The recruiting industry is growing rapidly both for recruiting services and for technology resources. Within all of this growth, people often fail to understand the differences in services.
Here, we will break down some of the perks, the do’s and don’ts, and the NEVER.
Let’s start with the NEVER!
I don’t exactly know how this even became a thing, but it did: the resume farm. We receive cold calls weekly from global resume farms where they promise 100 resumes per day or 1000 per week, etc.
Sounds cool, right? Like a more effective process than a job board?
WRONG! These recruiters reach out to thousands of candidates, mostly on LinkedIn, with statements like, “Hey (first name), we have identified you as a good fit for a position we are recruiting for. Can you send me your resume?”
Notice how the position isn’t described or the industry. This vague statement with the simple ask of a resume is how these farms capture the resume numbers. And guess what? Candidates never hear from that recruiter again.
This type of recruiting is pointless because there is no quality in the 100 resumes per day. The people providing the resumes have no valuable information to even understand if they are interested in the job. Comparing that to a job board, I will take 10 interested people any day over 100 people who have been misled.
These resume services are not even that affordable. They often cost $2,000+ per MONTH! I know this seems less than other options, but with unqualified candidates, you may successfully hire 1 or 2 people at best. Over a year, that’s $24,000 spent directly to the resume farm, not including the countless hours spent vetting disinterested candidates.
So even best case, you just spent $12,000 per candidate and a whole lot of time and frustration. Resume farms are not recruiting. They call it recruiting, but it is a different beast.
Retained Search
A legit form of recruiting is retained search. This service is absolutely fantastic for organizations looking to hire a group of people over a defined period of time. Need 5 new salespeople? This is the right path for you.
Retained search buys recruiting time. It is easily scaled to your needs.
Maybe you are a start-up and you received an investment to build a sales organization of 10 people over 6 months. Perfect! You will want a retained recruiter sourcing and interviewing salespeople every day for you.
The price for this is really based on how aggressively you need to hire because it thrives over time. The monthly retainer is based on how much help you need, whether it is only sourcing or highly involved interviewing. Typically, you can lock in a 6-month contract at $5,000 per month, which will buy you the sourcing and the introductory conversation you need to interview great people.
With this model, you hired 10 people for $30,000. Compared to the resume farm, this is a FAR better investment at $3,000 per hire. It is also less than one internal recruiter.
Keep in mind, this option still requires a good amount of time on your end. The recruiters are going for a mix of quantity and quality at this price point. This means the vetting is mostly a single conversation. It is up to you to carry on with interviews, scheduling, follow-up, etc.
You can still engage a retained search with full services, but the cost will naturally go up with each service, easily into the $25,000 per month range.
Contingent Search
Contingent search can often be the most expensive option for search, but it is also the most powerful. This is where you only pay a recruiter for a successful placement, and the recruiter is on the line for managing the candidates.
This type of search will cost a hefty amount if you are filling 10 jobs because it is typically charged at 25% of the salary. Yup, you heard me. That means if you are looking for an experienced account executive at a $125K base, you will pay that recruiter $31,250 for the one placement.
On the other hand, that recruiter is also equally motivated to fill your job position and will also take the bulk of time management off your plate.
In terms of cost, this option has either zero or minimal cost until the candidate is hired. I say minimal because it is common for a small retainer to be charged when the search is highly specialized (read about the purple squirrel). Compared to retained search, contingent search adds some motivation on the recruiter’s end to fill the position sooner rather than later because they don’t have guaranteed revenue. We call them the bet on yourself kind of people.
Contingent search, while the fees are high for the placement, has a lower overall risk because the fee is associated with a successful candidate. In retained search, you typically pay whether a candidate is found or not.
Talent Adviser
Whether you use retained or contingent financial terms in your recruiting efforts, the most impactful aspect is expertise. Strong recruiting firms understand how to identify talent. You are not simply paying for a candidate, you are paying for a talent adviser. Good recruiters will walk you through the strengths of the candidate, weaknesses, target salary, onboarding process, resources, etc.
This type of recruiting is the only recruiting anyone should engage when a position is critical or strategic.
For instance, if you are hiring a VP of Sales who is going to manage 10 sales managers across the globe, you BETTER get the right person in that position. That person is going to have a direct impact on your revenue. The wrong hire in a role like this can tank a sales team.
Let’s say those 10 managers each oversee 15 sales people for a total sales organization size of 160 people (including the managers). The poor process of your new VP causes a 10% churn in the sales department. That is 16 salespeople to suddenly replace! If each salesperson has a quota of 1 million dollars, then you just risked 16 million dollars of sales!
Let that sit for a moment….
By not wanting to hire experts in getting you the right VP of Sales for let’s say 25% of a 300K base salary, so $75,000….you instead risked 16 million.
I know what you are thinking, “that sounds a bit extreme.” But the sad truth is that this is a very real scenario. This study in the UK determined 42% of people left their previous job because of a poor leader.
And really, that 16 million revenue risk is most likely even higher because guess who leaves first? YOUR TOP PERFORMERS!
Look, if I’m your salesperson exceeding my quota over and over and I’m done dealing with a bad new VP, I will have no issue going to your competitor and asking if they want me. Which they WILL want me.
Let’s say that 10% churn on your sales team contained your top 4 performers who each average hitting double the numbers of their colleagues. That now takes your revenue risk from 16 million to 20 million.
When you look at the cost of churn from this perspective, it is no wonder recruiting is a growing industry! But when choosing a firm, be careful when prioritizing price over value. Resume farms have great prices, but they have no value.
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