Outsourcing business services has almost become a necessity for many functions of a business today. Getting support and guidance for hiring talent is no different. However, we know that partnering with a recruitment firm often means understanding far more than you may have initially expected.
If you are just beginning to explore this option for your business, or you are questioning the level of service and support you are getting now, this guide can help. Throughout these pages, we will provide a clear overview of our industry covering the essential elements needed to make informed decisions.
Beginning with the basics, learn about the variety and differences between agency types and the available fee structures. Then understand why organizations continue to rely on these services based on the direct benefits and value recruitment firms provide to their clients and specific roles within their companies.
Next, we’ll address the elephant in the room by reviewing the common complaints about our industry as well as the source of most frustrations. You’ll get clear information on recruitment guarantees and the usual alternative to recruitment services as well.
Finally, get tips on how to evaluate the services of recruitment firms you may be considering and what you should expect in the recruitment process and a working relationship.
No resource guide would be complete without initially covering the basics first. While this may seem rather elementary, beginning with a summary and outline of the industry is important when aspects and nuances can be confusing at times. So let’s begin with an overview of the recruitment industry and explain what services recruitment firms provide, the specialties within our industry, and how client companies are charged for these services.
Recruitment firms assist their clients with planning, sourcing, recruiting, interviewing, and hiring employees. Some firms will also assist their clients with employee development and retention efforts. These activities are a subset of an organization’s larger human capital or talent management strategy. Collectively, the process is commonly referred to as talent acquisition services where seasoned professionals recruit talent for employment with contracted hiring companies.
However, the terminology can get confusing with overlapping definitions at times. A case in point is when the terms talent acquisition and recruiting are used interchangeably.
Talent acquisition encompasses a holistic approach to managing your human resource talent. At its broadest scope, talent acquisition services can also include a consultative element to assist organizations with onboarding, employee development, engagement, and retention. Recruiting is a specific action or step at the beginning of that process to attract and essentially sell job candidates on the merits of a hiring company’s career opportunities.
The next area that can cause some confusion is how various recruitment firms and agencies assist hiring organizations. Although the purpose of each one is to assist in finding great talent for their clients, the methodology and purpose behind their services can widely vary. Within the recruitment industry, there are four classifications: temporary, staffing, employment, and recruitment.
Temporary agencies fill immediate talent needs that are typically very short in duration. The purpose is to provide businesses with talent that can support limited projects or fill short-term gaps in their current pool of employees.
Staffing agencies offer their clients a broader range of talent resource options. In addition to temporary staffing, many also provide contract workers, temp-to-hire employees, and some direct-hire placements. The biggest advantage of these agencies is their industry-specific focus. Their purpose is to support clients with longer-term experienced labor.
Employment agencies can vary the most from one service provider to another because they provide dual support for hiring companies in need of talent and for individuals seeking employment. Hiring companies often have the option of either contractual or permanent hires.
Individuals with a variety of skills may choose to seek their support for short-term employment needs of their own or to trial new industries and roles.
Recruitment firms or agencies can also provide a variety of services for their client companies however, the primary differences lie in their proactive approach to sourcing candidates and the position levels they assist in filling which typically ranges from mid-level to executive-level roles. As such their purpose is to source, recruit, and evaluate talent for permanent positions on behalf of their clients.
Historically, recruitment firms have charged their clients a percentage of a new hire’s first-year salary after a successful placement. However, it isn’t quite that simple nor is it the only pricing model available to hiring companies. Further, the difference between possible pricing structures can influence much more than the total of your invoice.
The most common pricing structure is a contingency fee. Here, the fee is calculated based on an agreed percentage of a position’s annual salary but may include other components of a compensation package such as commissions. While this can range from fifteen to thirty percent, senior positions and other hard-to-fill roles can run as high as fifty percent.
Similar to this structure is a retainer fee agreement. It is similar to a contingency fee except that a recruitment firm is paid for each milestone within the search process. For example, one-third at the start of the search process, one-third when a shortlist of viable candidates is provided, and the final third when a placement is made.
The third pricing model, which continues to gain enthusiasm, is an hourly rate fee. Under this option, clients are charged one flat fee for the hours worked on individual search projects. Only paying for the exact time and services used allows for greater flexibility and control over these business expenses.
Despite how simple it may seem based on these simple explanations to understand the differences, the real distinctions lie in what isn’t immediately clear. Specifically, what happens after you sign a contract with a recruitment firm.
With contingency agreements, you may be paying for access to a database of candidates. The same candidates a competitor is also granted access to. Since firms or agencies are only paid when a placement is made, they are motivated by clients with the highest compensation packages and the fastest reaction times. This means you may be paying higher fees than you need or are making faster hiring decisions to beat out your competition than you are comfortable with.
This is why retainer fees are often appealing since they do offer some degree of exclusivity. However, fees under this structure tend to be higher and if you are a rapidly growing organization that is making multiple and frequent hires, those commission fees can add up very quickly.
Conversely, recruitment firms that charge hourly rates provide full exclusivity to their clients. In addition, because their clients are only paying for the time spent on their searches, making multiple hires doesn’t mean paying a percentage of each new employee’s annual salary. This structure also promotes better collaboration between firm and client and a more consultative approach to the entire hiring process.
There is certainly plenty to evaluate and compare with these pricing models, far more than just fees alone. Take a moment to read Recruitment Fees: What are You Paying For to gain deeper insights into the differences and implications.
Partnering with a recruitment firm is more than just having a resource for sourcing and vetting job candidates though. It is the sum of their services that provide the true benefits and meaningful value for their client companies. Those services provide strategic, organizational, and financial benefits. Even more, is how those benefits provide significant value for key areas within an organization.
Working with a recruitment firm isn’t going to give your organization any direct competitive advantages. However, the right partnership can support specific initiatives and objectives your business has. Here’s how.
First, reputable recruitment firms will help your organization refine your hiring processes with proven systems and structures designed to source and recruit the highest quality candidates in the shortest time. In addition, they allow hiring companies to expand their recruitment efforts with additional resources for specific hiring campaigns or to outsource searches for critical and hard-to-fill positions. The right recruitment firm can help your human resource team and managers hire new employees more efficiently and effectively by either supporting your current efforts or by allowing your team to focus their attention on other needed areas.
Second, the labor market is always adapting and changing. These shifts have just happened at a faster rate and with greater impact recently. The result has been a demand on hiring companies to react just as quickly and substantially. Because recruitment firms are closely monitoring these changes, they are highly adept at helping businesses remain agile and informed so they can develop proactive talent management strategies. This guidance is not only vital for attracting and hiring new talent but also for engaging, developing, and retaining their current workforce.
Third, partnering with a recruitment firm helps organizations avoid the common pitfalls and missteps in hiring while bolstering a positive brand image as a desirable employer to develop and enhance one’s career. Employees have become more discerning about their employers and toward businesses in general. Their desires have gone far past competitive compensation alone and now include elements that support all aspects of their professional and personal lives. Recruitment firms can help businesses consider and proactively plan for both attracting and retaining top talent.
After the strategic benefits that address the larger questions of why you would partner with a recruitment firm, the second primary benefit focuses on the logistics and operations of your hiring methods.
Reputable recruitment firms have proven processes for everything they do. Further, those processes, from sourcing to evaluating candidates, are followed consistently. This frees members of your team to focus on other important functions that are central to your business. Partnering with an expert team with tested and proven methods in talent acquisition means you can (and should) expect quality outcomes at each stage.
In addition, their knowledge of the labor market means you gain expert consultative guidance and advice throughout the hiring process. No one wants to make bad hiring decisions. A recruitment firm can provide insight into crafting an attractive job description that correctly outlines who you are looking for. They will guide you through the interviewing process with honest feedback and practical ways to make adjustments when and if needed. Further, they can counsel your team through hiring decisions and onboarding processes to ensure a smooth transition. Some recruitment firms can even help your organization with employee development, engagement strategies, and ways to improve employee retention.
Review our article on Reasons to Outsource Talent Recruitment for more details and the specific ways a recruitment firm can assist your organizational efforts.
The third set of benefits organizations can gain by partnering with a recruitment firm are financial, starting with the costs of open positions on your team. Whether this is a new opening due to business growth and the need to redistribute the workload on your existing team, or because someone has left your team, open positions are a drain on your current employees and your business.
It may be hard to place an exact value on some impacts of open roles, but overworked employees, unsupported customers, gaps in expertise or essential tasks, and even fading brand reputation can all result from positions that remain open for too long. A partnership with a recruitment agency you can trust and rely on can help ease and even remove these financial strains.
To determine the specific costs of open professional and revenue-generating roles, visit Calculating the Cost of an Unfilled Position for formulas and more.
Next, consider your costs of recruiting and hiring employees. How long on average does it take for your organization to plan, source, recruit, interview, evaluate, and onboard a new employee? Now consider how many people on your team are involved in that process and the hours each person is investing. If you are hiring multiple people, that number will jump exponentially. Since your hiring managers and human resource professionals managing this process aren’t entry-level employees, their time is incredibly valuable to your business.
Having another team at your disposal that can accomplish this means your team can focus their attention on initiatives and projects that are generating revenue for you. Even organizations with robust human resource departments rely on recruitment firms when they are hiring for niche, specialized roles or when they need to quickly hire at scale.
Recruitment firms with hourly fee structures are especially helpful for managing hiring costs because they allow you to easily ramp up efforts, pause ongoing searches, and make multiple hires without additional costs.
The final financial benefit is that recruitment firms minimize the likelihood and impact of bad hiring decisions. The reason is that bad hires are often the result of missteps in a hiring process, an area where recruitment firms excel. Higher quality hires and fewer regrets mean better results, better company culture, and improved company growth.
Learn more about How a Recruiting Firm Can Help Your Bottom Line here.
What these benefits mean to you will vary depending on your specific role within your organization since the needs of corporate leaders aren’t always the same as a department manager or even the human resource professional regularly engaged with these responsibilities. The good news is that there is clear and meaningful value for everyone.
Executive-level recruitment firms like ours provide business leaders with a reliable partnership that enables them to:
The needs of HR professionals are very different from other areas of an organization because of their existing expertise in talent acquisition. However, that doesn’t mean that a recruitment firm doesn’t provide them with immense value as well. For these professionals, recruitment firms provide:
Leaders within an organization may find the most value when partnering with a recruitment firm, especially when they don’t already have a large HR department to lean on. Here a recruitment firm provides:
Gain more insight into Why Business Professionals Rely on Executive Search Firms here.
Historically, the recruitment industry has had an approval rating on par with cable companies. The reason both industries have these perceptions is rather simple: a poor customer experience that favors the recruiter over the customer or client they are serving. The bright spot in these poor impressions is that they act as warnings of what to avoid and indicators for reputable recruitment firms to consider.
In this section, we will explain the sources of these complaints, misconceptions about recruitment guarantees, and why the alternative to recruitment firms may not be that advantageous.
While there are plenty of criticisms about the recruiting industry, complaints and frustrations tend to fall into four primary categories: dedication, transparency, results, and cost.
The most common criticism of recruitment firms centers on their ability to provide consistent service that is focused on your business and the hiring process. This happens when a recruitment firm doesn’t have a formalized hiring process, has recruiters who are heavily motivated by their commissions, and who don’t take the time upfront to learn your competitive advantages and hiring requirements. The best recruitment firms will allocate dedicated individuals to your unique needs and will have a process that has been thoroughly tested to provide the best outcomes.
Closely behind, are complaints about poor communication on progress, candidate status, or project challenges. The cause is a recruitment firm that doesn’t see you as a true partner in the talent acquisition process. Working with a recruitment firm should never mean you have to request updates or feedback on the progress of your search.
Frustrations continue when outcomes are at best, poor. When shared candidates are lacking needed proficiencies, are misaligned with hiring goals, or are discovered to be bad fits it’s clear the recruitment firm isn’t working for you. Reputable recruitment firms will clearly outline their process and reporting methods before you partner with them and will provide clear visibility throughout the hiring process.
When these criticisms build, it is only natural to question the costs and what you are really paying for. You should not be paying for access to a database of resumes to review, wonder if you can do a better job yourself, or feel pressure to artificially inflate your compensation plans. You should be gaining access to expertise in sourcing highly talented individuals, sound consultative advice, and receiving candidates that perfectly match your criteria.
Gain a better understanding of why recruiting firms fail to deliver the best service and experience for their clients here.
Given these complaints and criticisms, it’s easy to see why hiring companies are often compelled to inquire about a recruitment guarantee. Sadly, this may be the biggest misconception about recruitment firms.
There are two primary options in recruitment guarantees:
A money-back guarantee promises that a recruitment firm will give all or a portion of the fees a hiring company has paid back if a hired candidate leaves their company before a predetermined date.
The more common replacement guarantee promises that a recruitment firm will find a new candidate for the client company to hire should the original candidate leave before a predetermined time frame.
The problem is that a recruitment guarantee protects no one. The purpose behind any guarantee is to build trust and reduce risk. How does a guarantee like this instill trust that your recruitment firm is going to provide you with the best service? How does this reduce your concerns that a recruitment firm can source better candidates than you can yourself? They don’t and they especially won’t remove the risk of a new hire leaving shortly after they have started.
Recruitment guarantees are written for the benefit of the hiring company with stipulations and exclusions that provide them with a multitude of loopholes. Further, they do nothing to address what should be your real focus: reliable services that provide you with higher quality candidates in less time than you could hire on your own.
Before a candidate is hired, your recruitment firm should be evaluating them thoroughly to ensure they fit your set criteria and have the right motivation for making a career change. If they have any doubt they shouldn’t even present this candidate to you. At the very least, they should be communicating their concerns.
Beyond this, it is the responsibility of the hiring company to ensure a new hire is properly onboarded, is well supported, and is engaging with their new colleagues and employer. While some recruitment firms do offer consultative services to help in these areas, this is separate from the services they provide to assist their clients with sourcing, recruiting, and hiring new employees.
Read Why Recruitment Guarantees are Meaningless for more details on guarantee options and better alternatives to confidently partner with a recruitment firm.
When organizations handle their recruitment and hiring efforts themselves the primary vehicle beyond their website and social channels is the use of job boards. These can be very effective for hiring companies. However, there are some downsides to be aware of.
The most attractive features of job boards for hiring companies are the ability to have a constant digital presence sourcing candidates and pre-filtering applicants based on preselected criteria. It also can provide a cost-effective sourcing method on a per-hire basis.
However, this process means organizations must handle nearly every other aspect of talent acquisition themselves from talent planning to creating effective posts to candidate selection and evaluation without outside support. By nature, it also means they are only attracting active candidates thereby limiting a good portion of the possible talent pool. So while job boards offer a good method of sourcing candidates, this option is often limited in what it provides hiring companies.
Recruitment firms offer the same benefits but with a great deal of added value for their clients. These include monitoring and managing brand reputation, actively sourcing both active and passive candidates based on preset criteria, managing a majority of the hiring process for their clients, and providing a consultative resource throughout. While the cost per hire can be higher, they provide a better allocation of resources for a more cost-effective talent acquisition process.
Making a choice isn’t always an either-or selection, nor is there an absolute right or wrong. Your decision needs to be based on how each service fits within your business goals, talent strategy, and budget. The next section in this guide reviews methods to evaluate recruitment firms and important factors to consider.
This article, Job Board vs Recruitment Firm: What’s Your Best Option? dives deeper into each option with answers to questions many organizations ask when considering these two approaches to recruiting.
Business partnerships can have a significant impact on the trajectory of your organization. So finding the right recruitment firm that matches your business objectives is important. However, the process of selecting the right recruitment firm is not unlike hiring the right person. Keep reading to see how.
Before beginning any talent search it is important to understand who is participating in the process and how, the number and format of interviews needed, plus the criteria you will be matching candidates against. Selecting a recruitment firm also begins by establishing your requirements and reviewing your processes.
Start by determining the type of recruitment firm or agency you need to work with. Refer back to the classifications we outlined at the beginning of this guide: temporary, staffing, employment, or recruiting. Each is structured a bit differently and therefore supports its clients in varying ways.
After determining which type of agency is best matched to your business and hiring needs, review your hiring process. How does it compare to what a prospective recruitment firm is describing? Consider how they will plan for your search, source and recruit prospective candidates, evaluate skills and qualifications, and assist you in the hiring phase.
Even if you don’t have a formal hiring process yourself, schedule an introductory call with a recruitment firm you may be interested in. Is their process detailed, yet easy to follow and understand? Are they genuinely interested in your business growth needs or just an open position they may be able to fill?
Then, establish your budget and consider the pricing structures of these firms. Again, recall that both contingency and retainer-based fee structures are calculated as a percentage of a hire’s salary. However, a growing option is an hourly rate with exclusivity of services and candidates, dedicated resources, and greater flexibility in hiring decisions.
Ultimately, your goal is to partner with a recruitment firm that can deliver on its promises with a seamless experience and will solve your hiring challenges while easing your workload. Look for an organization with an approach and philosophy that most closely aligns with your business structure, budget allowances, talent needs, and hiring processes.
For specific questions your organization should consider and ask of prospective recruitment partners, review How to Evaluate Talent Acquisition Services.
Let’s go back to our comparison between selecting a recruitment firm and your hiring process. After you have outlined how your process will proceed and your working parameters, the next step is to provide structure to your candidate search criteria. What criteria are essential and what will you consider an added bonus? Can one qualification be substituted for another?
Education and experience are factors often weighed between and against each other when evaluating candidates. Likewise, hiring companies will often view a recruitment firm’s industry experience in the same light. The rationale is that a firm from your industry will always provide better results than a firm serving multiple industries.
While there is a great deal of validity to this, the ultimate value depends on your definition of better. Start with these questions:
The shorter the duration you are hiring for, the more industry experience matters because you don’t have the luxury of time to bring a new hire up to speed on your business and processes. When hiring for permanent positions, finding someone with a broader range of capabilities and knowledge is more valuable. This also allows you to consider a recruitment firm that understands your business goals and objectives above just your daily operations.
As the positions you are hiring for advance into senior to executive-level, the less industry-specific skills matter. Skills in leadership, management, critical and analytical thinking, and strategic planning are a priority for these roles. Therefore you will want a recruitment partner that understands this type of candidate intimately and how their capabilities can support your business. Experience sourcing and vetting candidates of this caliber is more valuable than industry experience alone.
The type of agency you are considering will play a small, but important role here too. Temporary, staffing, and employment agencies are highly focused on making quick placements for entry to mid-level roles that are often sourced from a pool of pre-vetted candidates. As such, industry experience is vital. Recruitment and executive search firms specialize in mid to executive-level roles with a focus on your larger talent strategy objectives and business goals. Therefore, their track record of successful placements should weigh more heavily in your decision than just industry experience.
Ultimately, focus on a recruitment partner who takes the time to understand your needs, communicates clearly, and has a proven recruitment process.
To learn more about how industry experience should influence your selection of a recruitment firm, read this article, Should a Search Firm Know Your Industry.
Before hiring companies extend an offer to their ideal candidates, the final step is to seek input and verification from other sources by way of reference checks. You will want to do the same for any recruitment firm you are considering.
Think about how you might evaluate other business or personal services you are interested in using. We ask for recommendations from our network of friends and colleagues, we look at online reviews, and visit their websites and social media pages for clues and proof of past performance. Take the same approach when evaluating your options of recruitment firms to partner with.
Signs of a good potential partner will include:
Be observant of any of these warning signs:
Get a list of specific questions to ask and ideal answers to hear before you reference check a recruitment firm.
Go past the obvious expectation that a recruitment firm will help you source and hire talent for your organization. What do you think the recruitment process will look like? Do you have assumptions or hopes for your ongoing business relationship?
If you have worked with a recruitment firm in the past you might conclude that other firms and agencies will operate similarly. Those who have experience with multiple recruiters know this isn’t always true. This leaves organizations new to these partnerships with feelings that can cover a full range of emotions and thoughts.
What does a reputable recruitment firm look and act like? Let’s answer this from two perspectives: the recruitment process and your business relationship.
A partnership with a recruitment firm will go through a couple of important stages: the sales process, onboarding phase, and actual recruitment process.
During the sales process, the goal is for each side to gain a deep understanding of the other. For organizations, expect to receive a wide variety of probing questions that cover your business history, growth plans and goals, current hiring process, and ongoing challenges. The purpose is more than just learning about you and your business though. They are also evaluating your potential fit as a client. A reputable and honest recruitment firm will tell you if they are not the best option for your needs and why.
In turn, they will be expecting a wide range of questions from you. So be prepared to ask and to listen intently. This will aid your evaluation process to determine if their agency is the right match for your organization to reach your business growth goals. The best recruitment firms will act as consultants, not order takers.
The onboarding phase will set the stage for how your search project will go. Expect this part to feel the slowest as it should be methodical and detailed. The more your recruitment firm can fully understand your company culture, ideal candidate profile, and search criteria, the faster they can find potential candidates for you. Even better is that when you take the time to invest intentional thought into planning your search, you will get higher-quality candidates.
When you provide this level of involvement and detail, you should expect to receive a clear understanding of how the search project will progress, your business will be supported, and results will be measured.
Once your search project has begun in earnest, the very last thing you should expect is a “set it and forget it” mindset. Your recruitment firm should be providing you with complete visibility into their progress, regular and consistent updates, and clear insight on all recommended candidates for your consideration.
This means your recruitment firm will expect you to be responsive to communications, consistent with your candidate evaluations, and timely with your feedback. Full engagement on both your parts is essential for a mutually-beneficial partnership.
See a more detailed breakdown of what to expect from your recruitment firm at each stage here.
A key tenant of any great relationship is trust. You need to trust that your recruitment firm is going to support your business with sound advice and quality hires. If you only anticipate a purely transactional relationship then you either won’t gain the full value of their services or you may be working with the wrong firm.
Therefore, you should expect a recruitment firm to be:
You should expect that your confidence in their abilities to deliver on their promises will only increase over time. In a word, it’s about being transparent.
Learn more about What Transparency in Business Means Today.
Recruitment firms provide talent acquisition services that support client companies in sourcing, recruiting, and hiring great talent. However, that hardly covers all the nuances of this service. Hiring companies have many options for the type of agency or firm they partner with, the specific services provided, and how fees are structured. All variables that have a significant impact on the benefits and value they provide for organizations.
These variables also explain the common frustrations due to poor experiences, and why hiring companies often request some form of guarantee or decide to manage their entire hiring process themselves with limited outside support. Unfortunately, neither can provide the level of trust or assistance that a reputable recruitment firm can.
Selecting the right recruitment firm means taking a similar approach to sourcing, evaluating, and hiring new employees: define your process and hiring requirements, clarify what is important to you in a partner, and thoroughly vet your options. Then set clear expectations for yourself knowing what a mutually-beneficial working relationship should look like.
We hope you see our recruitment firm as a clear choice for your organization’s talent needs. However, if you haven’t connected with us before now allow us to share a bit about who we are.
Foremost, we are passionate about the impact that hiring and developing employees has on organizational, individual, and community values. Our mission is to deliver transparent, dedicated, cost-effective recruiting solutions designed to achieve perfect-fit hires. This drives our vision forward as we continually strive to be the premier industry leader in designing, building, and executing talent strategy solutions.
We are dedicated to increasing our clients’ profitability by using the best resources to match our clients’ needs with thorough, transparent, and honest work. Our clients have access to real-time reports detailing all the work performed for their search including unlimited access to all candidates in the pipeline. They also have a highly experienced team dedicating their resources on a daily and weekly basis to meet their specific needs.
Our talent acquisition process was built to disrupt the recruiting industry as we know it. This revolutionary model provides the highest quality candidates in record time and continues to exceed client expectations while saving up to fifty percent on average costs.
We invite you to connect with us to learn more about our process and how we can support your business growth.