As the years have rolled by, I have become more and more aware of how poorly internal recruiting functions perform when compared to recruitment process outsourcing (RPOs) organizations or agencies. These firms have to make a profit or go out of business. They have to operate efficiently, continue to innovate and stay ahead of the demands that clients have.
Until Coronavirus hit, internal functions were normally found in almost all large organizations and their value was unexamined. Now leadership is deciding on their value and whether they need them or not. Many functions have been eliminated or downsized for economic reasons but also because there is a realization that recruiting can be done in other ways.
Recruiters try hard to justify what they do portraying the function as essential to the organization’s success. However, in my experience senior leadership rarely sees it that way. When given the alternative of using an external provider, as long as perceived costs and quality are roughly similar, they rarely insist on keeping the internal function. Recruiting has never been immune to significant downsizing or even elimination during economic turmoil and is seen as a function that can be turned off and on as needed.
This means that recruiting leaders have had to fight long and hard to get budget for technical improvements and there is little incentive to create an efficient and proactive function. It is a reactive function that is judged primarily on how quickly it can fill positions and keep hiring managers happy. If no one complains, no one pays much attention to it.
So, this leads to the headline question: do organizations need an internal function at all? Can recruiting be done just as well or better by an external provider? Do internal recruiting functions do something that an external provider cannot do? Can they do it cheaper but with the same or better quality and speed? Can they provide a higher caliber candidate?
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 could tap into Big Data and use analytics to find and hire better and better employees. This is one area where the length of service and commitment to the culture can pay dividends.
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. They also most likely do not have access to the data that an internal recruiter could access.
2, There is scant data supporting whether an internal function provides a higher quality candidate or not. Judgments are always political. Many agencies and RPOs can provide extensive data on their processes and results. Internal functions would have to gather data and do the analytics to prove that they can do a better job. With the lack of qualified staff and budget, this is very difficult for them to do.
In addition, whether an external provider does a good job or not depends on the confidence and leadership internally. Insecure leaders see the outside provider as a threat and may unconsciously undermine their effectiveness. Or the outside provider is given searches the internal team has failed to find.
3. 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, accessing detailed market information, coaching to hiring managers, and building a reputation for adding real value through the quality of talent it provides. Internal functions are never very efficient primarily because leadership is transitory and budgets are small: I am not sure of the average tenure of a recruiting leader, but I would guess it is less than 3 years. This means there is little to no continuity of strategic planning, no oversight of process improvements, and little opportunity or budget to choose, install, learn, and refine the technology. Most organizations I have worked with change processes, procedures, and technology with each leader that arrives. Plans that have taken months to create are thrown away overnight. This is the area where an external provider has an advantage. They can spend whatever it takes to hire the best talent and put in place tools that improve speed and efficiency.
4. 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 incompetent 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.
5. Technology has become essential to an efficient and cost-effective recruitment function. Unfortunately, internal functions are seen as overhead and have to compete with other HR functions for scarce funds. There is rarely the budget or the skilled staff to evaluate, install, and operate the various recruitment technologies effectively.
RPOs and agencies view technology as an essential investment in their future. They hire technical experts to either purchase or develop the tools they need to reduce costs and staff and improve efficiency. They train staff to use these tools and use automation to free up recruiters so they can spend more time engaging and closing candidates. Many have pioneered the use of video interviewing, assessment testing, and CRM to increase candidate quality and hiring speed.
Very few internal functions have the same level of capabilities or the same amount and quality of trained recruiters.
Given the pandemic, the resulting reduction in staff, and the growing use of remote and virtual workers, there are few compelling factors to recommend retaining an internal function and 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.