By Gemma Morris
18th June 2013

It’s a hoary old chestnut but one still debated by many large organisations, both private and public sector. Can you save costs by bringing your recruitment in-house?

The answer, as you often find, is ‘it depends’.

Research from the Chartered Institute of Personnel and Development (CIPD) shows a mixed picture on the average cost to recruit between 2011 and 2012. Most notable is the increase in the amount the private sector pays to recruit senior managers and directors, rising from an average of £9,000 to £10,000. This reflects the survey’s findings of growing skills shortages despite high unemployment figures. Indeed 82% of respondents reported difficulties in recruiting at least some vacancies.

There is a different picture in the public sector with recruitment costs significantly lower than the private sector and a reduction in the overall cost to recruit year on year. This is attributed to budget cuts across the public sector as the Government attempts to reduce the national deficit.

When does in-house equal cost saving?

If you had to take a sharp intake of breath reading these numbers, you may want to think about the circumstances where an in-house recruitment team could operate more efficiently than an outsourced recruiter.

The Guardian recently published an article suggesting that local authorities were discovering the disadvantages of being tied into long-term procurement-led recruitment contracts including a lack of flexibility to adapt to changes in regulation or skills requirements.

It argued that if viewed as a service rather than a process, recruitment should be able to be well managed and cost effective internally.  Interestingly, the cost of poor recruitment practice was not only counted in financial terms but in damage to employer brand reputation and the hidden cost of time to hire.

In-house teams are generally felt to save money on agency fees but tend to work well with organisations who recruit large numbers of staff every year ie in the hundreds. They also have a well defined, well structured process that frees up the time of hiring managers, uses technology/networking and social media to search the widest available talent pool and offers good feedback mechanisms to continually refine the process.

When outsourcing becomes commercially sensible

The most frequent question asked of in-house teams is how they can efficiently maintain recruitment networks across all the disciplines in a typical business. They may prove great at recruiting in areas where there is a wide pool of available candidates, typically the lower skilled jobs such as call centre or administrative staff, but how can they find the best talent with leadership skills in specialist areas such as IT?

Writing for HR Magazine, Virginia Raemy of TalentPuzzle comments “selective employment of the better operators can give organisations access to a much wider pool of candidates, particularly those who are not actively seeking a new role. This allows businesses to identify and acquire the best people, rather than those who are either already on the market or are the most obvious targets. Agencies can also reach out to candidates, such as employees of client or supplier companies that might be off-limits to an in-house team for political reasons. In this context, the payment of a controlled number of agency fees may seem like a worthwhile investment rather than an unacceptable overhead.”

She adds, “the argument in favour of the selective use of agencies is particularly strong when it comes to recruiting for highly specialised or 'hard to fill' roles. In-house teams tend to be good at making volume hires for their employers, but how realistic is it to expect them to be effective across all areas of a business? And can any but the very largest organisations afford to have the necessary (and often expensive) expertise permanently on the corporate payroll when it may spend long periods of time twiddling its metaphorical thumbs? Particularly when expertise gained from making these types of appointment day in, day out is readily available in the agency world. Given this, the deployment of specialist external help on an ad hoc basis may actually make good commercial sense.”

A recent KDR success story highlights the point.  After eight months of fruitless interviewing for a Data Quality Analyst,  a national insurer engaged us to find the right candidate.  Four CVs and two interviews later, a successful hire was in place, just two months after the initial approach.  I asked Managing Director Mark Dexter what difference hiring a specialist recruiter had made to the client.  He replied “We understood the difference between data quality and more general data analysis.  This particular client  had spoken to loads of data analysts before we got engaged but the quality aspect was missing. And of course, we work those types of roles all day long rather than mixing it up with underwriters, actuaries, receptionists etc.”

So the lesson seems to be to assess the type of recruitment your organisation needs (high volume, readily available skills vs key senior appointments plus the level of specialist skills required in your industry) and whether the cost of a recruitment agency fee outweighs the cost of hiring an in-house team, taking into account who will best represent your employer brand and most importantly, find the right people for the right job at the right time. 

Spotlight on recruitment costs

What price do you put on successfully filling a role and what is the price of getting it wrong?

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