Build Your Staffing Agency Inside!

For how much are you ready to let your recruiting department go? This article covers this exact theme with Jeremy Bono, Director of Recruiting for Global Network Technology Services (GNTS), a Cabletron company. Jeremy started his career as a headhunter, and then moved to Oracle before joining Cabletron. We spoke about how recruiting is evolving within his division, and how he compares his internal function’s efficiency and value-add to third-party recruiting agencies.

Business Goals

“You are a business contributor,” says Jeremy, and this translates to the alignment of your service (recruiting) towards the business objective. You must spend the time to understand your company goals and how you help to achieve them. Jeremy reports to Business Development (not HR) and is not at all in an overhead framework of thinking. His work is structured as a business unit in its own right. He believes you take the time to sit down with your company leader and understand their vision because it is what you are working towards and selling.

Jeremy makes sure that there are quarterly targets and bonuses associated with success, and that all of his team members are aware of them and work toward the same goal.

The methodology Jeremy uses is a five-fold strategic approach based on:

  1. what skill-sets and level are needed (scarce or not) ==> the demand
  2. experience of the recruiters ==> the ability to execute
  3. total # of recruiters ==> the ability to execute
  4. resources (Hiring Management Systems, etc.) ==> the ability to execute
  5. # of hiring managers to support ==> the demand

This methodology helps him to calibrate the demand made on his department and his ability to execute and deliver the value to his (corporate) customers.

Market Share

One of the key metrics Jeremy uses to manage his business is the market share. Market share is where the recruiting department is providing a support. When the company is using an external staffing provider (currently in 15% of the cases, reduced from more than 50% a year ago), he provides very limited support. The rest is internally provided (85%) and Jeremy’s ongoing target is to further increase this share of business.

With this perspective, Jeremy sees his role as that of a competitive business, with one main competitor. His motto is: “How much have I been saving for the organization?” Here he is thinking in terms of market share and growth, as well as efficiency. Jeremy defines his department as a business entity with its own mission to help to reach the corporate goal and try to be as effective as possible. In our view, Jeremy and his company are most progressive in their thinking, and his headhunter background is not a surprise.

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Controlling Costs

Cost per hire is a concept that is meaningless for Jeremy in measuring the value of the recruiting function, since there are always added costs to any new hires, i.e. relocation, sign-on bonuses. Conversion cost is what makes more sense, which includes all the costs of the internal recruiting function. That includes salaries, advertising, Job Boards, Agency fees, employee referral, HMS and more. Jeremy takes all of this into account and excludes the (fixed) costs that are always there. Based on his last quarter, Jeremy is ready to let his department go completely if any agency can come and provide equivalent services for 6% of the first year salary.

We forecasted in our 1999 report (available at www.ilogos.com) that staffing firms with very little value added will have significant pressure from the Internet technologies to justify their prices. This example clearly shows that corporations today are ready to use internal departments with search firm techniques and automation tools to leverage the power of the Web in order to reduce the high cost of the outsourcing paradigm.

Margins and Value

The impact of a reduced friction in the human capital world is only starting to show. The gap between 6% and typical agency margins of 20% to 30+% is between 3 and 5 times, which is really hard for any company to justify. The golden age of the agencies seems further and further away when their primary value was their database, and high friction prevented anybody from recreating that easily. Today, corporations can create huge databases of candidates very quickly and efficiently.

Many agencies already struggle today to justify their fee when a company pulls the candidate from their own database or even from Monster. They will probably disagree with Jeremy’s cost justification (and perhaps even see him as a heretic), but the offer is there: 6% fee to provide the service! <*SPONSORMESSAGE*>

Yves Lermusi (aka Lermusiaux) is CEO & co-founder of Checkster. Mr. Lermusi is a well known public speaker and a Career and Talent industry commentator. He is often quoted in the leading business media worldwide, including Fortune, The Wall Street Journal, Financial Times, Business Week, and Time Magazine. His articles and commentary are published regularly in online publications and business magazines. Mr. Lermusi was named one of the “100 Most Influential People in the Recruiting Industry” and his blog has been recognized as the best third party blog.

 

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