When to use a recruitment company and when to go it alone?

Life is hard for businesses looking to recruit new staff at present. There is a worldwide skills shortage and online job advertisements are at a record high. In response, the recruitment business is booming as employers look for external assistance to ease their plight.

The question is, when should you use a recruitment agency and when should you go it alone? Recruitment agency fees are expensive and you want to be sure you are getting value for your money.

The first thing it is important to understand is that most recruitment firms are really just job advertisers and do not undertake employee selection for you as well. There are some newer agencies which are starting to take heed of employer demand and incorporate some employee selection procedures such as psychometric testing and behavioral interviewing into their repertoire, however most don’t. If you require these services then this should be an important part of your selection criteria when deciding which firm to use.

Given that most recruitment firms don’t provide selection services, if you have the skills either yourself, or within your organization to write effective job advertisements or have other arenas through which you can source potential job applicants yourself, such as via:

• word of mouth from current employees,
• recommendations by other business contacts,
• help wanted signs pinned up at your place of employment; or
• notices placed at universities, colleges, community centers or other local notice boards,

then you will save considerable amounts of money by undertaking all of your employee recruitment and selection process yourself.

A recruitment firm can offer you greater benefits if you are looking to hire staff for temporary assignments and also wish to use the recruitment company’s services as an outsourced employer. The recruitment firm will charge you an hourly or daily rate for the contractor and also act as the worker’s employer who will then be responsible for insurances, salary, superannuation and all employee benefits.

This type of outsourced employment relationship is generally more expensive than if you act as the employer yourself, however there is the added convenience of just a single invoice to be paid rather than the workload associated with an additional employee and managing their superannuation, payroll taxes, insurances, leave accrual, etc. Additionally, the recruitment firm takes all the risk and you can ask for replacement staff at any time if the employee is not working out like you hoped, if you no longer require their services, or if the employee is away sick or on other leave. This can be particularly useful if you require particular skills for only a short period of time, for example you need an accountant to help you out at tax time or a receptionist to fill in whilst your regular employee is on leave. Using a contractor through a recruitment firm can also often be cheaper than using a professional services firm.

Many employers also use recruitment agencies to find them contractor employees initially and then utilize the external employment arrangement period to assess that employee in the workplace and determine whether or not they’d like to offer them a permanent or longer term position. One of the best predictors of on-the-job performance of a potential employee is actual job performance. And yes there will be a cost in terms of fee to the recruitment firm concerned to convert your contractor to your own employee, but that fee is not dissimilar to that you would have paid if you had used their services to recruit a new employee in the first instance. And you’ve had the chance to try before you buy so to speak.

A recruitment firm can also provide you with benefits in the recruitment process if they are expert in a particular industry or employee market. They may have specialized knowledge of where to find and how to attract employees of particular skills types. If you are unable to attract the employees you want yourself, you may require the services of a recruitment agency that has good industry contacts and can headhunt the appropriate staff you require.

Whilst most recruiters are sales professionals (not employee selection specialists), some agencies hire staff with extensive experience in a field (e.g. electrical engineering, software programming, etc) and teach them how to recruit and place. Recruitment consultants who themselves have the particular skills and experience you require, are generally better able to understand and assess what it is that you are looking for. This means that the quality of the short listed candidates that are provided to you to assess will be higher.

Many employment markets are so large that for a business to initially screen all applications for a position would be so time consuming that it could result in lost business whilst this process occurs. This is particularly the case in large cities such as New York and London, however this problem also occurs in many cities within the EU where applicants readily apply for and move to new jobs right throughout the region. The use of recruitment firms in this instance can save considerable time and stress provided that correct selection and screening procedures are utilized. And you must insist on this. If you do not ask for this service, you can bet it won’t be provided. And ask to see the interview results and scores so you can ensure yourself that this process is being undertaken. You will need to work with the recruitment firm to determine the skills and personal attributes that should be tested for.

Similarly, if you do not have the time to undertake the recruitment and selection process yourself and the cost to your business in lost business or business development opportunity during the recruitment process is more than the cost of utilizing a recruitment firm, you should definitely consider outsourcing your recruitment. If you choose to go this route however you should insist that your chosen firm undertakes the whole process for you and uses scientific selection methodology. As mentioned previously, although small in number, there are now firms that will do this properly for you. Take the time to seek them out. It will be well worth your while.

At the very least your recruiter should undertake background and reference checks on your behalf and use behavioral based interviews. Otherwise you will end up having to put in just as much time and effort yourself anyway to assess the applicants they send you. If not, the effect of your outsourced employee selection process will be just as effective as taking a lucky dip from a hat. And you will have to deal with the consequences, which could not only include you being stuck with a less than productive employee, but even a disaster. I can assure you that the time and effort required to performance manage a poorly performing employee or one with a bad attitude is much, much more than would be required to undertake a successful selection process in the first instance.

Remember that the difference between an average performing employee and a high performing one can be as much as 100% difference. Think about how that can impact on your bottom line, no matter what the position you are hiring for is: be it a motor mechanic, a part-time sales assistant, the CEO of a financial services business or a sewing machinist. In any of these cases performance of the employee has a direct and financial impact on the profitability (or not) of your business.

In summary, recruitment firms can provide you with many valuable services, particularly in such a tight employment market as it is at present. It is important however to assess potential recruiters carefully and ensure that they provide you with all the services you require. The free industry guide “Recruitment Agency Secrets” provides more information on how to assess potential recruitment firms as well as inside information to assist you in getting value for your money when you do decide to use them.

About the Author

Tracey Bowyer is a recognized authority on the subject of employee recruitment and selection. Her website www.employee-selection-guide.com provides a wealth of information and articles on how to hire better and find the right employees for your business.