It may be a history of disappointing hiring decisions, the burden of extended vacancies, or simply a lack of time that leads many employers to outsource recruitment to agencies who have the skill, experience, and aptitude to get the job done on their behalf. Yet standard recruitment pricing models present a challenging dynamic for traditional agencies and their clients.
Most recruitment agencies follow a contingency or retained search model.
Contingency Search: These agencies collect their fees once the job requisition has been filled. There is a built-in incentive for the agency to submit the highest possible number of candidates as quickly as possible while doing as little work as possible, to increase profitability. The inevitable result is that quality suffers. For example, it is common practice for some agencies to assign lower level agents to the project, who do not know or understand the client’s business or their needs. The result? A high probability that the wrong candidate is placed. We’ve seen churn/turnover figures as high as 80%. Contingency agencies often charge 20-25% of the new hire's gross annual compensation. So an individual hired at $125,000 per year, for example, would earn the recruiting agency $25,000 to $31,250. That’s a fair investment for a strong hire, but a risky investment if the wrong candidate was placed just to earn the commission. That’s costly.
Retained Search: These agencies traditionally are paid a large upfront fee when selected, and then a second large fee with placement. That's a heavy hit to the budget before the project gains any traction. For example, the average C-suite executive’s base salary is reported to be $278,800. Retained search agency fees often range from 30-35% of the new hire's gross annual compensation, so total fees can run the client between $83,640 to $97,580 on average. Another challenge faced when using a retained search agency is their laser focus on executive search. So, if you are hiring for the C-suite, plus front line supervisors, you’re likely managing two agency relationships rather than just one. That’s time consuming and inefficient.
What can business owners do? Here’s our solution. A Project Manager (PM) is assigned to each client to not just oversee the project, but also perform every step within our holistic approach, including the following:
Visiting your offices and touring your facilities, or meeting with the members of your existing staff remotely. Our goal is to get a thorough understanding of who the new hire will be managing, collaborating with, and reporting to. We want to understand your culture at the micro and macro levels.
Performing a job analysis and writing the Job Description(s).
Launch the recruiting process, taking a hybrid approach of both traditional and active recruitment.
Previewing and prescreening candidates, plus editing Job Descriptions as warranted to increase targeted candidate flow.
Conducting first interviews (either in person or remotely) to minimize disruption to your workforce, then guiding your interview panel through the second and possibly third round of interviews. Ask us about how our rolling interview process increases speed and efficiencies while still thoroughly vetting each highly desirable candidate.
Performing searches and reference checks, as well as conducting pre-employment skills testing.
Negotiating a verbal contingent offer of employment.
Drafting a written contingent offer of at-will employment together with all relevant documents (such as a Restrictive Covenant Agreement).
After pre-employment documents have been executed, ordering background checks and screenings.
Advisory services continue as your new hire's first day approaches, with an onboarding and orientation guideline to get you well past those very important first 45 days.
The Bottom Line
If you want to compare apples to apples, let’s look at one of our examples above. For a $125,000 hire, our average placement would result in a fee comparable to a 12% commission, somewhere around $15,000. That's a savings of $10,000 to $16,250. The value of our service is undeniably high – we don’t work for 50% or 55% or 65% completion rates. We aim for 100% placement rates, 100% candidate satisfaction, and 100% client satisfaction.
The Employee Experience (EX) starts not on the date of hire, but during recruitment. It doesn’t end after onboarding and orientation; it’s a journey that evolves and continues during and after (as a company alum) employment. Tap into our services at De Novo HR Consulting to maximize the potential of each member of your workforce.
Contact us today so we can give you a fresh new perspective on recruitment services.