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How to Choose an External Recruitment Agency

Posted by Jonathan Rice on Apr 10, 2019 3:16:17 PM
Jonathan Rice

Businessmen talking on phones

There are many perfectly good reasons for engaging with an external recruitment agency when you need to hire someone for your business, but there are also many risks and pitfalls that can prove costly, if you don’t go about it the right way.

We’d like to help you out.  Over the past decade and more, we have learned pretty much all there is to know about the pros, the cons, the ups, the downs, and the vagaries, personalities, character and foibles of the local recruitment industry.

One thing to make clear now:  Not all recruitment agencies are created equal.

Across the ditch in Australia there has been recent commentary that there exist 165,000 agencies on that big, brown Continent.  Our industry in NZ closely mirrors theirs and so, applying a size comparison, we could estimate at NZ harbouring upwards of 20,000 agencies, large and small.

Mostly small, to be fair, because for an industry famed for its low barriers to entry (no Real Estate licence required here folks, just a phone and an internet connection) there are new firms popping up on a daily basis.  So, it’s little wonder that choosing which agency to entrust your future staffing requirements with is an absolute minefield.

The recruitment industry’s reputation doesn’t help matters either.  Recruitment seems to be the final bastion of the cold call, little wonder with that number of recruiters fighting over limited opportunities.  With recruiters incentivised by placement bonuses and tasked with making sales calls as well as filling your job to make ends meet, it has bred many stories of dodgy practices, suspect ethics and unflattering comparisons to the used car industry.

However, there are also many benefits to engaging an external recruiter that, much like a positive comment on a community Facebook page, gets lost amongst the general vitriol and spleen venting.  Things like the time it can save you, with most recruitment processes taking over 30 hours of your valuable time from woah to go. Also, the benefit of having an expert (if that’s what your chosen recruiter actually is), who is well-networked and knowledgeable about your industry and can quickly identify talent who might not be actively searching and applying to your job ads.  It’s also useful to have a hungry and motivated consultant on your side, skilled at nurturing, engaging and influencing your top target when they do enter the process, keeping things moving along at pace while you focus on your day job.

 

Selecting a recruitment agency

Selecting which agency to engage with

There are many factors for you to consider, so to help I thought I’d provide some clarification and dispel a few myths:


1. Briefing multiple agencies

You might have noticed I said “agency” singular above, rather than plural.  Due to the fact that most agencies don’t charge you unless they make a placement (more on that below), it is tempting to have a number of different firms looking for your new hire, in the hope this will increase your chances, without increasing your financial exposure.  This is very rarely the reality though. Better agencies will divert far more time, energy and attention to vacancies where they are working on an exclusive basis, and can take the time to properly consult with you, rather than feel they have to engage in “CV races” with competing firms which benefits nobody.

 

2. Cost

Most agencies charge between 15% - 18% of the first year’s salary of the placed candidate.  This is usually billed to you only when the candidate signs their employment agreement with you, or on the day they start in their new job with you.  Beware firms seeking to win your business by undercutting the competition. You might feel like you’re getting a better deal, but you might also end up getting an inferior service.

 

3. Contingent versus Retained

The better agencies will ask that you demonstrate a level of intent to engage seriously and ask for part of the placement fee to be paid up front, or in instalments, as a Retained Assignment.  This typically takes the form of a fee estimate based off the calculation above, broken down into a third at engagement start, a third at short list presentation, and the final third upon successful placement.  Due to the high levels of competition in recruitment, most agencies will offer a “Contingent” recruitment service, where the billing of a placement fee is contingent upon them finding a successful candidate for you.  This probably seems appealing from a financial and risk perspective but is often the cause of the bad behaviours mentioned previously, and should probably only be used for particularly hard-to-fill positions where you want your recruiter to maintain a “watching brief” for people with a particularly specialised skillset rather than run a specific recruitment campaign.

 

4. Size of database

If you’re sat across from a recruitment agency and they’re pitching for your business based on the size of their database of candidates, raise a red flag.  As important as this was in the turn of the century, the speed and fluidity of the job market these days means candidate information is often outdated a few weeks after it’s stored, and using this as a selling point probably suggests their recruitment approach will be rather old fashioned as well.  You already have access to the world’s largest candidate database: LinkedIn. What’s more important is the size of the recruiter’s networks, their level of reach and influence within it, and their ability to harness products like LinkedIn to benefit you as the client.

 

5. Global Brands vs “Boutique” firms

I’ll start by generalising here:  The global recruitment brands are often publicly-listed entities headquartered in the US or Europe with larger, less experienced, more generalist teams of recruiters who can benefit from better marketing, better training and are able to better handle bigger projects or higher volume recruitment campaigns.  Smaller (or “boutique” which is the more common parlance locally) firms are usually locally owned, more experienced, more deeply networked and more focused on a specialist industry sector. As mentioned, this is a generalisation, and isn’t always the case (see next point) but decide on how you want to work with your agency, and how closely you want to partner with them, before making a call on the size of firm to engage.

 

5. Company brand vs Personal Brand

Ultimately, it’s not the brand that your agency recruiter works for that really matters, it’s how they work as an individual.  When engaging with an external recruiter always look beyond the marketable branding and glossy salary surveys to the actual human recruiter who will actually be delivering the work on your assignment.  How do they work, what is their process, how strong is their understanding of your industry, and of your company, and can they provide testimonials or recommendations from similar clients to you, for them personally rather than for the firm they work for?  Much to the annoyance and consternation of agency owners, the best recruitment relationships often exist between two humans, you as a client and your actual recruiter, rather than between your company brand and their recruitment firm.

As you can see there’s lots to explore and digest when choosing an external recruitment agency, if that’s the route you want to take. So what are the key takeaways? 

Here are my top five tips for engaging with a recruitment agency:

  1. Exclusivity beats briefing multiple agencies for the same work.
  2. Pay 15% or more for a quality level of service delivery.
  3. Retained, rather than Contingent.
  4. Size doesn’t matter, whether it be company size or size of candidate database.
  5. Personal brand of the recruiter trumps the broader brand of the agency.

 

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Topics: Insider, Recruitment

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