Why You Shouldn't Outsource Your Recruiting Process
While an organization’s hiring needs may change from year to year, season to season, and sometimes, minute to minute, one thing is certain: Every organization will face the decision to outsource their hiring at some point. Whether you’re a startup founder, VP of HR, or Director of TA, you will consider using external firms to help with hiring. There’s nothing wrong with getting some extra help when you need it.
Outsourcing is appealing for quick-wins (e.g. hiring five new members of the sales team) and supplementing gaps in your internal talent acquisition team. It can be a slippery slope, though.
Like every function you build outside of your organization, outsourcing your talent acquisition efforts can become a crutch that has lasting negative impacts on your team and business. Read on to learn why you shouldn’t outsource your recruiting process.
4 reasons not to outsource your recruiting process
1. Outsourcing is not sustainable.
Much like ordering takeout every night, working with staffing and recruiting firms means you’re paying a convenience fee for the talent that you hire. In many cases, 20–30% of your new hire’s first-year salary after 90 days. That means that the Software Engineer that you’re paying $100,000 annually will cost you almost $50,000 in the first quarter that they’re at your company. Talk about an upfront investment!
Not only are premiums high for new hires, but those fees cut into the Employee Lifetime Value (ELTV)—or the amount of ROI a company can expect from each employee given their cost of acquisition, ramp time, and tenure at the company. By using recruiting firms as a main source of hiring, companies will see their mean ELTV decrease, by adding cost, increasing ramp time, and reducing employee tenure. Meanwhile, you’re giving your internal team an excuse not to become more efficient with hiring, when all learning and iterating happens outside your building.
2. Outsourcing solves for the hire, not the right hire.
While an internal recruiter’s job is to find the right hire for a company, an external recruiter’s job is to fill open positions fast. They’re not incentivized to build your team for the long-term, they’re incentivized to build your team now. Individual contributors at agencies have to hit their quota of filling positions. You can’t fault them for trying to outperform at their job, but keep in mind that their incentives are not exactly aligned with yours.
3. Learning happens outside your organization.
The most often overlooked area where outsourcing hurts your team is in missed learning and data-gathering opportunities. By outsourcing, you miss out on testing outreach and messaging, hearing immediate candidate feedback, and synthesizing key data to spot emerging trends. Day-to-day learning opportunities are not just the key to improving recruitment marketing and your employer brand, but to the pulse of your entire business.
Hiring an in-house recruiter as soon as possible means you can begin collecting data on recruiting key performance indicators like “qualified candidates per open role.”
4. Relaying core values and corporate culture becomes a game of telephone.
When recruiters don’t experience your company culture firsthand, it’s hard for them to relay things like core values and what it’s like to work at your company. Compared to a happy, knowledgeable in-house talent acquisition team member, recruiters reading off of a script may not be able to convey the culture, mission, and day-to-day as convincingly. With 64% of millennials reporting that working for a company with purpose is a priority for them, you can’t afford to have someone reading your values from a script.
Now that we’ve covered why you shouldn’t outsource your recruiting process, let’s look at a few ways that you can begin to build an internal hiring culture as soon as possible.
How to build an internal “hiring culture”
Instead of looking outside an organization during times of high-stress hiring, teams can take steps now to build a sustainable internal hiring culture that empowers not just the recruiting team, but individual managers and employees to contribute to company growth.
Build talent acquisition early
Teams wait until a certain (often arbitrary) number of employees to hire someone dedicated to talent acquisition, and then this person spends their first 6–12 months trying to build the engine while also flying the plane.
Consider building your talent acquisition function early, as soon as you feel the first pains. Providing hiring managers and executives with a resource to find top talent early means not only bringing on key hires sooner, but allowing time to build the trust and rapport between your managers and talent team.
Recruiters and talent leaders who are immersed in your day-to-day culture are also able to “sell the vision” of your team earlier—and proactively build out your employer brand via recruitment marketing. Not only will they lay the groundwork for an impressive recruiting engine that will help attract top talent, but in-house talent leaders will be present to see what makes a candidate successful (and less successful) in the long-term on your team. They can use these indicators to better inform your core values and the profile of candidates who succeed on your team.
Empower hiring managers
No hiring manager considers themselves as such first and foremost: They consider themselves engineers, marketers, and servant-leaders that have goals to hit, products to ship, customers to please, and somewhere very far down their list, they have to hire new employees.
By having a dedicated resource in-house, TA leaders can build out the necessary candidate scorecards, interview stages, questions, and processes—while teaching best practices that enable managers to hire effectively without losing focus on their goals and business objectives.
The internal talent acquisition team can be a powerful and effective consultant to managers, while managers can focus on where they are most effective: Sourcing quality candidates through their own network and speaking at (or hosting) relevant events to expand their network.
Talent leaders can also build and promote a diverse and inclusive workforce of your team’s former colleagues and friends, via referrals. 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.
In addition to referrals, talent leaders can also build a culture of learning and development that promotes high-potential employees into mid-level and executive roles, reducing the need for long executive searches.
While it’s not easy, committing to talent acquisition early is the best way to build a lasting business. Outsourcing recruiting costs your business money, but the real hidden cost is losing the ability to learn and build on hiring processes and improving your candidate messaging, recruitment marketing, and employer brand. 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.
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Please note: This guest post was written by our partners at Drafted and does not necessarily reflect the opinions of Greenhouse.
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.