^[1]As the years have rolled by I have become increasingly aware of how poorly internal recruiting functions perform when compared to recruitment process outsourcing organizations or agencies. These have to make a profit or go out of business. They have to operate efficiently and continue to innovate and stay ahead of the demands or questions that clients will have.

Internal functions don’t have to do any of these things. They are entrenched in almost all organizations, and because their function is perceived as incidental to overall organizational performance or success, not much in the way of efficiency is really expected or, unfortunately, rewarded. This means that few recruiting leaders have any incentive to improve their function. In fact, doing so may mean a smaller budget, less headcount, and even less status.

So this leads to the headline question: Do we need an internal function at all? Does it do something that an external provider cannot do? Can it do it at least as cheap or as fast? Can it provide a higher-caliber candidate?

Some thoughts:

1. Internal recruiters who are employees should have one major advantage over any external provider. That is a deep knowledge of the corporate culture and what success criteria are, and also what individual managers are looking for in candidates. The deeper and more scientific this knowledge is, the more it can be repeated, refined, and taught to others. A really outstanding internal function would nurture and develop a core of highly knowledgeable and trained recruiters who would have this knowledge. HP, in the old days, and IBM today, have this kind of built-in DNA that is very hard to replicate. External functions will always have difficulty achieving this level of intimacy with their clients, even when co-located, primarily because their employees have less motivation to invest in gathering this information and may be interchanged frequently. This is one area where length of service and commitment to the culture can pay dividends.
2. To remain competitive with outside providers, an internal function has to be as efficient as or more efficient than an outside provider. This means constantly improving operational excellence, adding appropriate technology, providing detailed market information and coaching to hiring managers, and building a reputation for adding real value through the quality of talent it provides. I have never seen this in any client or organization I have worked in, and I think this is the area of greatest potential return. Internal functions are never very efficient, primarily because leadership is transitory: I am not sure of the average tenure of a recruiting leader, but I would guess it is less than three years. This means there is little to no continuity of planning, no oversight of process improvements, and little opportunity to choose, install, learn and refine technology. Most organizations I have worked with change processes, procedures, and technology with each leader who arrives. Plans that have taken months to create are thrown away overnight. Recruiters know that they can do what they want, for the most part, because there will be no accountability or continuity. This is the area where an external provider, with a profit motive and an efficiency goal, can beat an internal function hands down.
3. Recruiters also need to be retained, trained, and incentivized to perform. External agencies can offer commissions, bonuses, and other rewards for outstanding performance. They can fire inefficient or incapable recruiters quickly. Internal functions are usually tied to traditional reward structures that do not provide the shorter term, efficiency-based rewards that would be more effective. A recruiter can barely perform at all and survive (and even thrive) by courting a few hiring managers or by being a good bureaucrat. And employment laws and internal practices limit when and how a recruiter can be fired, and the process is lengthy. Again, it is essential that internal recruiters be selected carefully based in skills and motivation and offered whatever incentives are available to encourage short and long term performance as well as retention.
4. The emerging prominence of social media ^[2] should offer internal functions hope. Social media inherently dependent on intimate knowledge about the firm, candid communication, and the ability to take advantage of the networks of current employees. All of these give internal functions an edge.

Yet I am not convinced that this will make much difference. The RPOs and agencies are rapidly adopting social media and are even offering to manage the talent communities of individual firms. Many medium or small firms are not even looking at social media as a recruiting channel, and larger firms have widely divergent opinions and practices.

Effective social media use requires time and dedicated people who can interact with candidates, generate content, provide advice, and screen candidates for individual jobs. These are all strengths that internal recruiters have if they are given the time and charter to do so. Unfortunately again, corporate policy, management’s inability to see the benefits of social media, the fear of litigation, and lack of staff depth usually means this does not happen.

Given the state of recruiting functions today there are few compelling factors to recommend retaining an internal function. I have outlined where they could gain advantage, and a handful are doing these things, but by and large they offer little that would make them indispensible. By negotiating tough performance-based outsourcing agreements and allowing outside recruiters access to hiring managers, firms could eliminate the administrative and benefits costs of retaining employee-recruiters and the function could be reduced to a few liaison folks and vendor managers.