If you’re looking to outsource your startup’s hiring needs, you’ve probably spotted different types of recruiting vendors, like Recruitment Process Outsourcing (RPO) firms, executive search firms, and traditional staffing agencies.
But what are the main differences? And which option is best for your company?
In this article, you’ll find answers to the following questions:
- What do traditional recruitment agencies offer (often called contingency recruiting, staffing agencies, headhunters)?
- What is the Recruitment Process Outsourcing (RPO) model?
- How do these recruiting services differ?
- How do you determine which recruiting model is right for your startup?
Let’s dive in.
What is a Traditional Recruitment Agency?
This kind of hiring model is often referred to as direct placement or contingency recruitment.
Here are some of the key aspects of this model:
What the recruiting partner does:
Typically, a traditional recruiting agency will source candidates, conduct phone screens, and submit candidates to you for review. If you like any of the candidates that have been submitted, you can conduct additional interviews to decide on whether or not to hire them. The recruiting partner is not heavily involved in the process once the candidate has been submitted.
What you’re responsible for:
Writing the job description, scheduling additional interviews with candidates, selling the candidate on your internal culture, checking the candidate’s references, and writing offer letters.
What are some of the benefits of the traditional recruiting model?
- Flexible Growth. There are no contracts locking you in. Instead, you can just get recruiting support as needed.
- No upfront fees. You’ll get charged when a candidate is successfully hired. Typically the rate will be 20% – 30% of the candidate’s first-year salary.
- Support for the occasional hiring needs. This model is great for one-off hiring needs since you only partner with the recruiting vendor when you need a specific role filled. Once the role has been filled, the recruiting relationship with them is done.
What are some of the pitfalls of the traditional recruiting model?
- No Commitment. Given the pure commission nature, the recruiting partner is not tied to your company. With this model you will often find vendors moving on quickly if they are not having success in the first few weeks or months.
- Many agencies will not disclose the name of the company they are recruiting for, in fear that they will lose their commission if the candidate applies directly to the company.
- Unhealthy Competition. Many companies will work with several different agencies for one search. This can create a churn effect of multiple vendors, and often discourage recruiting partners from remaining dedicated to the search.
- Varying Candidate Quality. Some agencies will primarily use compensation as their leading selling point. This can negate some other areas that are very important to screen for (e.g. Culture fit, interest in mission, diversity)
What is Recruitment Process Outsourcing (RPO)?
The Recruitment Process Outsourcing (RPO) model typically involves outsourcing most (or all) of your recruiting work to an external specialist — usually over the course of several months (or even years).
This model involves paying on a flat retainer or paying for a set amount of hours to be worked by a consultant or team. Some companies will charge you based on 40 hours a week while other RPO partners will charge based on guaranteed deliverables – such as a specific number of resumes submitted or candidate interviews conducted per month.
Below are some of the key aspects of the RPO model.
What the recruiting partner does:
In this model, the RPO partner integrates with your company’s internal recruiting process in order to achieve your hiring goals.
Some RPO partners will provide a dedicated recruiter who essentially operates like an internal team member, while other RPO partners offer a dedicated team (including a Sourcer, Coordinator, & Account Manager) that acts as an extension of your own team.
Most RPO partners offer the following services for you to choose from (note: this list is not exhaustive!).
- Assistance setting up your Applicant Tracking System (ATS)
- Writing job descriptions
- Management of your applicant flow and candidate pipeline
- Sourcing and screening candidates
- Coordinating and scheduling interviews
- Verifying candidate referrals
- Writing candidate offer letters (and rejection emails)
- Providing insights into hiring trends
- Recruitment marketing and brand awareness
What you’re responsible for:
Conducting internal interviews with candidates.
What are some of the benefits of the RPO model?
- Long-term growth. This recruiting model can be ideal if you’re either growing a team or planning to steadily hire new employees over the course of months (or even years).
- RPO is easy to scale up, down, or switch off and on as needed.
- Candidate quality. RPO partners embed themselves into their client’s culture, forming a deep partnership. This allows them to truly understand your team, culture, tech stack, and specific needs. The result? You end up interviewing candidates who already know a lot about your company and will likely be a strong fit.
- Support on hard-to-fill roles. If you outsource a difficult-to-fill role to a traditional recruiting partner, they may be less motivated to work on it since they don’t get paid until a hire is made. An RPO partner typically gets paid every month, based on either a guaranteed 40 hours of work per week or based on a guaranteed number of eligible candidates submitted to your company. This means that they will be far more willing to spend their time looking for those “needle in a haystack” candidates.
- Predictable pricing. You’ll know exactly what your recruiting spend will be for all your hiring needs. Instead of paying sporadic fees, based on how many hires you make and how much those hires get paid in their first year, you’ll pay a consistent monthly rate.
- Industry advice. With the RPO model, you end up paying for expertise, as well as the actual work filling your roles. A good RPO partner will offer insight into industry norms (regarding salary, benefits, etc.) and give you tips to improve your interview process.
Traditional Recruitment Agency vs. RPO Firm: How Do You Pick?
Each solution clearly has its merits. And while both options can help startups engage and hire talent, they are vastly different in scope, approach, and overall impact.
So how do you pick the best one for your startup?
Here are some key questions you’ll need to consider in order to choose the right option:
- How many hires are you trying to make?
- When are you trying to make those hires? (i.e. are you aiming to hire one person within the next three months or are you trying to hire 10 engineers throughout the year?)
- Do you anticipate that these roles are going to be easy to fill or are some difficult-to-fill positions?
- Do you have one type of role you’re trying to fill (i.e. 3 Full Stack Engineers) or are you trying to fill a variety of roles?
- Do you already have a recruiting strategy and system in place or do you need to get your ATS set up and build a long-term hiring strategy?
- Are your internal recruiters doing more sourcing, screening, or HR work?
- How important is hiring for culture fit?
- What is your budget for hiring?
With the answers to these questions in mind, here are some guidelines to help you make a good decision:
It’s Time to Find Your Recruiting Partner!
You’re now equipped to make a wise decision when it comes to external recruiting partners.
Now it’s time to do a little research and choose the right vendor.
If you ever need support along the way, our team at hatch I.T. specializes in finding technical talent for startups. We offer tailored recruiting packages (including RPO and Direct Placement), based on your unique needs.
Schedule a free call with us today to find out which model suits your team best!