I’ve gotten a chance to work both sides of the fence for an extended period of time in the Talent Acquisition/Recruiting/Staffing game. For ten years I ran corporate talent acquisition shops for some very large organizations. One organization spent over $3M annually on staffing agency fees! Obviously, prior to my getting there!
I’ve spent almost fifteen years on the agency side, sandwiched in between my corporate experience. What I’ve learned along the way is that there isn’t a “free” option when it comes to hiring great talent.
Frequently, I get asked from clients for discounts to my fees on the agency side. I get that. When I was on the corporate side, I would never take an agency’s first offer. Here’s the main problem with all of this:
Corporate talent acquisition pros don’t want any of it. They don’t your 20% direct fee, they don’t want your retained plan, they don’t want your RPO plan. What they want is Free. A free option.
Therein lies everything you need to know about staffing agencies and corporate talent acquisition. One side wants free. One side needs to get paid.
The reality is, even staffing on your own on the corporate side isn’t free. Corporate talent acquisition done right has a ton of costs. Recruitment tools, automation, branding, job boards, applicant tracking, college strategy, recruiter training, and hiring, etc. None of that is free.
All of this, though, should be screaming to the agency folks that something isn’t right. What corporate talent acquisition pros are saying is “we don’t like the options we are getting from agencies”. This should be of serious concern because there are companies trying to design other options for corporate talent acquisition pros. Options where they’ll feel like they are getting the value they want.
These options aren’t free, either, but they are less than all of the traditional options that 99% of staffing agencies are offering.
When I was on the corporate TA side of the desk, here was my decision matrix to when I would use a staffing agency.
This matrix made me feel good about my decision to use an agency:
1. Does my team have the capacity to do this search? If Yes, why would I pay to have this done? If No, the cost is justifiable.
2. Does the agency offer me recruitment expertise and/or pipeline I don’t have on my team? See #1 for Yes and No options.
3. Is it financially feasible for me to add more capacity to my team, as compared to an agency option? This one took some more work. If I had a need for an agency to fill, let’s say, three positions and it was going to cost me $100K, well, obviously I could hire a pretty good recruiter for $100K. But, would I need that Recruiter in year 2, 3, etc.? Adding headcount isn’t a one time cost for an organization.
Ultimately, for me on the corporate side, it was almost always a capacity issue. I had the expertise, but we had bubbles of work I needed extra support with. Too often, I see corporate TA leaders upset over agency spend and it’s based on the fact they don’t have good recruiters on their team, yet they’re unwilling to change this fact. I’ll pay for additional short term capacity. I won’t pay for expertise I should have on my team every day. That becomes my issue!
Corporate TA leaders become frustrated over agency spend because ultimately it’s a reflection on the team they have created.
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As an owner of an agency I am wired differently than corporate recruiters. What I encourage is to evaluate your agency spend against the cost of your internal recruiting costs plus payroll costs, unemployment insurance, wc insurance, W2 production, and employee oversight among other costs of employment. An agency’s job is not complete on a start date. They still have oversight of their placements including time collection, payroll, discipline, layoffs, workflow management etc. When a partnership is coordinated well agencies are a cost reduction to the organization and an effective tool for recruiting.
I am less cynical than you.
Saying that Corporate TA Leaders are frustrated at the team they created essentially says they are incompetent. I’ve met a few in my time, sure, but that is a direct result of the Business not valuing TA and allowing an incompetent leader in that role in the first place. Let’s be honest – if companies valued TA – we wouldn’t see the rise of RPO and Corporate Recruiters carrying 40+ requisitions.
What I would say is more often the case is that Corporate TA is frustrated that they are not able to create the team they want in the first place. Branding initiatives are denied, Technology implementations are reviewed to death and often denied, headcount addition is denied, all the while the business sees an agency fee as “necessary.”
I’ve been at a company where the CEO had to personally approve every headcount add as well as any one-time spend over 25k – guess what happened? No headcount add in TA, no tech or branding initiatives approved, but agency fees that were negotiated under that amount would slip through without review or scrutiny.
The even bigger insult that comes from agency spend – when it isn’t the corporate TA Team spending.
I’ve seen, and been at a couple places over the years where the business side went out and spent the money on a 3rd party because they didn’t trust or have confidence that their own internal team could do it.
Those moments are when the corporate TA leaders should really be frustrated and start to look really hard at the team and expertise they have built and start looking at changing things.
Now you’re opening a can of worms and a pet peeve of mine!
One thing I tell TA leaders all the time if you have to 100% put a stop to the business making staffing decisions and how to staff. Control all of that. The first thing I did as a corporate TA leader is to tell all hiring managers they were no longer allowed to do this, and if purchasing got any invoices from staffing firms on placements that weren’t authorized by me, they would not be paid. I then had Accounts Payable go out to every staffing vendor we ever paid and told them we would no longer pay invoices that didn’t run through TA.
TA needs to own all staffing. This doesn’t stop staffing spend, but it controls it in an appropriate way. Same for contract and consultant spend as well.
I agree that often times the agency spend argument is really frustration at the current team, but I also feel that there is a lack of ability to speak to value. No matter how good my team is, there are always going to be positions that our outside of the wheelhouse, and it is far more efficient and economical (in the big picture) to work outside of the team. It just is. It’s not an indictment on my team, it’s just the best business decision. Too many TA functions view their role as cost containment or reduction as to how they add value, but you have to put it into perspective of what truly contributes to the business.
Just my ramblings…
Brilliant as usual!
Far too few TA leaders get this, Jim!