When hiring managers need to fill their most critical and niche job vacancies, they turn to direct hire agencies (headhunters). In fact, about 1 in 10 positions1 are filled by direct hire agencies (tweet this). In 2014, U.S. companies increased their spend on such agencies by 7 percent.2
What’s even more interesting is that rate is expected to increase another 10 percent in 2015,3 driven by a variety of factors such as economic growth, talent scarcity, and rising voluntary turnover. These factors and more are highlighted in our newest infographic, “Insight/Foresight 2015.”
8 in 10 organizations already have difficulty filling positions. Tweet This!
The infographic details the tremendous pressures that will weigh on HR professionals and hiring managers in the coming year. Hiring managers are already struggling to find the key talent their organizations need to reach their business goals. If they want to be successful in a more competitive employment market, they need a better grasp on their direct hire agency spend and they need to effectively evaluate agency performance.
Most business leaders are unaware of how chaotic their process is when engaging with direct hire agencies, largely because of how spread out these relationships are throughout an organization. Some of the common problems that most companies face when using direct hire agencies include:
- No ability to track aggregate spend or direct hire activities across an organization
- Lack of analytics or objective data when evaluating agency performance
- A variety of contract negotiations (and compliance nightmares) because multiple headhunters are used
- No centralized control or transparency into agency usage
At 28%, direct hire agencies represent the largest talent acquisition spend. Tweet This!
Given that direct hire agency fees are the largest portion of most companies’ recruiting budgets,4 why aren’t business leaders looking for a better way to track and measure this spend (now estimated at $16 billion5 annually and growing) on direct hire agencies?
A Better Approach to Direct Hire Agencies
A good first step for any company using multiple direct hire agencies is to create a level of transparency. Remember, most companies have no idea how many headhunters they’re using, how much they’re spending on each one, or which ones are really finding the right candidates.
A system that aggregates all of these engagements under one vendor management system platform can remove all of that uncertainty. When hiring managers are able to view all of their direct hire recruiters side by side, they can begin to evaluate their organization’s spend, results, and ROI.
Next, a reliable platform that manages headhunters should include and create actionable data. We’re talking about much more than a simple spreadsheet. For the data to be actionable, companies should be able to use objective performance data to find a direct hire agency that best suits the needs of their organization or that would be the most effective for a specific job title or role.
Some niche agencies are better than others for certain job types, and any recruiting team should be able to choose the right agency armed with the right data — regardless of whether that agency is on their existing preferred vendor list or they find that agency in the open marketplace.
Finally, a good system of managing headhunter relationships doesn’t leave evaluation and determining ROI up to individual hiring managers spread throughout an organization. We know these hiring managers typically have core job functions to attend to and are not solely focused on recruitment.
A system that can track and evaluate direct hire agencies will provide a level of control for HR professionals, while still providing the flexibility hiring managers need to find the right talent.
We know HR professionals are juggling more than ever. They should be aware of how much they’re spending on direct hire agencies, and what is and isn’t working. When they know these things, companies can hire those difficult-to-find candidates in a more strategic, data-driven manner.