I enjoyed – and agreed with – the thoughtful piece by Ian Goodall earlier this month on why agencies will survive the rise of social media.
I’d like to address the wider question of why it makes sense to use a recruitment agency from a financial point of view.
As Ian says, it’s tempting to think that by bringing recruitment in-house you’ll save money. In today’s cash-strapped world isn’t it sensible to avoid paying agency fees and do the job oneself?
Actually, no. Companies who choose the in-house route often end up paying out more.
First and foremost, an agency can save you time when you need it most, and that time is most definitely money. Most hires are made because the company will benefit financially by bringing the new person in. The sooner they make that hire, the earlier they get that benefit.
On average, a professional will boost revenue by the amount of his or her salary plus twice as much again. So, every month of employment is worth two months of the salary paid in gross profits.
That’s a bit more than 15 per cent of the annual salary. Now recruitment fees for a sole agency assignment are, typically, 15 per cent as well. So you can see now that if, by using a specialist agency, you are able to bring forward the start date by just one month, you will have covered your agency fees.
That’s not to mention all the other benefits of using an agency – saving a huge amount of time, widening the net considerably, and the most important benefit of all, having the support and expertise of independent people with unparalleled knowledge of the market and long-term relationships with both client and candidate.
Second, an agency helps you stay in control with salary negotiations. In-house recruitment tends to rely quite heavily on headhunting and/or social media.
But in both these avenues, you are approaching the candidate rather than the other way round, and that means he or she has the upper hand with regard to salary.
You are likely to have to pay more to entice him or her to jump ship. This has a knock on effect on your salary structure and employment costs for existing staff. Your development costs gradually rise.
There have been a number of cases of studios going from being able to pay below average (because staff motivation and retention was high) to paying above average for everybody. In some cases staff were made redundant because costs became unsustainable.
So agencies don’t just offer the knowledge, expertise and relationships which make for excellent hiring recommendations.They can save you money in the most direct ways, too.