Is Outsourced Recruiting Cheaper Than Managing an HR Team?
In young startups, there comes a crossroads when business leaders have to decide whether to build out a full in-house recruitment function or outsource to a third-party service.
Founders can’t afford to spend their limited time on recruiting when there are more pressing matters at hand, like building a minimum viable product or finding customers. So, the question becomes what path leads to the best possible candidates for the least amount of money.
By going down the in-house route, founders retain 100% control over recruiting and can ensure that every potential candidate meets their high standards. However, this runs counter to the goal of freeing capacity to focus on other areas.
On the other hand, it can be scary to hand over the reins to an external party. They haven’t been with you in the trenches over the years. They are unfamiliar with your culture and may not fully understand the type of person your startup needs. And given the reality that 90% of startups fail (independent of COVID-19!), there is no room for hiring mistakes. Every new teammate should be stellar without exception.
At Funded.club, we believe the right partner alleviates all of these concerns and more.
Outsourced recruiting can be cheaper and more effective overall than managing an HR team. The challenge lies in finding an agency that specializes in startup hiring, which differs from corporate recruiting in many ways. Those who have expertise around startups recruiting can manage costs well without sacrificing quality.
Below are three economic reasons why outsourced recruiting can make more sense than building an in-house HR team.
1. Optimizing Recruiting Cost Buckets is Hard There are many cost buckets within recruiting.
On top of labor expenses, startups have to pay for job board advertisements, background checks, and technology platforms, like applicant tracking systems. In general, it is difficult for young, fast-growing businesses that have their hands full to optimize performance across these areas. In-house teams typically struggle with duplicative tasks, delays, and premium prices associated with acquiring their own suite of technologies.
Outsourced recruiters will typically offer these features at a price that is less overall than the startup would spend to get a comparable function up and running. Dedicated outsourced firms can achieve lower cost-per-hire and time-to-hire metrics by streamlining recruiting processes in a way that young businesses don’t know how to do.
Additionally, as tech skill shortages persist, recruiting is growing more competitive. Those who choose to build an in-house recruiting function may not realize the ROI on their investment as they are competing with recruiters with extensive experience.
2. In-house Recruiting Can Distract From the Core Business
Anyone who works in a high-growth venture is familiar with the idea of wearing multiple “hats.” When companies are small, employees often have to take on responsibilities that fit in various lanes. Job descriptions tend to be more fluid, and workers have a broader range of influence.
The same dynamic applies when it comes to in-house recruiting. Oftentimes, in-house startup recruiters will be tasked with cultivating a healthy candidate pipeline, in addition to executing essential HR activities. Startups that want to attract the best possible talent can’t expect to do so if their in-house team is distracted by two sets of priorities.
In this scenario, either recruiting quality or HR services suffer, which drain company resources in different ways. Bad recruiting leads to poor hiring decisions, bringing down the long-term potential of the organization. Neglected HR workflows can leave current employees feeling undersupported, leading to increased turnover. With outsourced recruiting, leaders don’t have to choose.
3. In-house Teams Can’t Scale with Business Needs
Startup recruiting needs can expand or shrink rapidly depending on the success of the business. Those experiencing high growth may need to ramp up quickly in certain areas to keep up with demand. On the flip side, a company may need to scale down to cut costs to survive tough times, like what we are experiencing right now.
Startups that have an in-house recruiting team can’t respond to volatility as effectively as outsourced firms can. Fast growth can quickly overwhelm a small team of internal recruiters, which means the business can’t respond to demand and take advantage of valuable revenue opportunities. Stagnant growth, or even contraction, can lead to startups paying for recruiting labor that they aren’t using.
An outsourced firm can easily align resources with need. Startups can take advantage of “pay-as-you-go” pricing, only incurring charges for recruiting activity that is needed at any given time. As a result, businesses don’t miss out on growth opportunities or waste precious resources on underutilized human resources.
Funded.club: the Best of All Worlds
As an outsourced recruiting partner, Funded.club helps startups all over the world build exceptional teams over the long-term. But, what differentiates Funded.club from other agencies is our fixed-fee recruiting model.
Our clients benefit from the efficiencies of outsourced recruiting without having to worry about racking up charges that are independent of results.
Want to learn more about how we work?
Five Employee Selection Methods You Should Implement Today
Even in the wake of the coronavirus outbreak, many European startups are still pushing forward with recruiting. Top talent is almost always valuable, especially for fast-growing, early-stage ventures that are trying to get off of the ground.
The challenge lies in cost-effectively attracting high-quality candidates. It can be hard to find the perfect fit for your organization if you don’t know where to look.
Here, we highlight five recruiting methods you should start using today to keep your talent pipeline active without breaking your budget.
1. Set Clear Goals Around What Gaps You Need to Fill
The first step in hiring top talent is to clarify what your startup needs:
It may not be evident to your entire team what gaps you need to fill. Or, you may not be aligned on what the most important next step is for your business.
Go through the exercise of creating a candidate “avatar” that represents your dream hire:
Answering these questions can help everyone get on the same page, especially when you are still refining your recruiting process.
Then, add metrics to help you measure your progress against these goals. Set benchmarks around cost per hire and time to hire so that you have targets to help guide your efforts.
2. Clarify Who You Want to be When You “Grow Up”
To get people interested in who you are, you need to create a compelling brand that convinces outsiders you are worth their time. Attracting top talent is a competition in many ways. More likely than not, the person you want to hire is in conversations with multiple companies.
If you don’t already, articulate a powerful mission statement and vision for your startup. Think carefully about what reputation you want to build in the world. Doing so will help you define your brand voice, as well as drive much of your promotional efforts.
Additionally, know that every early-stage hire impacts your culture in a significant way. Make sure you are intentional about establishing a culture so that you can bring in new teammates who fit the mold well or help you steer it in the right direction.
3. Find What Works and Double Down
Always keep track of what works and what doesn’t when it comes to recruiting. You want to invest more in the aspects of your talent pipeline that yield top talent while pulling back on areas that don’t.
Gather as much information as possible from interviewees, regardless of whether or not they accept an offer:
It’s hard to know what outsiders think of you unless you ask them for feedback. In many cases, you will be surprised by what you learn when you allow someone else to speak honestly.
4. Be Flexible and Open to Contracted or Part-time Talent
In today’s day and age, it’s becoming increasingly common for companies to work with freelancers or part-time employees before committing to a full-time hire. When your team is small, it can be scary to add a new, permanent face who will be working closely with you day in and day out.
It may be in your startup’s best interest to go the contractor or part-time route to gain clarity on exactly what you need. Think of this approach as a way to trial potential full-time roles or skill sets in a low-risk manner. You can learn if you truly need a new full-time teammate or just an expert to give you 20 hours per month on tightly scoped projects.
If you find someone you love working with and is enthusiastic about your mission, ask them if they would be interested in a full-time position. You already have a strong working relationship, and the contractor is already familiar with how you operate. Overall, this is an excellent strategy for validating potential hires without burning your recruiting budget.
5. Keep Tabs on Many Different Networks
You don’t always have to go through traditional channels to find new hires. Many times, the right person could be an ex-coworker of someone on your existing staff or a former classmate from business school.
If the position you are trying to fill requires significant knowledge about your unique product or service, consider an internal promotion first. Is there anyone on your team who could be successful if given the opportunity to step up to a new challenge?
By promoting someone internally, you can swap out a hard-to-fill recruiting need with an easier one. Your internal talent moves upward, thereby opening up a lower position.
You can also create an employee referral program and incentivize your staff to help you fill openings. Give monetary rewards or bonuses to those who help you qualify and hire exceptional candidates.
Finally, create opportunities to meet people in your community through recruiting events or other company-sponsored engagements that bring people together. You may be one or two degrees of separation away from your next A-level hire!
Why Work With Funded.club
After implementing these strategies, you may still need some help. You’ve exhausted your professional network, built a powerful brand, set clear goals, and tried working with contractors. However, you’re still having trouble finding that perfect fit.
Funded.club partners closely with founders to provide fixed-fee, outsourced recruiting services. We find top-quality candidates according to your needs, review applications, and coordinate interviews so that your team can get back to growing the business.
Want to learn more about how we work?
Contact us today.
As you move through the well-defined phases of startup evolution, your recruiting tactics should evolve in parallel. At all times, you must optimize your talent search and processes for where you are currently, not where you’ve been or where you’re going. Otherwise, you risk spending too much precious capital early or scaling too fast with B-level hires.
Many times, young businesses jump the gun and build robust HR capabilities before they need them. Founders will also outsource recruiting before fully exploring their professional networks for the ideal candidates.
In this article, we discuss how your recruiting efforts should mature with your startup over time.
Forming the Business: Starting With Who You Know
When startups are first beginning, the most important priority is building a founding team of individuals who all share the same dream. Every person should buy-in entirely to the overarching mission and vision of the business.
Although the exact product, service, or target market might change, it’s crucial to have people who are passionate about growing a company and persevering through unforeseen challenges. The founding team is the cornerstone of the startup, the bedrock upon which all else is built.
After establishing the founding team (or “minimum viable team”), it’s time to assess what you need to create an initial prototype or to find your first customers. You should only seek out new talent this early if your founding team is missing crucial skills or knowledge to test the originating business idea.
If you absolutely can’t move forward without filling a gap, recruiting should start with a “who you know” exercise. The founding team should sit down and create lists of moonshot hires - the best possible candidates for the roles that need filling, given the unique business model, market, and employment opportunity.
During this phase, you are looking for complementary skill sets and personalities, in addition to people who quickly grab on to the founding dream. You want to tap only those who you would be inspired to work with over the long term. Any new hires should be incredibly impressive and talented. They should be the best out there for what you are trying to accomplish.
At a time when 90% of startups fail, you can’t afford a wrong step this early in your startup’s life cycle. One bad hire could chart an unintended trajectory for your young business.
You know what you need better than anyone else. You know the personalities of those on the founding team, and you know what it will take to be successful. Start with your network. Go out and find the few people on your own who can help you build your minimum viable product.
Validating the Business: Recruiting A-level Players
It’s time to test your product or service in the real world with real people.
During the validation phase, you must be prepared to iterate quickly and adapt according to customer feedback. At the same time, you’ll likely develop Key Performance Indicators (KPIs) so that you can measure success. On the back end of the validation phase, your startup may begin to attract some interest from angel investors or incubators.
However, capital is still light, and the pressure to only hire top performers remains. The next employees must fit your company culture, as well as understand the vision of the founding team. They should possess a passion for startups and your business, in particular.
What many fail to realize here is the ripple effect that the next wave of hires will create in your startup. As John Collison of Stripe puts it, hiring decisions compound over time. If the founding five members bring in five B-level players, and those people hire five B-level players each, your organization is now 85% B-level players, which is not good.
Those seeking to scale in the validation phase need cost-effective, yet meticulous recruiting help. With a partner like funded.club, you can continue to focus on growing your business while our team takes care of finding high-quality candidates on your behalf. Overall, our services reduce cost-per-hire by 70-80% and take days rather than weeks.
Scaling the Business: Automating Talent Pipelines
After successfully forming and validating your startup’s existence, it’s time to scale. The market is ripe for your product, and you must act fast to capitalize on the opportunity.
It may still make sense to outsource your recruiting to a partner, like funded.club, who has grown to understand your business and unique hiring needs. The advantage of working with outsourced recruiters early (but not too early) is that they can kick it into high gear as soon as you’re ready.
You may also be in a position to build your own recruiting operation. Seed capital and outside investment can help significantly in creating the capacity for your team to take this step carefully.
We strongly recommend that you proceed with caution here. An inefficient and bulky in-house recruiting process will hurt more than help. Bring in someone who specializes in scaling fast-growing businesses and chasing down top talent in the marketplace.
But, don’t rush this step. Hold out for the right HR lead before jumping fully into managing your own recruiting. The right recruiting partner can grow with you without holding you back until the time is right.
For those ready to bring on an outsourced recruiting solution, contact our team today. We’d love to talk.
Ray Gibson is founder and CEO of Funded.club. He brings 20 years of experience in recruiting across Europe, North America and Asia and 5 years running his own startups.