Not that long ago, software development talent was at a premium, and many tech shops turned to recruiters to attract and hire staff. The ranks of recruiters have thinned in the last two years as the available talent has swelled, but recruiters still have a place as part of a manager's hiring strategy.
A typical recruiter's sales pitch is that the "best" people already have a job and are not looking for a new one. That may have been true a few years ago, but it is not necessarily true today. There are a number of different situations and criteria that you can use to decide whether it makes good business sense to use a recruiter.
Evaluation of your hiring practices
First, consider your company's current and past hiring practices (see Figure A).
It's important to understand what is or isn't working now and in the past. Like everything else in your shop, you want to make sure that your hiring strategy is as efficient as possible. You should know what it costs you—in real dollars—to hire staff.
Next, assess your current hiring needs and requirements with a needs analysis (see Figure B).
If you checked two or more of the above questions, it probably makes sense for you to proceed to the final criteria for deciding whether or not to use a recruiter.
Costs and benefits
One of the biggest criticisms of recruiters in the boom era was the high cost. As soon as talent became more available, hiring managers flocked to Internet job sites and touted their own site's career sections. Everything, as we know, has a cost, whether the work is done internally by your company or externally by a recruiter.
I've seen a number of my peers use various ratios to help measure an accurate cost benefit analysis of whether or not it makes sense to use a recruiter.
These measurements are outlined in Figure C.:
The higher the ratio the lower the productivity and efficiency for your own internal hiring process. You may be spending a lot of time in the process pipeline before an actual hire is made. Don't forget, your time is money.
Most recruiters work on a contingency basis. If the recruiter doesn't satisfy your candidate requirements, you don't pay. You'll also get a guarantee on the candidate, which could range from three months to a full year, depending on the terms you negotiate. Recruiters' fees vary; I've seen ranges from 15-25 percent of the new employee's annual salary.
The most critical factor for deciding whether or not it makes sense to use a recruiter is cost per hire (CPH). As part of your own cost-per-hire calculation, take into account all the considerations outlined in Figures A, B, and C.
A recruiter's ROI, and your decision on whether or not it makes sense to use one, is based on two simple items: money and opportunity. At this point, you should ask yourself these two questions:
- Can a recruiter find candidates faster than I can?
- Can a recruiter recruit candidates at a lower cost than I can?
Taking into consideration all the items that I discussed in this article, if you answer yes to either of these questions, it may make sense to use a recruiter for your hiring needs.