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?
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.