Optimizing Recruiting: Build, Buy or Hybrid

The goal of any recruiting function is to find qualified candidates that are a cultural fit—and to do so ASAP. A strategic recruiting process should yield a labor force that is safe, efficient, and productive, enhancing your brand image and bottom line.

When choosing the best recruitment process for your business, you’ll need to take your business size, budget, and hiring needs into account. You should also consider changing job seeker trends, demographics, and worker demands.

One important consideration with respect to recruiting resources is the “Build Vs. Buy” decision. Historically, there has been a bias toward keeping recruiting an entirely internal operation. The general perspective is that internal recruiters will be most effective in screening candidates that are a good fit with respect to skills and culture. But as the labor market tightens and the tasks associated with finding and engaging candidates increase, we’ve seen a growing trend of companies turning to third parties to supplement internal recruiting.

These third-party services have typically been of two types:

• Staffing firms that provide “temporary” labor, which often leads to permanent hires down the line
• Recruitment processing outsourcing (RPO) firms that manage some or all of the “recruitment funnel” in sourcing, screening, and evaluating candidates

Let’s look at the differences between staffing agencies and RPO providers. These insights will help you choose the most strategic solution for your business and bottom line.

What Is Recruitment Process Outsourcing?

A recruitment process outsourcing provider specializes in managing part or all of the recruitment process as an extension of a firm’s in-house team. They focus on finding the best candidates but also optimize operational aspects of recruitment—think of innovative technologies like AI-enhanced applicant tracking systems (ATS), talent acquisition platforms, automated assessment and resume screening tools, and self-scheduling interviews.

RPO teams work with you to understand your unique needs. They provide ongoing analysis of your recruitment strategy to assist with staff planning, forecasting, inefficiencies, and diversity hiring.

Additionally, RPO providers help you establish a solid employer brand—and always act as an extension of your brand. They seek to drive continuous improvements by tracking and reporting key metrics such as time-to-hire, cost-per-hire, and retention rates.

Companies that depend on a mix of permanent and contingent staff can count on hybrid RPO (a mixture of in-sourced and outsourced roles) for an even more tailored talent solution. Regulatory compliance for contingent staff is also managed by the RPO, eliminating significant operational stress.

What Is a Staffing Agency?

A staffing agency’s main objective is to fill assigned vacancies. Candidates that join a company workforce through a staffing agency are generally temporary workers and not employees. They appear on the staffing agency’s payroll, rather than the company’s.

Since the staffing firm insures and pays the candidate, it is legally the employer. In addition, if an employee isn’t the right fit, it’s the agency’s responsibility to compensate and terminate the hire.

Historically, staffing agencies specialize in meeting seasonal, contract, or short-term labor needs. But due to the tightness of the current labor market, these agencies have increasingly been relied upon to fill the permanent labor needs of companies.

This typically takes the form of a  “temp-to-perm” model, where a company will take on a temporary employee for a trial period. If the employee meets the performance criteria, they’ll move from the agency’s payroll to the business and become a permanent company employee.

Recruitment Process Outsourcing vs Staffing Agencies

While recruitment process outsourcing providers and staffing agencies are both involved in the hiring process, the service and strategy behind their offerings are very different. Let’s look at the most significant differences—and how these affect your business operations and budget.

Quality of Talent

As mentioned, RPO providers aim to secure candidates for the long haul to reduce staff turnover, improve productivity, and maintain high employee morale. Therefore, screening isn’t based just on skill. They’re also vetting for reliability, professional goals, teamwork, communication, and other beneficial attributes for the given role. 

People who seek employment through a staffing agency often prefer flexibility or face personal circumstances that make it difficult for them to commit to permanent positions (such as childcare, senior parental care, and so on). They see the temporary nature of such placements as a means to an end, rather than a long-term commitment to the company.

Staffing firms often rely on such workers simply to meet the client’s requirement regarding the number of workers requested. As a result, turnover among employees provided through staffing firms is typically exceptionally high—which impacts the safety, productivity quality, and training costs.

Cost-Effectiveness

If your company has high staff turnover, you’re losing a significant amount of money unnecessarily. In addition, your company loses productivity, staff morale suffers, and often your reputation does too—all costing you along the way.

A staffing agency can help you fill positions quickly—but it comes at a cost. Many agencies charge 20–40% markup to provide temporary workers, who then need training and onboarding. While the staffing agency does take the burden of finding a candidate off your shoulders, its primary aim is to fill the position and invoice for as many hours as possible.

An RPO provider works with you on a long-term recruitment strategy to ensure you minimize staff turnover. This end-to-end service significantly reduces the load on your HR department, while giving you the final say on which applicants you want to hire. RPO firms may charge between 2% and 8% cost-per-hire for first-year wages. Often, the more positions there are to fill, the lower the cost. In addition, the recruitment process outsourcing provider analyzes retention rates, highlighting inefficiencies that can help you save long-term.

While “recruiting costs” are embedded in the staffing company markup on labor, proper analyses consistently reveal that the cost-per-hire under the RPO model is nearly always lower than that of staffing firms for frontline workers in relatively high volume.

Scalability

Scalability gives businesses the flexibility to quickly scale up or down with their recruitment needs. Hiring poor matches can hinder your growth significantly. When it’s time to scale up—whether due to a growth spurt, new offices, or seasonal fluctuations—you need a skilled team you can rely on to see you through the stressful period.

While a staffing agency works on a vacancy-to-fill strategy, an RPO can help you strategically employ candidates to fulfill your functional needs. One size doesn’t fit all; that’s why RPO firms partner with you to build the best solution for your specific business needs.

RPO providers also build a talent pipeline of active and passive candidates. This means when it’s time to scale up, they likely already have some candidates to tap.

4. Talent Acquisition

Staffing agencies take on vacancies from multiple companies, and they don’t always manage to fill all the available positions. In contrast, an RPO provider acts more as an extension of its client. It performs a thorough evaluation of each applicant and assesses the suitability and compatibility with your company's culture and values. Since recruitment process outsourcing providers can handle the entire end-to-end recruitment process, they must fill the needed vacancies—regardless of how challenging the circumstances might be.

Still Not Ready to Outsource?

Many companies pass off hiring responsibilities to their HR department, saddling them with the task of managing functions across the entire recruitment journey with minimal resources. Additionally, HR teams are responsible for managing marketing spend on various job platforms, background checks onboarding, and training.

RPO providers can provide immediate relief to HR teams, as they:

• Are experts in recruitment processes, including the most cost-effective means to fill the top of funnel with qualified candidates
• Deploy advanced recruitment technology, saving time and money
• Have strategic knowledge and analytics tools to spot skills gaps
• Develop your employer brand to attract high-caliber talent
• Streamline and improve candidate experiences, which encourages retention
• Verify regulatory compliance

RPO and in-house recruiters can co-exist. With function-based RPO, the recruitment process outsourcing provider takes responsibility for a specific hiring function or skill set, such as the high-volume frontline workers. This lets internal recruiters to focus on higher-level professional and strategic hires, displacing reliance on expensive search firms.

With a highly intentional division of labor, also RPO helps internal HR and talent acquisition focus on core operations and other strategic priorities such as onboarding, retention, training , professional development, and planning.

Use Recruitment Process Outsourcing to Build Your Winning Team

Your workforce is the lifeblood of your business. Thus, to build a cohesive team with the right skill sets and core values, your recruitment processes must receive dedicated attention. At Source2, we see ourselves as an extension of your internal team. From candidate sourcing and background checks to interviews and onboarding, we work with your other HR functions. We employ innovative technology to streamline every step in the process and achieve extraordinary results.

Our team has extensive experience in a wide range of specialist recruiting areas, including frontline workers for roles in engineering, logistics, construction, utility services, healthcare, transportation, and more. Reach out today—let’s make your team the best it can be!