Virtually every employee is familiar with the process of applying to jobs and interviewing for those jobs directly with an employer. A smaller subset of workers have also had experience working with third-party recruitment agencies that help facilitate the process.
Typically, these third-party recruitment agencies work on behalf of, and are paid by, the employer. They offer broad-based experience and expertise in various fields and provide the resources to help speed up and enhance the recruitment efforts of in-house HR professionals and recruitment teams.
In this feature, we look at some of the reasons and ways companies use third-party recruitment agencies.
Why Use Third-Party Recruiters?
One of the primary reasons companies employ external recruiters is internal resource constraints. Depending on the size of the organization, the need to fill vacant positions is not constant, and those needs vary in terms of role and job function. This means a given company might not have a team of experts with in-depth knowledge and experience in hiring accountants or operations managers, for example.
“Third-party recruitment firms possess extensive industry knowledge, including salary benchmarks and candidate or generational trends,” says Sarah Doughty, Vice President of Talent Operations at TalentLab. “They help craft customized strategies and can offer objective feedback on employment branding.”
Additionally, external recruiters work with a range of employers, whereas in-house teams are generally only familiar with their own internal practices and processes.
“Recruitment partners have diverse exposure to various recruitment styles across different employers, providing valuable insights into effective recruitment processes and best practices,” Doughty adds.
“Passive” Candidates
Another reason employers sometimes turn to third-party recruitment agencies has to do with the distinction between active versus passive candidates. Generally, people applying to jobs are what can be considered “active” candidates. They’re out there actively looking for work. Often this means they’re currently unemployed. Or it might mean they’re unhappy with their current employer for various reasons.
While just about everyone has found themselves in the active candidate category at one point or another in their careers, it can be a sign that such candidates are not necessarily the cream of the crop. After all, why are they out of a job? Why aren’t they happy where they’re at?
Recruitment agencies, on the other hand, focus heavily on “passive” candidates as well as active candidates.
“Most agencies focus on passive talent—candidates who are already employed—making this the biggest advantage of working with an agency partner,” says Doughty. “Agencies build relationships with top industry talent, allowing them to present candidates who are highly qualified and experienced.”
By contrast, Doughty notes that most corporate or in-house recruiters don’t proactively head hunt or look to recruit currently employed individuals. “Headhunting is very time-consuming, and the ROI often doesn’t justify it for in-house teams,” she says. “Agencies can afford to invest time in pursuing top talent because they represent multiple employers, while in-house teams usually have only one or two open roles with the same hiring manager. Therefore, headhunting would be an inefficient use of their time. In-house recruiters typically focus on inbound recruitment, posting roles on job boards, sorting through applicants, and using social media and marketing tactics to engage larger talent pools.”
Time to Fill a Position
The business world moves incredibly fast, and time is often of critical importance when it comes to filling job openings. Leaving positions vacant for extended periods of time can put strains on teams, requiring staff to take on additional duties and contribute to overall stress and employee dissatisfaction.
Because of their expertise and economies of scale, third-party recruiters can also often fill open positions far more quickly than an in-house recruitment team could. The fact that these agencies tend to have existing relationships with a pool of potential candidates certainly helps in this regard.
“Recruiting agencies have such a high volume of positions generally, they already have candidates they can call on, which can speed up time to fill,” explains Justin Marcus, Co-Founder & CEO at Big 4 Talent.
Drawbacks of Third-Party Recruiters
Of course, third-party recruiters come with their downsides as well. If that weren’t the case, every company would be using them all the time.
The most obvious drawback is the cost. Employers and hiring managers have limited budgets with which to recruit staff, and adding an external company into the mix means one extra mouth to feed. “I have seen the costs anywhere between 18%–35% of the first year’s salary—depending on if the role is executive level or not,” says Marcus, adding that most employers internalize that cost.
The alternative to internalizing the cost of a third-party recruiting agency is to reduce the offered salary to some extent to help offset a portion of those costs. This will obviously make the company a less competitive employer for a candidate who is considering multiple opportunities.
Another potential drawback of using an external recruiter is their lack of in-depth familiarity with the hiring company. This is the other side of the coin with respect to the wide industry knowledge such recruiters can offer. While these external agencies may have great insights into the broader labor market and trends within a particular type of job function, they don’t necessarily have intimate knowledge of the pain points the organization is trying to address with a new hire or the company culture and how a candidate might fit in at an organization.
Third-party recruiting agencies can be a useful tool for companies looking to fill open positions. These external partners often bring extensive industry knowledge and the resources to look for passive as well as active job candidates. While these benefits are significant, external recruiters can be costly and may not have in-depth knowledge of the hiring organization to leverage in helping select the right candidates. On balance, the use of third-party recruitment agencies is often a great solution in the right circumstances and HR teams should keep such resources top of mind when hiring for critical roles.
Lin Grensing-Pophal is a Contributing Editor at HR Daily Advisor.