The $8 Billion Leaky Faucet (Part 2)

122435168Last week, I wrote about a major issue that seems to have crept up on corporate America without notice. U.S. companies will spend $8 billion in 2014 on direct hire agency fees, yet most will have no idea whether their agency strategy is effective or how much money is going out the door. While last week I focused on the reasons most companies don’t focus on agency spend (and the risks of not monitoring usage and compliance), here I address steps companies can take to get ahead of the issue.

The most forward-thinking companies have partnered with business units to create:

1. a shared vision of when direct hire agencies are used,
2. a mutually agreed-upon process for ensuring accountability, and
3. a common set of metrics to track performance.

Shared vision. Settling on a shared vision isn’t easy, especially if agency usage is seen as a sign of weakness.  Agencies are a smart part of any recruiting strategy: either planned strategically on the front end or executed haphazardly (and expensively) at the back end. Few companies set out TRYING to increase agency spend, but any company that claims it doesn’t use agencies at all has its head in the sand unless it has systems to ensure that statement is true (and universal).

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The nature of this shared vision can vary. One company may agree to use agencies only for rarely recruited roles. If the recruiting team steadily recruits one type of candidate (wealth management agents for example), creating expertise in those talents pools is worthwhile, while agencies should be used when sourcing for a openings that come up only once or twice a year (payroll specialists, for example). Another company may choose to recruit for all roles independently, but have an agreement with business units to turn to agencies when critical roles have been open for an agreed upon period of time.

Process. While an upfront agreement on agency usage is powerful, that clarity is wasted without an agreement on process. Recruiting teams like playing “internal headhunter police” about as much as they enjoy fielding constant agency cold calls. Agree in advance on critical items such as the make-up of preferred vendor list, who makes the call on which agencies are used (and under what criteria), or the point in which new agencies should be added to a critical (but long unfilled) role that is out to search.

Metrics. The last step is creating metrics to measure performance, and systems to regularly monitor (and report) those metrics. Any reporting system must track all jobs sent to search, monitor all agencies working on jobs, and integrate seamlessly with the ATS so that recruiters needn’t manually enter duplicate candidate data. Don’t settle for assurances by hiring managers that “this preferred vendor is different”(ie, deserves an exclusive, a different replacement candidate policy or the ability to work outside the systems).

Direct agency spend has exploded in the past five years as agencies have confirmed their worth despite the emergence of LinkedIn (and job boards before that). Results should never come without efficiency, however, and the smart money in recruiting always goes the route that can be measured and controlled.

MORE: What to consider when bringing the MSP back in-house

Mike Hard

Mike Hard
Mike Hard is the CEO of BountyJobs, an enterprise agency management company. He can be reached at mike (at) bountyjobs (dot) com.

Mike Hard

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