10 Ways to Avoid Paying Search Fees

May 20, 2004

The easy performance improvements are over. As the hiring market recovers, corporate recruiting departments will be called upon to handle more work with fewer trained recruiters and with fewer good people applying. Recruiting managers who adjust for this imbalance now will be able to minimize the impact of a recovering labor market. I’m hearing from more and more third-party recruiters (TPRs) that business is coming back. Fees are being paid, and the corporate purse strings are loosening up again. If you run a corporate recruiting department, this is a leading indicator of more turmoil ahead. Companies shouldn’t be paying search fees ó except for isolated critical positions or to meet a one-time special need. Paying search fees for standard positions ó accountants, sales reps, engineers, developers, mid-level managers, etc. ó is an indication of inadequate planning or lack of focus. Now don’t get me wrong: I started as a TPR and still do a few searches when called upon. I like doing these searches for a big fee. However, I now believe that with the insourcing of the recruiting department, stronger management, new advances in technology, well-trained corporate recruiters, and better use of the Internet including job boards, companies no longer need to use outside recruiters to find their top talent. Below are 10 ways to avoid paying search fees. You might want to rank yourself on each using the following 1-5 scale to see how well you’re doing now and how much money you can save or lose. Moving your ranking up one point on each factor will save tens or hundreds of thousands of dollars. That’s what it’s costing you if you’re a 1 or 2 on any of these factors.

  • Exposed (1 pt.): Something not being done, and now suffering for it.
  • Marginal (2 pts.): Partially being done, but could be improved. Will hurt us as hiring demands increase.
  • Adequate (3 pts.): Doing this fairly well. Can handle modest increases in hiring.
  • Solid (4 pts.): Doing this extremely well. Can absorb some major increases in hiring.
  • A core asset (5 pts.): Highly flexible, forward-looking; can handle all major changes.

Here’s what you need to do. Again, rank yourself on your current ability to do each based on the scale above:

  1. Take charge. Leadership is essential. You must not get behind the power curve. This is an instant loss in credibility. If you’re reacting to situations, doing too much firefighting, or hearing about information after the fact, you must do something dynamic to regain control. Leadership is the key to ensuring that progress is made. If the recruiting team can’t handle the hiring needs of your company, managers will go outside within a few weeks.
  2. Leverage your employee referral program. Your best employees know the best people you need to hire for 50-70% of your positions. Yet they won’t give them to you unless you proactively ask them for the names of the best people they’ve worked with in the past. Have your recruiters call these people, recruit them, and then network with them as well. This is what good TPRs do, but they don’t have the same access to your top people as your own recruiting team.
  3. Leverage your existing talent base. Increase internal mobility. Your best employees are now being called for other jobs by TPRs. You can increase retention and improve performance by making sure you can offer your internal staff members other opportunities within the company. This must be an aggressive and formal program championed by every manager. The biggest bottlenecks here are the hiring managers themselves refusing to release their own people. You must elevate this to the executive level and make internal transfers part of your company culture. Doing so will also help you hire more top outside people as they appreciate how aggressively you develop your existing team.
  4. Prepare a hiring manual now and strengthen the recruiting staff. Managers will go outside if recruiters can’t handle the work. Identify your critical needs as soon as you can, and assign your best recruiters to handle them. Backfill this with other recruiters to handle less important needs. Have contingency plans to bring on additional recruiters as necessary. Make sure you use a “best practices” manual so that all new recruiters do what they’re required to do. You can’t hire new recruiters and expect them to be productive unless they do what you want done. You can lose hiring manager credibility very quickly when success depends more on the quality of the new recruiter than on using a good process.
  5. Use more workforce planning to anticipate critical hiring needs. While this makes good business sense for a variety of reasons, you’ll also know when an open position is about to hit before the hiring manager can call his favorite outside recruiter. Recruiting managers must be in a position to rebalance their recruiting resources quickly to handle changing hiring needs.
  6. Insure effective ad processing and management. This is the simplest way to find more people and avoid paying unnecessary fees. Make sure your ads are visible and candidates can find them using a variety of techniques ó by keyword, company, geography, title, and function. Do not assume that your ads are easy to find. Use test candidates to check everything three times with three different people. Then simplify the application process to five minutes max. Design your filtering to bring the best to the top and call these people within 24 hours.
  7. Use more creative ads and compelling copy to attract top candidates. Employer branding and job branding are the two best ways to minimize the advantage companies have over TPRs. The best candidates apply for and accept jobs based on what they’ll do, learn, and become. TPRs sell this stuff vigorously. You can do the same thing in your ads, bypassing the need to pay fees.
  8. Find and fill the big gaps. Figure out where most of your outside fees go by position, and then make sure you can handle these needs in-house. This might require a strengthening of the recruiting team, a new sourcing channel strategy, or redeployment of resources.
  9. Increase user adoption of the ATS. If you don’t have at least a 75% utilization rate of your ATS, you’re losing candidates to outside search firms, aggravating hiring managers with lack of performance, and setting the stage for far more serious problems as hiring recovers. Below 50% is cause for immediate concern. Consider scaling down what’s being used and tracked in order to get higher adoption rates. A minimalist approach tied to best practices can get all recruiters online and productively using some of the basic features of the ATS. Work with your vendor on this. It will help with the reporting and allow the best candidates to be tracked properly. Losing an assignment to a TPR because the candidate couldn’t apply easily or couldn’t be tracked to a requisition will cost more than your monthly ATS license fee.
  10. Upgrade performance reporting. Shorten the timeframe on your reporting ó especially how much work is being assigned to outside search agencies. Don’t wait for cost per hire and time to fill to increase. Costs are guaranteed to go up as hiring managers use more outside search firms. Track this on a weekly basis, and intervene before the contract is signed or candidates are seen.

Now assess your own company on these 10 factors and the point scale above. With a maximum of 50, a score of 20 or less indicates a need for immediate corrective action, and something in the 20-30 ranges indicates that planning for change should start right away. The title of this article could have been “How to Build a Better Recruiting Department,” or “Is Now the Time to Clean Up Your Act?” or any number of more catchy titles. Whatever the title, the article would have had the same message: Get moving. Things will change quickly. Improve the way you’re now doing things. Work on the high exposure items first. Strengthen your recruiting team. If you delay, your costs will go up, candidate quality will decline, and you will be paying unnecessary search fees. Recruiting managers need to become more aggressive to meet their company’s hiring needs as the hiring market recovers. These 10 areas are a good place to start.

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