Cut Agency Spend by Increasing Agency Value

Great agency recruiters are experts at their craft. They know the market, are outstanding at building relationships, and deeply understand their clients.

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Lauren Pease

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Great agency recruiters are experts at their craft.  They know the market, are outstanding at building relationships, and deeply understand their clients.  While there is clear value from the best agency recruiters as Talent Acquisition’s strategic partners, the premium paid for their services can often prove unwieldy in the face of doing what most leaders are charged with — achieving ever better results with less dollars.  While lessening this reliance can be difficult, here is a guide to helping you achieve lower agency spend while improving service levels to clients.

1. Should I eliminate agency relationships altogether?

In a word:  no.  Assuming you have moderate levels of hiring, you may still opt to use agencies sparingly.  The two areas where you will gain the most from agencies are: (1) recruiting in a new region or division and, (2) seeking the elusive, ‘Expert Space Travel Agent’ candidates of the world (yes, it’s a real job).  In these scenarios, leveraging an experienced agency that specializes in these areas is helpful and cost efficient.  To facilitate introductions to these expert partners and simplify the contract process, you may wish to consider the marketplace platforms that exist.  These options often integrate with your ATS, streamline the process and communication in one place, and are free to join (your organization still pays the agency fee, of course).

Further, this is also a great time to establish a partnership with a recruitment research partner.  There are varying levels of engagement options, including simple market mapping to screening and lead delivery, and often cost less than you would spend on a single agency fee for the hire.

2. But, I like my agency partners and have doubts about my in-house team…

I’ve worked with some sharp third party recruiters in both large and small firms and I like them, too.  They can be excellent partners; however, there are reasons beyond your budget you may wish to shift your strategy to rely on in-house expertise.  First, in-house recruiters are laser focused on filling pipelines and open roles with talent solely for your organization, rather than a broad client base.  Second, your organization’s in-house team members are the best at selling your company and all the benefits the job might offer prospective hires.  After all, they are most incentivized to hand pick great colleagues and coworkers, since they will be working together.  Last, the right mix of in-house talent armed with proper training and  technology can be even more effective at filling the vast majority of your open roles.

3. The proof of progress is in the numbers!

Key Performance Indicators (KPIs) are key to quantifying your progress toward maximizing agency returns.  Cost per Hire, Time to Fill/Accept, Hiring Manager Satisfaction, and Candidate Experience are great metrics to measure and compare over time.  A quick survey of fellow companies will yield that most organizations calculates these in slightly different ways; however, whatever your formula, if you consistently calculate and report these metrics the same way, you’ll be able to measure the impact of your changed approach over time.

Additionally, establishing limits that guide agency usage, including maximum percentage of agency hires (benchmarking research reveals <1% to 10% across industries) and percentage of open roles out to agency at any given time, should provide further spend relief.

4. If I turn off the agency spigot, where will my candidates flow in from?

Agencies are often brought in to supplement low candidate volume for new requisitions; however, quantity and quality should not confused. Higher candidate volumes might make hiring managers happy on the surface; however, the wrong kind of candidates can increase time to fill, or worse yet, reduce quality of hire. Increasingly, companies are building out different job marketing solutions, including headcount and technology tools, to build pipelines and passive candidate pools that can also help effectively target and capture quality candidate leads. These include launching/refreshing Employee Referral Programs (resulting often in shortest time to fill, high performance and high retention rates), creating Talent Communities and purchasing CRM solutions (warm lead capture and recruitment marketing campaign management), purchasing job board slots and recruiter licenses (for job boards and networks), and marketing via social media channels, to name a few.

5. The hiring manager is king and they insist on using their agency of choice.

To talented in-house recruiters, this can be one of the most frustrating conversations to have with a client, but, armed with data and process knowledge, you can combat this.  First, understanding the hiring manager’s motivations for agency use is key to winning them over.  Common concerns include misconceptions related to time to fill and expertise in building candidate pools. Sitting down with business leaders to educate them, allay their fears, and brief them on your change in service can help provide air cover for your front line recruiters.  Second, establish guidelines and protocols for approaching agencies, including illustrating the different scenarios and frameworks for how to delay and when to engage agencies.  Train your team to overcome hiring manager objections by talking through your new approach, explaining the value of this new process, and walking them through any wins you’ve achieved to date.  In-house recruiters will feel trusted and empowered to drive better results after getting their hiring manager’s trust and commitment to a new approach.

6. What else can I do that has a lower cost and even higher benefits?

The best-of-breed organizations have built expert, proactive in-house sourcing/research functions.  The creation of these teams effectively installs an agency inside of your organization in a cost effective way.  This structure not only leverages your team’s expertise in marketing your corporate culture, (i.e.,  your employees) but also puts powerful resources at your fingertips.  These teams can focus on engaging passive candidates, nurturing these leads, and delivering them to recruiters as soon as a req is created.  These proactive pipelines usually focus on frequently filled roles or hard to fill specialties.

In conclusion, effective in-house talent acquisition teams bring great value to an organization — they identify top talent and get them excited to join your organization, build awareness of your employer’s value proposition within your target market, and drive business wins in reducing spend and increasing new hire quality.  Effectively managing agency spend by shifting budget dollars to cover in-house recruiters and technology solutions is a winning strategy that is sure to please business and recruiting teams alike.

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