In house recruitment vs external agency – the pros and cons and what to choose

In-house recruitment vs external agency is the age-old question that I will help answer for your specific case.

Caution here: this is mostly related to the European market as opposed to the North American market.

Simply put, external agencies are expensive but if you need very senior people that focus on a specific niche and internal in-house recruitment teams can be more suited if you have a lot of people to hire.

If you have ever read Freakonomics, there is a chapter on how a Real Estate agent impacts the sale of your house from the economical perspective (as there are other points that it does not cover) that notes that the interest of a real estate agent is to sell the house, and not to get the best possible price. The same thing happens with recruitment agencies. The nature is to seal the deal rather than get the best deal ever. It will always be your responsibility to determine that.

Let me help you get a better idea of what to choose:

In house recruitment

Good for:

1. If you are hiring a lot of people for different departments as usually recruitment agencies are fairly specific to a specific niche. You may want to hire a marketing manager, a project manager, a Senior Java Developer, and a Content Writer. No recruitment agency will help you to do that.
2. You can source everywhere that you want

Bad for:

1. It is a time-consuming process that usually requires a person to handle it. On my last recruitment process for a Senior Java Developer, I received over 150 applications that need to be processed (and this is not my primary task)
2. You need to have the time to communicate with a lot of people, and screen, which means a lot of time spent on short calls with all sorts of questions

External Agency

Good for:

1. If you need people fast and now
2. Senior niche people that are extremely hard to source
3. Executives and C-Level.

Bad for:

1. Expensive
2. The fit of the candidate is always to be “considered”
3. No guarantee that the new hire will stay yet you will need to pay for their services
4. Usually, charge an upfront fee especially when they are a niche recruitment

My recommendation

Chose both. Be greedy here.

First and foremost negotiate the contract of the recruitment agency on these three points:

1. You are not exclusive, and if they want to be exclusive, it should cost you half
2. They need to provide insurance. i.e If a candidate leaves before x time, they need to provide another for free. You will also get other models where they return back a % of the fee, but you do not need your money back, you need candidates. For the time, I always go for the trial period. If your candidates trial period is 6 months, then 6 months insurance
3. Negotiate the percentage that they will get per hire and do not accept upfront fees.
4. Focus on hiring key people here, that can help you hire more and not just extra hands. In other words, hire a tech lead and not a Middle developer.

Second and most importantly, replicate the same effort internally. Post on your LinkedIn profile, email your friends, have a career section on your product’s website. No one, should, at any given point fully depend on an external provider. You need choice and flexibility

Here is how you can manage that. Follow my Recruitment Process setup.