Direct Recruit or Staffing Firm?

Making the right hire is what every organisation wants to do. However, the reality is often the contrary! It goes without saying that hiring the right candidate is critical for every organisation. It means successful projects, happy clients and organisational growth. On the other hand, wrong hiring decisions could prove disastrous, apart from the obvious loss of time and money.

One aspect that contributes to successful hiring is the recruitment process. Organisations in expansion mode or those looking to fill the talent gap need to first decide on the mode of hiring: whether to handle the recruitment process in-house or to partner with a reputable staffing agency.

First, let’s look at option one: direct recruitment. One of the reasons that makes business owners go the direct recruit way is the cost factor. Paying out the industry standard recruitment fee of 8.33% of CTC per candidate would appear to be on the higher side, especially while hiring for senior positions or going for mass recruitment drive. The cost-effective alternative is to hire directly using the available in-house resources. For organisations in development mode this could mean sizeable saving considering the number of recruits.

Now, let’s look at the second option: a staffing firm does the recruitment and you get to take the final call on the candidate that match your skill sets and demands. However, like all other services, this too comes at a price. Now, the question that needs to be answered is- why would any organisation want to outsource an activity which can be done internally, that too in the cost-effective way? There could be reasons, which we will try to find out.

Organisations going the direct hire route would be doing so under the optimism that they will land up in right hiring decisions. However, the right analytical way is to take into account the efforts and effects of a bad hire. Think about scenarios where the in-house recruiters are unable to find matching talent or where it ends up in a bad hire. Consider the effort and time spend on repeat hire or prolonged periods of recruitment drive. In such cases, apart from the sourcing cost, the cost of time and cost of lost productivity should also be account for.

Take for example the efforts that go into identifying, attracting and hiring a resource. It starts with creating job description, posting ads in online job boards, attracting talent, reviewing resumes, preparing candidate assessment tests, conducting interviews, performing background checks and all that needs to be done before welcoming the candidate on-board. Companies which does not have an in-house recruitment team would find itself in an incompetent position to carry out these steps effectively, often forcing themselves to be satisfied with below par talent. Setting up and training an in-house hiring team would be even more complicated and costly process. The most sensible answer in such scenario is to go for option two: outsourcing the hiring process to a trustable staffing agency.

Staffing firms brings with them a team of recruitment specialists with many years of combined hiring experience which far exceeds that of an in-house human resource team. By virtue of being continuously involved in the placement process, staffing agencies have better coverage of the active and passive talent market and updated information on the current employment trends and recruitment practices. High industry networking, in-house database and access to quality talents who are not active on job portals make it possible for staffing firms to find quality talent even for the hard-to-fill positions. This in fact is the strongest reason why more and more organisations are opting for staffing firms over and above the direct hire option.

In essence, the complexities of the recruitment process, the resources, expertise and the market knowledge required to tap quality talents makes recruitment process outsourcing a safer choice than the direct hire. It also helps mitigate the risk of a bad hire as clients get to choose from the best candidates who have cleared multiple levels of screening and assessment. If you are still not sold yet on the advantages of recruitment outsourcing, try categorising and accounting the various costs involved in the direct hire process such as the cost of sourcing, job posting, advertising, screening, interviewing apart from the cost arising out of low productivity, bad hire and repeat hire.

Having said that, one also need to be cautious while choosing a staffing firm, as organisations differ in their area of specialization and expertise. Having a decade of experience in placing candidates in finance and banking sector does not guarantee any competency while coming to IT sector. Therefore it is safe to investigate and select a staffing firm who has specialised hiring expertise in your industry and are equipped to meet your staffing demands.

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