams of all shapes and sizes end up hitting a point where they ask themselves the same question:
“Should we outsource our hiring?”
The smart answer: no. Outsourcing is appealing to address quick and pressing talent needs (such as hiring a handful of new BDR’s), especially if you have some gaps in your internal talent acquisition (TA) team. But relying on external TA – like relying on any function outside of your organization – can quickly become a crutch that impairs your team performance and business success. Read on to see just why long-term TA outsourcing is damaging.
Outsourcing is like ordering delivery every night, or taking an Uber everywhere you go. In addition to paying for what you actually want, you’re paying an additional service fee. In most cases, you’ll be paying 20-30% of your new hire’s first-year salary after just 90 days.Those surcharges cut into the total ROI of a hire - measured by Greenhouse as the Employee Lifetime Value (ELTV). Outsourcing your TA to another firm decreases ELTV by increasing the cost of hire and increasing the ramp time. Meanwhile, it decreases your internal hiring team’s morale, since you’ve undermined their value.
Internal hiring teams know your company, know your team, and want to find the right person for the job. An external recruiter wants to fill open positions as fast as possible to collect their commission. They’re not thinking about long-term team success, culture fit, or company goals. They’re just doing their job, which is to hit their hiring quota.
Hiring new people is like building a foundation for your team. If you build with ill-fitted bricks, you’re going to have to end up doing repairs and replacements sooner and more often than if you find bricks that fit right in the first place.
An overlooked, but still damaging, side effect of using an external company to recruit is that your team loses out on candidate feedback, data analysis and trend recognition. You aren’t collecting information, or improving your own team, if someone else is doing it all for you. Daily learning opportunities are critical to all elements of business, including TA and building employer brand.
External recruiting agencies aren’t your company, and don’t know your company from a firsthand perspective. This makes them poorly qualified to evaluate candidates for being a culture fit, which is a huge part of a successful hire. Conveying your values and mission is critical, especially since 64% of millennials say that they want to work for a company with ‘purpose.’ Having a third party read off your values from a script won’t properly convey the heart of your company to a candidate.
When your company is under pressure to fill talent gaps, don’t look to high-cost recruiting agencies. Enable and empower your recruit team to hire - and encourage your whole company and extended network to make referrals.
Teams usually wait until it’s too late to hire someone into a dedicated talent acquisition role. Then, that person often spends their first year trying to build the engine while the plane is already in flight.As soon as you feel the first pains, you should focus on talent acquisition. Giving executives and hiring managers a resource to source and recruit gives your team the best chance at finding key hires during critical growth points.
Additionally, the longer a talent leader is on your team, the more able they will be to build out your employer brand through recruitment marketing, and sell the vision of what it’s like to work at your company. The longer someone is in a TA role at your team, the better they can understand what makes a candidate successful or unsuccessful, and the more efficient and effective their talent practices will become.
Hiring managers don’t usually think of themselves as hiring managers. They’re executives, engineers or marketers with their own functions and goals. Hiring new employees is usually not their top focus.But having a dedicated TA person can help empower hiring managers to be involved in the process, by teaching the hiring manager best practices and key insights about hiring for that team.
By enabling your employees to refer candidates, you can help your in-house talent team build a diverse and inclusive workforce.
Referrals can come from friends, former colleagues, business partners and more. Referral hires ramp faster, are more productive, and stay longer than any other type of candidate, and while referrals make up less than 10% of all candidates, they often account for 40% of your team.
Committing to a dedicated, in-house TA function at an early stage of your business can be daunted. But it’s the best way to build a lasting business with solid team foundations. Outsourcing recruitment, on the other hand is costly – both the fees involved, and the hidden costs of losing your learning opportunities, ability to convey your brand, and the ability to exercise judgment about what is best for your company based on experience.
By building a great talent acquisition engine early, you’ll be ready to fly with a highly-competitive hiring process for years to come. So the next time you’re tempted to “just put the agency on it” - keep in mind it may be costing you far more than those placement fees.
- Vinayak Ranade is the founder and CEO of Drafted, the first referral network that makes referral based hiring fast, fun, and rewarding for everyone. Before that, he served as the Director of Mobile at KAYAK.com, the travel search engine acquired for $1.8 billion. Vinayak holds a B.S and M.Eng in Computer Science from the Massachusetts Institute of Technology.
At Drafted, we believe that your company network is your single biggest competitive advantage when it comes to hiring. Our mission is to make it easy for you to leverage your network in the hiring process to find the best candidates. Your network is already powerful, it’s just too much work to make it a priority over the day-to-day of recruiting. Companies that use Drafted see their employee referral numbers go up by 2x, their time to hire drop by 30% and their overall hiring efficiency increase significantly within just a few months.