In-house, agency, or outsourcing? Identify the best way to manage your recruitment needs

Andy Agouridis Talent Acquisition

Recruitment can make or break a business. If you build a strong talent acquisition function, you can get top talent, when you need it. In turn, this can enable you to build a world-class workforce that enables you to reach your goals. On the other hand, a weak recruitment function may cause delays or even worse inability to access the required talent. Needless to say, this can be catastrophic for a company.

However, it’s not all doom and gloom, as employers have a multitude of recruitment options at their disposal. Firstly, companies can build and maintain their own recruitment function in-house. However, this may not always be a fit-for-purpose solution. In these cases, organizations can outsource their recruitment to recruitment process outsourcing (RPO) companies or get support from recruitment agencies. In this article, we will share with you all you need to know to select the best option based on your needs.

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What are my options?

In-house recruitment

Recruiting in-house means building an internal team that is responsible for talent acquisition. This team can consist of permanent payrolled employees, fixed-term employees, and contractors. These workers typically work exclusively for your organization and their roles are focused on bringing the right people on board.

 

Recruitment process outsourcing

RPOs are companies that offer recruitment as a service. Partnering with them means outsourcing your talent acquisition process to them partly or in its entirety. For example, you and an RPO could enter into a contractual agreement where they become responsible for managing specific steps of your recruitment process, the end-to-end recruitment process for a specific job function, or even your entire recruitment function. RPOs work with many clients and typically focus on long-term, ongoing partnerships. The recruiters they provide you with may work only with you or with more businesses depending on your agreement.

 

Recruitment agencies

Recruitment agencies also offer recruitment services, however, their business model is different from RPOs. While agencies may partner with clients for multiple assignments over a period of time, in most cases they provide support for immediate recruitment needs. They work with many businesses and may focus on a specific market, function, and geography. Once you have an open vacancy, you can work with them to find suitable candidates. Then, you can select the one that suits you best.

 

What are the key differences?

In-house recruitment, RPOs, and recruitment agencies have all been used by employers successfully. However, each approach is different, coming with its advantages and limitations. Here is what you need to know.

 

Scope

Recruitment agencies

Recruitment agencies typically manage a specific part of the talent acquisition process. A standard engagement would start with you providing a briefing of what talent you are looking for. Then, the agency would source talent for you, screen some suitable candidates, and provide you with a list of a few qualified applicants. Then, your hiring manager would interview these candidates and select the best one. While recruitment agencies don’t manage the end-to-end process, they manage their part autonomously without requiring much input from clients.

RPO

RPOs are happy to take responsibility for your entire recruitment process. When you partner with them, you can develop a plan and suitable workflow in collaboration with them. Then, they can manage your recruitment operations as outlined in your agreement. While they can work autonomously, you may have to collaborate with them on an ongoing basis to enable them to manage your talent acquisition.

In house recruitment

If you build an in-house recruitment team, it will be able to take responsibility for your end-to-end talent acquisition needs. Assuming you hire the required resources, they can support you in building your employer brand, attracting talent, sourcing candidates, assessing applicants, hiring workers, and onboarding new hires. They can also be responsible for your recruitment strategy, ensuring hiring is aligned with the overall business needs.

 

Cost

Recruitment agencies

Employers who work with recruitment agencies enter into a contractual agreement with them. Recruitment agencies are paid per placement and in most cases request a fee based on the new hire’s starting salary. This means that working with agencies would be costlier when it comes to senior or very technical hires.

RPO

RPOs charge based on the scope of services they provide to their clients, irrespective of the number of vacancies they work on. For example, if they provide you with work equivalent to 10 FTE to manage your entire process, the cost would be higher in comparison to an agreement where they only manage a part of the process requiring 5 FTE effort. Payment is typically monthly.

In-house recruitment

If you maintain an in-house talent acquisition team, you will have to cover their costs on an ongoing basis. Typically, most workers would be payrolled as permanent or fixed-term employees. However, you can also work with contractors, in which case you would have to pay them based on their daily rate. In this case, pay is linked to the effort of your workers rather than the number of people they hire for you.

 

Control

Recruitment agencies

When you work with a recruitment agency, you have minimal control over their work. Their consultants will liaise with you to understand your requirements and then get to work. This means that you will have little influence over what they do and how they do it. However, you have total control over whether you will select the candidates they suggest or not, as contracts with recruitment agencies are not exclusive in most cases. Also, recruitment consultants are typically experts in their job and don’t need close supervision.

RPO

If you select an RPO, you have some degree of control over the work they manage for you. This is a more collaborative, strategic, and long-term approach in comparison to partnering with an agency. While an RPO would provide strategic advice and run your recruitment process, you would have the opportunity to get involved in both the design and execution if you need to. However, when you work with an RPO, you would enter an exclusive agreement with them for the outsourced scope of work, i.e. you wouldn’t outsource to multiple RPO.

In-house recruitment

If you build internal recruitment capability, you have total control over the talent acquisition strategy and process. You can set your workers’ goals, manage them along the way, and evaluate them based on their performance. However, you may lose some flexibility when it comes to growing or downsizing your recruitment team. Adding resources may take time while you would need to adhere to local legislation to terminate someone, which can complicate things.

undraw_Work_together_re_5yhnWhat are the key benefits?

Technical capability vs organizational understanding

Successful recruitment depends on a combination of talent acquisition capability with an understanding of business needs. However, each approach has its own qualities.

Recruitment agencies can be excellent when it comes to technical recruitment expertise, however, they can’t have a deep understanding of your business. In any case, this is not always an issue, as they should be able to gain a strong understanding of your vacancy due to their in-depth experience.

RPOs may possess deep recruitment expertise too, as they focus all their efforts on managing recruitment processes for their clients. Also, they may be able to get a good understanding of your business in time, however, it is unlikely they will be able to get as immersed in your organization as your own workforce.

Lastly, if you opt for in-house recruitment, you can expect a team that develops a great understanding of your business, as it’s their only focus. However, unless you hire highly skilled and experienced recruiters, they may not be as technically sound as their agency and RPO counterparts.

 

External vs internal talent pools

A strong candidate pipeline can be key for successful recruitment. However, building an internal talent pool from scratch is not an easy feat. On the other hand, an external existing talent pool can be a great short-term solution, however, it may not be fit-for-purpose for the long run. Here is what this means for each approach.

Recruitment agencies have their own talent pools. In most cases, an agency focuses on a specific niche, which enables them to build and maintain a strong talent pool. If you work with them, you will gain access to tap into their candidate pool and access the talent you need. However, this won’t help you build your own candidate pool.

Coming to RPOs, they may have existing talent pools that they have built for other clients. While you wouldn’t be able to tap into these candidate pools directly, this means that a good RPO has the ability to build and maintain a successful talent pool for your organization.

Last but not least, if you build an in-house recruitment function, you can create your own internal talent pool. However, you will have to build it from scratch and take all the actions required to maintain it, which requires significant effort.

 

Time efficiency vs Attention to detail

When businesses have a hiring need, they need relevant talent, fast. While time efficiency and attention to detail are both important, sometimes they can be mutually exclusive. Again, every recruitment approach has its own advantages and shortcomings.

Recruitment agencies can operate with great speed. The combination of their business model, which incentivizes them to pursue fast placement, and their deep recruitment expertise, enables them to find strong talent, fast. However, this could be at the expense of some detailed requirements, which could be overlooked. This means that the candidates they put forward may not always be relevant to all your needs.

RPOs can operate quite fast too, as they possess strong recruitment know-how, however they may be slower than agencies due to a lack of existing niche talent pools. Since time to hire doesn’t affect their compensation directly, they may focus on detail, too. However, they are unlikely to understand all detailed requirements as an in-house team would, as they are not as close to your business.

Lastly, an in-house team could focus on each detailed business requirement when filling a role, as their performance reviews may depend on this. However, they are unlikely to be able to fill vacancies as fast as a recruitment agency, as they may not have the capability and their KPIs are not necessarily linked to time to hire.

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Which one is the best for me?

When it comes to selecting your best recruitment approach, one size does not fit all. You may find that you need one, more, or all of the approaches we discussed based on your specific needs. With this in mind, here are the key criteria to consider to make an informed decision.

 

Company size

Smaller and less mature businesses may not be able to afford an in-house recruitment team. Indeed, maintaining a permanent team is a considerable ongoing cost, which may not be aligned with your budget, unless you are going through a sustained period of strong growth. In these cases, businesses can benefit from outsourcing most or all of their recruitment to an RPO or an agency, with senior leaders being involved in key decisions. However, as a business grows and matures, building internal talent acquisition capability makes business sense, as there are more financial resources and recruitment needs.

On the other hand, large or medium employers typically have in-house HR departments and dedicated recruitment resources. This allows them to adopt a long-term and strategic outlook to talent management. However, this doesn’t mean that external recruitment support is redundant for these organizations. For example, if a business has increased hiring needs due to entering a new market, growing, or having seasonal needs, it is common to turn to agencies or RPOs.

 

Role seniority

In theory, every talent acquisition professional can recruit for any role. However, things are a bit more complicated in practice. Senior executives can be notoriously challenging to recruit, due to high demand and low supply. Also, privacy and confidentiality are paramount when it comes to c-suite roles, which means that every step is significantly different from the standard process. Specifically, having a strong network of relevant candidates is key, which is why executive recruitment agencies may have a lead in this area.

On the other hand, more junior roles are usually easier to fill. Talent supply is higher for this type of role and employers may be able to attract the required interest passively by posting job ads. Even if this is not the case, sourcing is typically straightforward, especially for companies with a strong employer brand.

 

Expertise

If you are hiring for a role that doesn’t require scarce skills or deep expertise, most recruiters should be able to manage your vacancy. With this in mind, any recruitment approach could work based on your needs. However, things are a bit more complex if you are hiring for scarce talent. In these cases, having a deep knowledge of the market, a relevant network, and a strong talent pool can make a significant difference. So, when it comes to managing these vacancies, we suggest turning to recruitment agencies for support unless you work with a specialized RPO or you have a highly-skilled internal team.



Andy Agouridis

Andy helps candidates and employers connect faster and better. Apart from being a Jobylon contributing writer, he is the Director of CareerHigher (https://www.careerhigher.co) and a Careers content creator. He has a background in HR with Fortune 100 businesses, holds an MSc in HRM, and is a Chartered member of the CIPD.

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