Hiring top talent is critical in today’s business world. A McKinsey study found that for high complexity job functions (the information, interaction and skillset heavy work of software developers, product managers, data scientists, product marketers, UX designers and the like), there was an 8X difference between high performers and average performers! Silicon Valley has long known about this gap and is obsessed with finding 10X engineers who can fundamentally transform the trajectory and market position of any company. No wonder, recruiting feels like a “war for talent” in today’s labor market with fierce competition to find, attract and retain the best employees.
In such an environment, companies naturally wonder whether they should augment their internal efforts with outside recruiting agencies. Given the costs of using a recruitment partner (fees can easily range from 25-35% of an employee’s annual compensation), this is not a trivial decision to make. If you or your organization is considering using an external agency, the framework below can be helpful in determining whether that is the right decision for you.
"8X difference between high performers and average performers for high complexity job functions"
One of the main reasons for using a recruitment partner is the bandwidth of the internal recruiting team compared to the open roles. This can typically happen for a variety of reasons:
- Small company – when companies start out, they often don’t have a fully built out recruiting function. Using an external partner allows companies to hire quickly and focus on building product without wasting valuable cycles on hiring an internal recruiting team. Peter Zhou, CEO at Rutter, decided to go down this path when starting his company.
- High growth periods – companies often experience high growth spurts after a financing round or if they are building out a new product or business unit. In this scenario, companies can tap a recruiting agency to provide on-demand recruiting help without waiting to first hire and train the internal recruiting team. Shri, the VP of Engineering at Snackpass, found himself in this scenario when they needed to rapidly hire an engineering team after raising a large Series B round.
- Cyclical businesses/Boom & bust cycles – many industry sectors are volatile or prone to boom & bust cycles. In such a scenario, using only an internal recruiting team can be counter-productive as Zynga found out in rapid periods of growth followed by staff redundancy. It is a much better strategy to have a small core recruiting team and augment as needed.
- Need for highly specialized talent – it can be helpful to engage an outside vendor when recruiting for roles that require deep domain knowledge. The domain knowledge is critical in being able to evaluate potential candidates and getting them excited about the opportunity at your company. Tejas Maniar, Operating partner at Mayfield Ventures, found an outside partner helpful for this reason when hiring a developer evangelist for the portfolio.
- Geographic expertise – if you are expanding into a new geography or taking advantage of the rise of remote work, partnering with an external firm can be advantageous and help you tap into the right talent pools and provide market specific context. LeapDEV, decided to leverage an external partner, when building up an office in San Francisco in addition to their HQ location in Sydney, Australia to quickly scale the location.
- Business Unit demands – In extremely large companies, internal business units may face unrelenting pressure to deliver results while feeling unsupported from the corporate recruiting team which often has broader priorities or follows a “pooled” recruiting strategy. Allowing the use of external vendors in this scenario, can be a useful release valve. Amazon has successfully used this strategy by allowing internal managers some latitude to engage third party vendors to feel that they can get the attention they need.
"Using an external partner allows companies to hire quickly and focus on building product without wasting valuable cycles on hiring recruiters"
Higher quality hires
Companies using an outside partner often experience an improvement in the quality of their hires. This is often counter intuitive but happens for three key reasons:
- Pre-existing relationships – Recruiting agencies have deep relationships with candidates developed over a multi-year period. The same candidate will often answer the phone or email when a familiar person reaches out versus a recruiter at your company.
- Target passive candidates – the best candidates are often not looking for a job and content in their role. Recruiting agencies specialize in finding and reaching out to these candidates. Once again, many of them may take a call with the agency recruiter to start building a relationship or to better understand the market.
- Closing success – counter-offers from their current employer, competing offers from other companies, distance between expectations and the offer – many promising candidacies end before the finish line if not managed well. Having a recruiting agency involved often helps. Candidates are often more candid with agency recruiters than company recruiters. They view internal company recruiters as future co-workers and are more guarded in sharing their offer expectations and negotiating red lines. On the other hand, candidates view agency recruiters as a trusted resource aligned with their own interests who they likely have a long term relationship with. This trusted relationship often helps agency recruiters bring candidates across the finish line.
Another reason to consider external partners is hiring speed. Once again, it is helpful to understand why they may be faster than internal hiring methods.
- Active candidates – chances are that an agency is recruiting for many roles of the same type simultaneously. Within hours of being assigned a job requisition, a best-in-class agency will touch base with dozens of candidates who are discreetly looking on whether your role could be a good fit for them.
- Pre-built talent pools – again if a role is within an agency’s wheelhouse, they will have pre-built talent pools that they can bring to bear on your role. Agencies will have detailed data on the preferences and needs of stellar candidates and can match that with your role to see who could be a good fit that they should consider.
- Resourcing – agencies typically have a number of recruiters ready on staff who can start working on your role immediately.
- Technology – as you would expect, agencies have access to the latest recruiting technology. Examples include tools to find contact information, reach out to candidates, run A/B tests on messaging, machine learning models to predict candidate interest etc. Some of them like Rocket even build their own technology which is very difficult to replicate internally and not available to purchase.
Executive searches almost always require an external partner given their complexity, importance to the organization and high visibility to the executive team and board. Not all companies have the capabilities to perform these searches internally and may not have the political capital or authority to push back and reshape the role to meet the organization’s needs.
Short term staff augmentation
Recruitment firms particularly staffing firms can be helpful if you want to quickly find contingent workers for specific projects, provide coverage for absences such as parental leaves or in noncore areas of your business. Staffing firms often have these candidates on bench and can provide reference checks, payroll, timesheets and other HR services needed to work with contractors.
Should I hire a CFO or a Controller? Who should the VP of Engineering report to? Are my job descriptions accurate? A good recruitment partner will help provide answers to these and many other questions across the following dimensions:
- Job descriptions – best in class agencies will help with crafting JDs from scratch or editing JDs to capture the essence of the role.
- Unconscious Biases – agencies may uncover unconscious bias within your organization as they champion their candidates through the process. For example, we recently worked with a client to remove the requirement of undergrad technical degrees, by proving that product managers without those degrees were performing at similar levels in the interview process.
- Org structure – org design can be extremely complex but a good recruiting partner can help surface anomalies in your org structure that might make it hard to attract good candidates. For example, we recently helped a client realize that the product team needed their own leader instead of being rolled under engineering.
- Compensation data – in a rapidly changing market, recruitment firms have their ear to the ground and can provide real time compensation benchmarks (base, bonus, equity, benefits, competitor offers etc.) which help improve your offers and closing rates.
In summary, knowing when and how to use recruiting agencies to complement your existing recruiting efforts can help you win the "war for talent" and provide the resources your company needs to thrive. Let us know if we at Rocket, can be helpful as you make this important decision.
Rocket pairs talented recruiters with advanced AI to help companies hit their hiring goals. Rocket is headquartered in the heart of Silicon Valley but has recruiters all over the US & Canada serving the needs of our growing client base across engineering, product management, data science and more.