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Companies often think an easy way to save money is to eliminate outside recruiting expenses, particularly in economic conditions where they are receiving hundreds of applications every day. They think to themselves, “Why should I use a recruiter if I’m getting a ton of applications?”  

It’s a tempting cost-cutting method, definitely, but how realistic are the savings?

Many organizations have never examined the true expense of hiring new employees solely through internal efforts. There are both direct and indirect costs that need to be considered.

The direct costs are often slim, which can trick a hiring authority or even the leadership team into believing they can afford to manage the entire process on their own. Direct costs consist of job advertisements and screening/ background check expenses, among other minor elements.

They pay a couple hundred dollars for LinkedIn, Monster and CareerBuilder listings and the applications come flooding in. There’s bound to be one gem in the stack at least. It would seem like a no-brainer to cut out recruiters in this case, wouldn’t it?

It wouldn’t.

This is where companies go wrong: they don’t factor indirect costs, such as manpower and lost revenue with an unfilled position over time, into the equation.

The cost of manpower

It takes manpower to find the best candidates, and realistically, the best candidates are not even applying to your job openings because they are passive candidates. This means that your Talent Acquisition Manager is spending hours reviewing resumes from applicants that are not the most qualified or compatible individuals to fill your openings.

That TA Manager will forward on the 10-15 “best” of that pile to hiring managers who then have to spend 15-30 minutes reviewing every mediocre resume that crosses their desk, 30 minutes – an hour on phone interviews with the better of the average candidates from that stack, and roughly 2 hours for each in-person interview with the least ordinary phone interviews.

That was exhausting to read, so imagine how exhausting it is to actually do it. Think of all of the hours that hiring authority is spending away from their actual job to review and interview candidates who are, at best, average.

And if they don’t find the lone gem of the bunch, or move too slowly to secure that gem, they have to start this entire process over again. It can take months to fill a role through this method.

How does a third-party recruiter help with manpower?

There is significant time saved for everyone involved. Recruiters know the job market better than you do, because they live and breathe it every day. They know how to find the best candidates for the type of role you’re seeking and the industry your business operates in. They track down the best of the best and sell your organization, culture and benefits to those candidates.

Recruiters rigorously vet prospective hires early on and pass along only the gems, so hiring authorities can skip (or reduce the amount of time spent in) the second-tier screening process and progress straight to interviews. Even though interviewing still takes time, the hiring manager is interviewing only a select few candidates who are all a great fit for the role. The decision comes down to which of these one or two individuals are the best rather than which one of the 20 isn’t the worst?

The cost of lost revenue

Every day that position remains open is another day of potential lost revenue, particularly when it comes to filling sales and senior-level roles. Hiring managers must recognize and be able to communicate that leaving a position unfilled is bad for the company’s bottom line. In even the most remedial positions, customers go uncalled, questions go unanswered, orders go untaken, and new efficiencies go undiscovered every hour that a chair remains unfilled.

It is difficult to assign an exact cost of your opening due to the numerous intangibles, but it’s easy to see the money lost on things like unsold components or un-designed plans. This revenue can be lost permanently in some instances. For example, if a sales region goes uncovered, or is covered poorly, the company risks losing market share to a competitor.

How does a third-party recruiter help with lost revenue?

By simply filling openings faster. The US average Time to Fill is 43 days for all job functions, according to Workable.

Recruiters often work within a niche industry and job function building expertise over time. This knowledge makes them more agile in the space to fill open roles quickly. They can even provide strategic analysis of your job description, compensation packages and skill requirements/expectations to help better position your organization for hiring.

It is tempting to reduce expenses by eliminating outside recruiting fees from hiring budgets, particularly if your job listings are receiving a large response. Be sure to evaluate both direct and indirect costs before making that call.

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