Is there a Need of Internal Recruiting at All?

Is there a Need of Internal Recruiting at All?

As the years have rolled by I have become increasingly aware of how poorly internal recruiting functions perform when compared to recruitment process outsourcing organizations or agencies. These have to make a profit or go out of business. They have to operate efficiently and continue to innovate and stay ahead of the demands or questions that clients will have.

Internal functions don’t have to do any of these things. They are entrenched in almost all organizations, and because their function is perceived as incidental to overall organizational performance or success, not much in the way of efficiency is really expected or, unfortunately, rewarded. This means that few recruiting leaders have any incentive to improve their function. In fact, doing so may mean a smaller budget, less headcount, and even less status.

So this leads to the headline question: Do we need an internal function at all? Does it do something that an external provider cannot do? Can it do it at least as cheap or as fast? Can it provide a higher-caliber candidate?

Some thoughts:

1. Internal recruiters who are employees should have one major advantage over any external provider. That is a deep knowledge of the corporate culture and what success criteria are, and also what individual managers are looking for in candidates. The deeper and more scientific this knowledge is, the more it can be repeated, refined, and taught to others. A really outstanding internal function would nurture and develop a core of highly knowledgeable and trained recruiters who would have this knowledge. HP, in the old days, and IBM today, have this kind of built-in DNA that is very hard to replicate. External functions will always have difficulty achieving this level of intimacy with their clients, even when co-located, primarily because their employees have less motivation to invest in gathering this information and may be interchanged frequently. This is one area where length of service and commitment to the culture can pay dividends.

2. To remain competitive with outside providers, an internal function has to be as efficient as or more efficient than an outside provider. This means constantly improving operational excellence, adding appropriate technology, providing detailed market information and coaching to hiring managers, and building a reputation for adding real value through the quality of talent it provides. I have never seen this in any client or organization I have worked in, and I think this is the area of greatest potential return. Internal functions are never very efficient, primarily because leadership is transitory: I am not sure of the average tenure of a recruiting leader, but I would guess it is less than three years. This means there is little to no continuity of planning, no oversight of process improvements, and little opportunity to choose, install, learn and refine technology. Most organizations I have worked with change processes, procedures, and technology with each leader who arrives. Plans that have taken months to create are thrown away overnight. Recruiters know that they can do what they want, for the most part, because there will be no accountability or continuity. This is the area where an external provider, with a profit motive and an efficiency goal, can beat an internal function hands down.

3. Recruiters also need to be retained, trained, and incentivized to perform. External agencies can offer commissions, bonuses, and other rewards for outstanding performance. They can fire inefficient or incapable recruiters quickly. Internal functions are usually tied to traditional reward structures that do not provide the shorter term, efficiency-based rewards that would be more effective. A recruiter can barely perform at all and survive (and even thrive) by courting a few hiring managers or by being a good bureaucrat. And employment laws and internal practices limit when and how a recruiter can be fired, and the process is lengthy. Again, it is essential that internal recruiters be selected carefully based in skills and motivation and offered whatever incentives are available to encourage short and long term performance as well as retention.

4. The emerging prominence of social media should offer internal functions hope. Social media inherently dependent on intimate knowledge about the firm, candid communication, and the ability to take advantage of the networks of current employees. All of these give internal functions an edge.

Yet I am not convinced that this will make much difference. The RPOs and agencies are rapidly adopting social media and are even offering to manage the talent communities of individual firms. Many medium or small firms are not even looking at social media as a recruiting channel, and larger firms have widely divergent opinions and practices.

Effective social media use requires time and dedicated people who can interact with candidates, generate content, provide advice, and screen candidates for individual jobs. These are all strengths that internal recruiters have if they are given the time and charter to do so. Unfortunately again, corporate policy, management’s inability to see the benefits of social media, the fear of litigation, and lack of staff depth usually means this does not happen.

Given the state of recruiting functions today there are few compelling factors to recommend retaining an internal function. I have outlined where they could gain advantage, and a handful are doing these things, but by and large they offer little that would make them indispensable. By negotiating tough performance-based outsourcing agreements and allowing outside recruiters access to hiring managers, firms could eliminate the administrative and benefits costs of retaining employee-recruiters and the function could be reduced to a few liaison folks and vendor managers.

Author: Kevin Wheeler, the President and Founder of Global Learning Resources, Inc.

The Future of Contingent Search

What does the future hold for the age-old industry currently in transition?

The traditional contingent search business model is a risky one in that it is incredibly susceptible to macroeconomics, technological innovation, and population demographics. While many industries can balance their product and service portfolios to survive the most brutal application of the laws of supply and demand, many smaller contingent search providers ride a one-trick pony.

In 1999, contingent search providers were riding waves of success that made those on the North Shore of Maui look tame. Search commissions were rising steadily, exceeding 45% in some markets, newbies to the profession were pulling down six-figure incomes, and the influx of job orders seemed unending. Then 2001 hit, and one contingent firm after another cut back, laying off thousands. Now that double-digit employee growth is once again a challenge for most companies, you would think that the glory days of contingent search are back. But, as many firms will attest, they aren't.

Revenue Is There, But Not From the Same Sources

While industry revenue is forecasted to grow from 10.4% in 2005 to 11.6% in 2006, the industry is deriving the greatest percentage of newly booked revenue from value-added services, namely temporary or contract staffing and professional services. More companies are relying on contingent workforces than ever before. It is estimated that in 2006, as many as two-fifths of newly created jobs are first offered on a temporary basis. That's a fourfold increase in the growth of contract labor in just 10 years.

While the job orders being placed with traditional contingent agencies aren't drying up, the increased use of contingent labor and a confluence of technology driving candidate visibility is forcing such firms to change or die. With the opportunity to maintain minimum placement volume needed to sustain a business in jeopardy, many contingent search providers are increasing the scope of value-added services they offer, and are finding clients more receptive than ever.

The contingent search industry has long been one that defined success too early, in that it never sought out opportunities to extend the value of its services beyond the initial placement transaction. This lack of prior industry development has made the industry ripe for a series of progressive, qualitative transition cycles. Early leaders embracing this transition are already blurring the lines between temporary staffing, contingent staffing, retained staffing, professional services, and training. With this transition firms like Adecco and Kelly, which had few urban competitors, today have thousands, ranging from local companies of one to foreign companies of thousands.

The Confluence of Technology Driving Candidate Visibility

Traditional contingent search firms take advantage of their ability to find candidates who have not been found by companies or who have been overlooked. It is, for the most part, a low-volume, high-margin business. However, the confluence of numerous technologies that service the recruiting function and the proliferation of the Internet have made a majority of the world's workforce more visible to corporations and, in the process, eroded the value proposition contingent search providers once banked on.

In this new era, contingent search professionals are finding it a lot harder to find a candidate who:· Doesn't appear on a lock-out list (a list of the agencies' other clients or strategic partners of the client organization);· Hasn't already been introduced to the company via the employee referral program; or· Doesn't already appear in one of a multitude of databases that employers have purchased access to; or· Hasn't already applied directly to the company sometime in the past four years; or· Presents a background so stellar that companies don't balk at paying search fees.

In short, the inventory of talent that contingent search providers can trade upon for permanent placement is in extremely short supply.

New Services on the Horizon

As stated earlier, those agencies embracing change are finding more ways to extend the value inside the organization. The most common extension is, of course, the move into supporting temporary labor. While many large service providers like Randstad and Kelly have the market economics to secure the largest companies in a metropolitan area, a number of small- and medium-sized firms desperately need help leveraging contingent staff.

In addition to temporary staffing, a number of other potential services are on the horizon, some that many large organizations should consider taking advantage of.

Outsourced Referral Program Management

Employee referral programs are quickly becoming the predominate source of hire inside most organizations. Those firms that lead their industries in hires attributed to employee referral can attest that providing world-class customer service to both referees and referrals is essential to maintaining program momentum.

Unfortunately, most HR organizations are not adept at even spelling world-class customer service, let alone delivering it. For years, HR organizations have focused on containing costs and enabling self-service, two objectives that don't always drive customer satisfaction. Contingent search firms, on the other hand, have built their businesses around customer service, servicing not only the client but the candidate as well.

By outsourcing the management of the employee referral program to a trusted search provider, the client organization could gain several key benefits, including:

· The search provider could more easily ramp up and down the human resources attached to the client employee referral program to maintain pre-established customer service standards.

· Under a split-type agreement, the search provider could provide referrals with additional placement services should the client organization opt not to hire, thereby creating a revenue source to self-fund the employee referral program.

· The search provider could provide more advanced analytics regarding the success or failure of the employee referral program because traditionally agencies have been more adept than HR functions have been at applying metrics internally.

· The search provider could leverage economies of scale and build internal staffing proficiencies in marketing and sales skills to support the employee referral program that would not make sense for small- and medium-sized firms to invest in.

External Brand Assessment

While most lock-out list scenarios prevent companies from using an agency to raid another employer, they don't prevent organizations from hiring services to help identify and understand their position in the market as employers. Because contingent search providers have a proven ability to blueprint a competing talent organization, target specific talent, and establish contact with said talent, it makes sense to leverage that ability to identify and gauge an employer's reputation in specific talent markets.

Professional recruiters may be more adept at getting an honest perception than market researchers because they have a proven ability to keep talent talking. Under such a scenario, search providers would:

· Build contact lists of target talent in competing organizations.

· Establish relationships with said talent over time.

· Use the established relationship to gather research on how the client is perceived in key areas by the target talent.

· Aggregate the research and report back to the client perceptions that limit the client's ability to attract said talent.

Competitive Landscape Mapping

Nearly every contingent staffing professional can tell stories about when it introduced a candidate to a client who came from a competitor whom the client was unaware of. While companies like to think that their marketing teams are adept at identifying potential competitors, staffing professionals often do a much better job at mapping who-competes-against-whom for customers, and especially for employees.

They are more adept at recognizing industries that hire compatible talent, and much more adept at identifying new entrants to the talent market. Client organizations can use contingent staffing firms to build competitive talent landscape maps as a precursor to organizational benchmarking initiatives. Maps can help insure that organizations have a realistic picture of who is after what talent in a specific geography, and what each player's strengths and weaknesses are.

Recruiter Training

While the visibility of candidates may have improved, the ability of the typical corporate recruiter to acquire said candidates has not. Most corporate recruiters are phone averse, and seem to think that proactively contacting any potential candidate before they have applied to you is an ethics violation!

As such, a number of contingent search firms have started offering training seminars and certification programs that help prepare recruiters to be successful in the role of corporate recruiter. Some aspects of these training programs focus on sourcing techniques, while others focus on how to engage candidates and deal with the all too common objections. A number of Fortune 200 companies now rely heavily on recruiters who have undergone said training.

Under this service, contingent search providers:

· Recruit entry-level recruiters onto their payroll.

· Train the recruiters in full life-cycle recruiting or a life-cycle specialty, depending on client needs.

· Provide the newly trained recruiters with on-the-job experience for a minimum period of time.

· Contract out or place the new recruiters with client organizations and guarantee their on-the-job performances for a set period of time.

Vendor Management

Another service that is growing in popularity among traditional contingent agencies is vendor management. Many corporations are horrible at managing the multitude of services that support the staffing function and could not optimize the deployment of searches or resources if the future of their staffing function depended on it.

Despite years of challenges and a host of software products that have sprung up to do the job, most companies still need help. Because agencies are generally better at using metrics internally and have a profit incentive to use resources wisely, outsourcing vendor management to a contingent staffing vendor again makes sense. They can leverage the same metrics that they use internally for assigning recruiters to job orders to assign subcontractors to accounts. Because their profits are tied to helping you maximize both the efficiency and effectiveness of your staffing efforts, you build in accountability to a corporate function that traditionally hasn't been held accountable.

Conclusion

Contingent search firms have existed for years and will continue to exist for years to come. But like all industries, the contingent staffing industry is not subject to life as we have known it forever. It too must evolve — now more than ever. The position of search firms is one that lends organizations a great deal of power to identify what does and does not make sense to do internally. In short, it gives organizations the strength needed to force trusted search providers to become mini-recruitment process outsourcers. Are you progressive enough to leverage your partners?

Ref: Dr. John Sullivan & Master Burnett

Oldest Executive Search Firm

The executive search business began in the United States in 1926 when Thorndike Deland launched a business that charged a $200 retainer to find expert buyers for New York department stores. However, it was not until after the second world war that executive search gathered speed as part of the rapidly growing management consultancy business. It soon became evident to search consultants at McKinsey and Booz Allen Hamilton that the service might best be provided as a separate business. McKinsy moved out of the executive search business in 1951.

McKinsey left the search sector in 1951. H. Wardwell Howell, head of the McKinsey search practice at that time, left to found Ward Howell, which became one of the biggest global search firms (until 1998 when its American division was acquired and the rest of the company rebranded itself as Signium). Handy Associates also broke away from McKinsey. Booz Allen Hamilton, which maintained its search activities until the late 1970s, groomed many of today’s top search consultants. Among firms launched by its former management consultants are Boyden (1946), Heidrick & Struggles (1953), Spencer Stuart (1956) and Amrop Hever (1967).