By Paul Dodd
Illustration: Cathy Pentland  A COST-EFFECTIVE METHOD OF RECRUITING IS GAINING POPULARITY AS CORPORATIONS FACE THE CHALLENGE OF A SHRINKING TALENT POOL
Recruiting top talent is not only a major challenge for corporations, but it can also be a significant drain on a company's bottom line. And thanks to such external forces as a rapidly evolving digital economy, increasing competition and a shortage of younger workers to replace retiring baby boomers, that situation is not expected to ease up anytime soon. Companies employ a myriad of tools in their hiring process, such as employee referrals, print advertising, company website postings, job boards and online recruiting, but ultimately sourcing, screening, interviewing and selecting candidates must be managed with human intervention.
This leaves three basic options for facilitating the process: allocate it to the human resources department; enlist a recruiting agency; or build up a stock of internal corporate recruiters who work closely with HR but focus on recruiting. However, there is another emerging approach: bring contract recruiters in-house.
Internal corporate recruiters, with their leading edge skills developed through agency work, are employed by a firm and paid a salary instead of on a per hire basis. Similarly, contract recruiters provide the same value for an hourly rate, minus the overhead of employee and benefit costs. Both options save money that would otherwise go to agency commissions, but contract recruiters have the edge in cost savings and flexibility.
For example, if an agency recruiter hires 30 employees, each with an annual salary of $70,000, at a 20% commission fee, the total cost adds up to $420,000. A contract recruiter can fill the same 30 positions or more in six months for an hourly rate that adds up to $48,750 and potentially save a company $371,250 or more.
When you need to recruit, the option you choose may hinge on the experience required, the scarcity of the desired skill sets and the quantity of positions to be filled.
The first inclination may be to allocate recruiting only to the HR department, but it is not always practical or cost-effective. This is particularly true in mid to large-size organizations where HR generalists need to balance their time between performance management, retention, training and other key programs and not get consumed by hiring challenges.
"With the current volume of job seekers for some skill sets, such as IT specialists, screening applicants can now take frontline people up to three times as long as it did when the economy was thriving," says Manny Bettencourt, CA, director of finance with Baker Street Technologies.
For years, many companies heavily augmented their HR efforts with recruiting agency services and accepted commission fees as the cost of doing business. With fees ranging from 15% to 25% of the employee's first year salary and an uncertain economy, many firms are beginning to weigh the value and explore alternatives.
This value varies between hires. "In some cases, an agency can fill a position within days when the right person is just a click or phone call away but the client will pay the same commission regardless of the time spent," says Steve Ryan, vice-president of HR with DWL Inc.
Ryan volume-hired to ramp DWL up in the late 1990s and then pared it down with the fledging IT market. In reviewing recruiting costs, he believes that it is time for management to step back and challenge traditional assumptions. "You need to assess what you are paying per hire against the ratio of positions filled and ask if there is a way to drive this cost down without reducing quality," he explains.
Wes Neichenbauer, CA, CFO for real estate firm Patriot Equities Corp., puts the onus on the chief financial officer. "In their daily efforts to anticipate future ebbs and flows to ensure a steady cash flow with minimal spikes, CFOs need to understand their firm's recruiting model and feel confident it is the best solution, long before the 'finder fee' hits the books."
Firms that chase to build an internal infrastructure of full-time corporate recruiters find the convenience, savings and benefits great in the boom times or when demand is steady, but a heavy financial drain when growth plateaus, hiring is frozen or cuts need to be made.
This is where contract recruiters shine by providing the same advantages as corporate recruiters but they move on when the job is done, without incurring the cost of layoffs, severance and employee benefits. Although contractors may earn more per hour than salaried recruiters, many firms find the overhead savings, plus service value, add up to a windfall.
Bettencourt knows the quick return on investment this approach delivers. "In the first month and a half, we saved more than $45,000 by using a contract recruiter to fill six positions," he says.
Dave Turnbull, CFA, MBA, of Arch Capital Inc., says, "This model works particularly well for start-ups and emerging firms that run a lean operation, lack extensive funding but need to bring in a high volume of top talent in a short period."
Many contract recruiters relish the freedom to work in overdrive for several months then slow down or take time off between contracts. This flexibility is ideal for Ryan, who now uses contract recruiters extensively and adjusts their schedule according to peaks and valleys of demand. "When hiring needs spike in certain quarters, we have a recruiter onsite five days a week; when it tapers off, they are content to be here only one day a week," he says.
But the value of a full-time corporate or contract internal recruiter can also be measured in "soft cost" savings realized through their expertise, efficiency and strategic approach. "When you bring a recruiter in-house, you bring in a committed resource with extensive knowledge, a wealth of contacts and state-of-the-art skills honed after years of experience uncovering hidden talent," Bettencourt says.
Being on-site, internal recruiters have to consistently deliver high-end results because they are regularly assessed and may be around to deal with the aftermath if a placement doesn't pan out. Bettencourt says this diligence to finding the perfect fit increases retention potential and minimizes attrition costs.
Efficiencies are also realized because once internal recruiters are on-site to hire for a specific project, they absorb the company's culture, learn each department's goals and become acquainted with the decision-makers. "This insight gives them an edge and an upfront understanding of a hiring manager's soft skills and preferences sometimes long before the specific job orders arrive," Bettencourt says. "This reduces the briefing time required, freeing the hiring manager to focus on mission-critical tasks, with minimal down time."
Neichenbauer concurs. "With the recruiter on-site, I can see how much effort is invested, get regular status updates and ensure efforts are going in the right direction," he says.
The growth of the contract and corporate recruiter coincides with increasing recognition that to ensure prosperity, a firm must replace ad hoc hiring practices with a strategic recruiting plan that also addresses employer branding, succession management and long-term retention.
This mandate probably exceeds the core services offered by most agencies and HR generalists, but many internal recruiters are evolving to fulfil it. Today's on-site recruiter is more knowledgeable and influential in developing long-term plans, job requirements and employment policies, as well as the core skills that are needed to find people with the required skill-set and sell them their dream job.
At Baker Street, the contract recruiter worked with the team to develop a strategy to define the skill-sets to hire, and to determine which advertising vehicles to use and when to post a job. "Our contractor developed an in-house test for first-level screening after spending time with the hiring manager and learning his preferred responses," says Bettencourt. "She could administer the test and run a quantitative analysis to narrow the number of candidates the manager had to meet, saving time and money."
However, these approaches are not mutually exclusive and are often used in combination with each other. Bettencourt says his contract and corporate recruiters try to find candidates without going to a third party but enlist agencies when they need to cast a wider net. Wherever possible, Bettencourt and Ryan will use contract recruiters to hire the best, with long-term value, for the least cost — a strategic approach growing in popularity as a cost-effective alternative to traditional practices.
Paul Dodd is president of Head2Head Inc., which specializes in recruiting recruiters for contract and full-time placements and developing recruiting strategies
T echnical Editor: Carolyn Cohen, CA, MSW, president, Carolyn Cohen, Training and Human Resources Consulting (c.cohen@sympatico.ca) RELATED LINKS |
