Recruiting Leader s Guide to Direct Hire Agency Planning Setting Your Agency Recruiting Strategy for 2016
Recruiting Leader s Guide to Direct Hire Agency Planning 2 INTRODUCTION Direct hire agencies are a big business. In fact, according to Staffing Industry Analysts, it s an $8 billion a year business here in North America. Yes, that s billion with a B. Bersin by Deloitte estimates that headhunters and direct hire agencies make up 20 to 30 percent of the recruiting budget for the average organization. That s a significant portion of the budget for recruiting departments. THERE ARE TWO REALITIES IN MOST RECRUITING ORGANIZATIONS: 1. Headhunters and agencies are responsible for a lot of important hires. 2. Direct hire agency use, rates, and processes vary across the organization. Many organizations simply have no idea how their company uses direct hire agencies. That means 20 to 30 percent of your recruiting budget disappears without any understanding of how and why it was used. Most recruiting leaders have a deep understanding of how their internal recruiters are being used, have tools to measure their performance, and have consistent usage across the organization. When it comes to setting your direct hire agency strategy, it can be much more difficult than understanding your in-house team. These are third parties, often used by hiring managers directly, and IN THIS GUIDE, WE LL COVER: How to understand the current state of your direct hire agency use Five things to look at in 2016 How you can get started today the decisions that are made on how to use them are not in your control. In 2016, it s imperative that your organization take a closer look at how direct hire agencies affect your organization and how you can manage them as closely as you do your internal recruiting teams. When you bring together your business outlook, talent initiatives, and direct hire agency strategy, you can plan and execute to drive your organization forward. The starting point is understanding the present situation.
Recruiting Leader s Guide to Direct Hire Agency Planning 3 UNDERSTANDING YOUR CURRENT DIRECT HIRE AGENCY REALITY The reality for agency use in most organizations isn t pretty. It s not as if most recruiting leaders haven t thought of agencies, it s just that it s so hard to get your arms around it. YOU HAVE ALL KINDS OF ISSUES THAT POP UP AS YOU DIVE DEEPER INTO UNDERSTANDING HOW YOU RE USING HEADHUNTERS AND AGENCIES: Rogue hiring managers are using agencies. Instead of coordinating through talent acquisition, hiring managers have cut their own deals with direct hire agencies. They sign the contract, stay in direct contact with the headhunter, and even navigate the selected candidate through the hiring process. Agency spend is nearly impossible to nail down. Because of this reality, it s impossible to know what your agency spend is across the organization. Recruiting leaders are in for a rude awakening once they start looking at how much is being spent on direct hire agencies. Which agencies are doing good work for you? When you take a siloed approach, recruiting leaders can t get a feel for which agencies are worth the money and who might be getting preferential treatment because they play golf with the hiring manager every month. If this current state sounds familiar, don t panic. You re not alone. This is very common for organizations of all sizes. You ll need to take some steps to get as complete of a picture as possible of how you re currently operating, so you can plan for 2016.
Recruiting Leader s Guide to Direct Hire Agency Planning 4 HERE S WHERE YOU CAN START TO LOOK: Who is using agencies without our knowledge? You need to get as complete of a picture as possible of who is using agencies. Some hiring managers may be a little hesitant to provide you with who they re using, especially if they know they were supposed to go through you first. What s our roster for approved providers? Compare who is getting used versus who you have contracts with and determine where there is a disconnect. Are there multiple contracts with the same firm for different rates? How much did we spend and what positions did we spend it on? Direct hire agencies make sense as part of an overall talent acquisition strategy. You need to determine if they re being used on the right types of positions and whether you overspent. If you have internal capabilities that an agency doesn t need to take care of, it can help you get a feel for where changes can be made. How well did our agencies perform? This will be a tough one to measure, especially if a hiring manager has a good relationship with an agency. Any metrics you can pull concerning the number of interviews or the time it took to fill roles will help you evaluate possible changes for 2016. We understand that you might not be able to get a complete picture. Organizations have practiced decentralized use of agencies for years maybe even decades. But get as complete of a picture as you can; it will help give you a baseline to compare shifts in strategy that might happen in 2016. MOST COMMON PROBLEMS ORGANIZATIONS IDENTIFY WITH CURRENT DIRECT HIRE AGENCIES INCLUDE: We spent too much on agencies and we think we can optimize it. We spent the right amount on agencies, but we got poor results. We don t know exactly what we spent, but we didn t get the results we need.
Recruiting Leader s Guide to Direct Hire Agency Planning 5 WHAT FIVE THINGS SHOULD YOU BE LOOKING FOR IN 2016? Regardless of the current state, whether you have a centralized recruiting organization or you re completely decentralized, there are steps you can take to get your direct hire agency use in line with the rest of your organization.
Recruiting Leader s Guide to Direct Hire Agency Planning 6 HERE ARE FIVE THINGS TO LOOK AT FOR 2016: 1. ALIGN TALENT ACQUISITION WITH BUSINESS CHANGES Take a step back from talent acquisition and look at the big picture across the business. What changes are coming your way in 2016 and how should agencies be used or not be used? Understand where your organization has used agencies in the past whether for specialized roles or simply added recruiting capacity for a big project and plan now for the coming year. You also might be looking at a different budget for talent acquisition based on these changes. You could also have talent-related issues in 2015 that you need to alleviate in the coming year. Either way, you must have a strong understanding of where the business is going and how you re expected to operate in the coming year. If you can only do one thing: Bring top stakeholders together to understand the business changes taking place in the coming year and make proactive decisions on how agencies should fit into your overall talent acquisition strategy. 2. ESTIMATE NEXT YEAR S AGENCY SPEND Once you understand how agencies fit into your talent initiatives, look at the budget range you re aiming for when it comes to agencies. This is where knowing roughly what you spent in 2015 will be helpful, so you can minimize any looming surprises. Even if you have a hazy understanding at best of this year s spend, you can still do some rough projections. When a budget is handed down to you, you re going to have to be able to talk about it with some hard numbers and manage it. For example, the dollar amount spent on fees might go up because the market is demanding higher and higher salaries to recruit and retain talent. There is a limited candidate pool, so companies are always competing against one another, especially in major markets. If you were starting a new project or opening a new location in a competitive area, you should anticipate an increase in spend. The most important part is that you track every dollar being spent on agencies in 2016 so you can make better-informed decisions in 2017. If you can only do one thing: Have a conversation with your organization s leadership to learn how the business is growing and where to collaborate on direct hire agency spend for the year.
Recruiting Leader s Guide to Direct Hire Agency Planning 7 3. UNDERSTAND THE MARKET RATE FOR FEES The market rate is changing for certain types of talent or in certain geographies. Understanding what you ve spent on fees per position is going to be helpful as you re planning for the coming year. For example, if you re projecting two executive hires and five director-level hires and you know the going rate and expected compensation level, you can estimate your direct hire agency cost pretty well. Rates are beginning to stabilize, so you might be surprised that the going rate of 20 percent might be low for certain areas and 25 percent might be high for urgent openings. Arming yourself with accurate market data can help you have more strategic discussions with business leadership. If you can only do one thing: Download the BountyJobs Direct Hire Jobs Report to get a level set on the rates that others are paying in your industry. CASE STUDY: PAYING LESS FOR THE SAME QUALITY A Fortune 500 healthcare client with an average posting fee of 20 percent noted that the trend they have started to see throughout the industry and implemented in-house is to not automatically go to the highest fee approved. Instead, they are conscious of the quality of agencies and candidates needed in order to make the best possible fill, and then arrive at a number for a fee. By being mindful of the quality needed to fill the role, the company has been able to lower its average fee by 3 percent, all while maintaining the same quality of agencies and, most important, hires.
Recruiting Leader s Guide to Direct Hire Agency Planning 8 4. EVALUATE YOUR CURRENT AGENCY PARTNERSHIPS Although there is a high focus on cost, it s not all about money. Evaluating agencies should also take ease of use and compliance into account. You might have some agencies that have a sweetheart deal with a hiring manager they know but are underperforming, and you might have others that have done good work for you but rarely get selected. Depending on your strategy and budget goals, you might need a full evaluation of who is doing the work and how well they are executing on it. An agency that can execute quickly at a higher fee might be worth it for the right position. Understanding who has what terms and conditions can help you avoid unpleasant surprises with higher-than-planned fees or out-of-compliance candidate guarantees. If you can only do one thing: Get a handle on the different terms and conditions each of your current agencies is working under, as well as the general effectiveness of those agencies across the organization so you can make smarter decisions about which agencies to use this coming year. THREE CRITERIA TO EVALUATE YOUR AGENCY PARTNERSHIPS TIME TO HIRE SPEND PER HIRE CANDIDATE QUALITY
Recruiting Leader s Guide to Direct Hire Agency Planning 9 5. MEASURE SUCCESS MOVING FORWARD As a recruiting leader, you need all the information you can get at your fingertips. For direct hire agencies, that information can fall into two categories: numbers-driven key performance indicators and subjective measures of agency success. Although spend is important to track, you need to also have an idea as to who is performing. An agency might be a few percentage points higher for their fee but deliver superior results. You won t know that unless you use effective KPIs. You know the KPIs you use for your own recruiting, so measure your agencies by the same yardstick. In addition to evaluating your agencies based on spend, you should also be watching their effectiveness based on whatever KPIs are most important to you: Time to hire Interview rate Fills Number of jobs taken Number of candidate submissions Average days to submit Average days to interview Subjective measures of agency success should look at which agencies are following processes and compliance measures, and making it easy to work together. If you can only do one thing: Pick KPIs that you can track and that align to your business and talent acquisition strategy, and apply them across both your internal recruiting and direct hire agency teams.
Recruiting Leader s Guide to Direct Hire Agency Planning 10 HOW TO GET STARTED These five areas are a good place to start for next year, but you may be thinking to yourself, There s no way I can do all of this in 2016, and even 2017 looks iffy! We get it. Direct hire agency use isn t the only thing on a recruiting leader s plate. You re managing staff, working on relationships in your organization, and have pressure to perform, regardless of the circumstances. Headhunter use is one of the least understood parts of the talent acquisition equation, and you owe it to yourself to get started. First of all, don t worry about what you can t do; focus on what you can do. Get a handle on the one or two things that can help you today with the expectation that you can expand. For some organizations, it s just getting a better understanding about how their budget is being spent. It won t impact any decisions for 2016. Others will want to use the information to evaluate agencies and revisit their preferred partners for the coming year. Still others will want to start investigating options for direct hire agencies in areas they haven t worked in before. It s smart to vet and set up agencies the right way, before you need them. COMPANIES LIKE BOUNTYJOBS WORK WITH MANY ORGANIZATIONS ON THEIR DIRECT HIRE AGENCY STRATEGY AND SPEND. THEY HAVE A WEALTH OF INFORMATION AT THEIR DISPOSAL THAT CAN HELP YOU: Benchmark Compare your direct hire performance to others in your industry and area. Understand market rate and budget information If you re expanding to a new location or just want to understand your current agency program, we can help you understand market rates and give you the information to build a better budget. More easily manage your strategy and day-to-day agency execution BountyJobs helps many organizations manage their direct hire agencies more effectively and efficiently.
Recruiting Leader s Guide to Direct Hire Agency Planning 11 CONCLUSION: BETTER-INFORMED TALENT ACQUISITION STRATEGY Even if you don t use BountyJobs, we re passionate about equipping you with the knowledge you need to understand your direct hire agency strategy. Too many leaders let it fall by the wayside, and we want to help you make smarter decisions. When agency recruiting makes up 20 to 30 percent of the average budget, we think it s time to take a responsible approach to agency spending and there s no better time than 2016. Today, too many organizations don t have a firm grip on their agency spend. Inevitably, someone in your organization the CFO, CHRO, or even CEO will want to know why hiring costs are what they are. We ve seen too many recruiting leaders get caught off guard by this question because they only have 70 to 80 percent of the answer. It might not be your fault since the information can be buried across dozens of departments, but you owe it to yourself to get the answers you need. Using this guide, you can understand the current state of your direct hire use, plan ahead to 2016, and get started. And if you need any help thinking about your strategy or simplifying the management and reporting on direct hire agencies, BountyJobs is here to help. ABOUT BOUNTYJOBS BountyJobs is a direct hire agency recruiting marketplace that simplifies the entire process between companies and direct hire agencies, helping companies hire better candidates, faster. BountyJobs uses the only data-driven VMS that gives HR teams and hiring managers complete control and clarity. Through one contract, one portal, and unrivaled benchmarking data, BountyJobs partners to help you simplify, analyze, and then deliver unmatched velocity and results in landing candidates from direct hire agencies. bountyjobs.com