The Growth of Direct Sourcing

The growth of dedicated in-house talent acquisition departments has been well documented in recent years, with an increasing number of senior strategists realising the numerous benefits of direct sourcing, and building sophisticated internal recruitment teams in response. However, while this phenomenon has been widespread within blue-chip organisations for some time, the vast majority of smaller firms have – until very recently – continued to rely on external partners to identify, engage and secure the skills their businesses need to thrive. That is about to change.

The benefits of managing recruitment in house, rather than relying on external agencies, are self-evident. By taking full control of the function, business leaders can guarantee that employer brand messages are communicated effectively and that metrics such as quality of hire are prioritised over the time it takes fill a vacancy. Taking this approach also ensures that individual hires are not made in silo, but are fully connected to a wider people strategy designed in line with mid and long-term organisational objectives.

In the digital age, external recruiters have lost their key differentiator

Historically, the arguments ‘for’ and ‘against’ bringing talent acquisition in-house were fairly balanced. Businesses essentially had to weigh up whether they were willing to forgo the relationships and reach that their external providers boasted, in order to retain control of recruitment decisions and ownership of their brand. Today, though, an increase in digital capabilities and the accessibility of data and tools means that you don’t need to be a sector specialist to enjoy access to valuable talent. It seems that external recruiters no longer have the ‘edge’ that they once sold as their key differentiator.

As a result, small and medium enterprises which would previously have housed talent acquisition activity within more generalist HR functions – or allocated resource to focus on administering the relationship between external agencies and business hiring managers – are considering alternative options.

Controlling employer brand

One of the key drivers for doing so is the significant impact that having a resource solely committed to hiring for a single company has on external brand perception. According to data from LinkedIn, companies with stronger employer brands enjoy a 43% decrease in the cost per candidate they hire – and grow 20% faster than their competitors as a result.

With this in mind, being able to communicate a company’s Employer Value Proposition (EVP) authentically is vital. External recruitment partners may be comprehensively briefed on the cultural vison that should be sold to potential recruits – but there is no substitute for living and breathing a company’s values when it comes to sharing an accurate and compelling picture of what a career with an employer will look like.

As the keeper of candidate experience, in-house teams are also able to ensure a favourable – and consistent – recruitment process, from the first touchpoint to on-boarding. This includes making sure that unsuccessful applicants are also left with a positive impression of the company, which will, of course, help to enshrine wider consumer brand perception.

The bigger picture

The wider organisational understanding that internal talent acquisition teams inevitably possess also has value beyond effective EVP messaging. Internal hiring teams, whether consciously or not, are undoubtedly invested in ensuring that the talent they bring on board is fit to grow and develop within and alongside the organisation itself. The nature of the role means a short-term approach to staffing is simply not feasible: the calibre of candidates matters above all else.

In house teams also have the significant advantage of full visibility of the company’s wider talent management plans. By taking a bird’s eye view of the people strategy, internal recruiters can plan and execute detailed hiring roadmaps – in line with strategic workforce plans – that ensure the right roles are filled at the right times. This, in turn, offers the freedom to pipeline talent for future or alternative positions – or to flex role criteria to increase access to hard to source skills.

In a similar vein, internal talent acquisition teams are also perfectly placed to harness the benefits of internal mobility to influence organisational success. Deloitte has reported that companies which promoted internally are 32% more likely to be satisfied with the quality of their new hires. We can assume this is largely because those who find a new role within the same organisation are already culturally aligned to the brand and have knowledge and relationships which means that they can hit the ground running.  Despite this, external recruiters are often actively discouraged from targeting those who are looking within the organisation for professional opportunities. This disjointed approach can clearly have an adverse impact on staff retention, productivity and long-term profitability.

The business case for direct sourcing

While the above reasons as to why companies are increasingly turning to direct sourcing are compelling, the financial burden which comes with relying on recruitment agencies to manage the procurement of your business’s most valuable assets should also not be underestimated.

According to the latest Recruitment and Employment Confederation (REC) annual Recruitment Industry Trends report, the average fee for a permanent placement across the recruitment industry was £4,238 in 2018. To put this in perspective, a company hiring just 50 people a year is handing over in excess of £200,000 to recruiters annually – and that is without taking into account factors such as the inflated fees associated with senior hires, attrition due to poor recruitment decisions and the cost of sourcing and managing contingent workers.

That’s not to say that, for those setting up an internal talent acquisition function, knowing where to prioritise resources, the technology platforms to select and how to build a scalable direct hiring function isn’t challenging. However, by taking the reins on recruitment, business leaders can ultimately monetise all the benefits that direct sourcing brings.

For more information on how we can help your business to attract talent directly, improve efficiencies and reduce costs, get in touch today

February 11, 2019

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