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How SME's Can Turn the Tables on Recruitment Costs

Why does recruitment cost so much?

By quite a long way, the most common issue we are asked to tackle is the cost of recruitment. As 75% of SME recruitment is done through agencies, usually this translates to “we’re spending too much on agencies”, typically at the end of a financial period when recruitment stands out on the P&L as a relatively enormous spend. SMEs get a rough deal compared to their larger big-name competitors. Fees are a little higher; the candidate pool is a little shallower; attrition is a little more and managers spend more time recruiting as their HR support is stretched further. This becomes a very frustrating spiral and is often perceived as unavoidable. What choice does the manager have other than to call an agency when they need to recruit?

 So how can you break the cycle and get ahead?

The obvious costs

Agency fees are expensive, in theory anyway. In fact, the costs are pretty reasonable when the service is good. Where it starts to stick in the craw is when a business is going through a growth spike, but for an SME the percentage fees don’t tend to go down much. Advertising is the same, and without anything guaranteed in return.

Hidden costs

Part of the solution lies in identifying the detail within the problem. Many of the costs are hidden, such as management and admin time. It is astonishing how much time is sucked into recruitment.

Let’s take one role in sales as an example. The sales manager, John, calls their favourite five agencies, each call taking twenty minutes. The agencies begin sending through CVs, around ten each. Each CV takes John five minutes to review. The agencies are calling for feedback by now, so that takes another twenty minutes per call. John interviews seven candidates at around an hour each plus fifteen minutes preparation time, then gives more feedback and arranges more interviews. Another round of interviews, this time the top three, then hopefully an offer secures the best. If the word has got out to the agency community, John is also fielding calls from another half dozen agencies and sifting through more CVs.

At a conservative estimate, assuming a short interview process and that the offer was successful, the whole process takes well over eighteen hours, and that doesn’t include time other managers will spend interviewing the top three candidates. This is time John should be spending doing his job, so another hidden cost is opportunity cost. Now multiply this up by the number of vacancies John and his management team are handling to maintain a steady state. Now imagine that John and the team are going through a growth phase. They will need to find a lot more time for planning and readjusting.

The big agency secret…

The big secret is pretty simple: candidates you receive via agencies are very often actively looking for a job. If you are going to rely on agencies, there should be nothing to stop you from doing everything yourself. The irritating thing about this is that all of a sudden the agency’s problem becomes your problem. Whether you receive 100 applications or 5, you have to read and respond to them all. If there are no candidates with the right skill set, what do you do? (This can happen for any number of reasons, for example – the advert is boring or too corporate; you’re not advertising in the right place; the skills combination you want doesn’t exist and so on.)

Get creative and stop the spiral

The answer is to get your ducks in a line. Know what you are looking for, then cover as many bases as possible. Design a proactive approach strategy based on previous success and proven supplier statistics. Ask for referrals and recommendations. Be more inventive – set up graduate traineeships, apprenticeships, partnerships with local colleges or government employers who may consider secondments. Advertise accurately and honestly. Get your website working for you. If you have PR and marketing, coordinate with them. Focus on employer branding and do everything you can to make your existing workforce feel valued and appreciated. They are your best ambassadors.

All of these things are possible for an SME going through growth. The major limiter is typically time and having the in-house experience to set things up properly. At Quarsh, our specialism is RPO for the SME world. We can help you to set up the right systems that will complement your business, so that you can find and recruit the best. We can even run your recruitment for you, sitting within your business. There is a solution for every business. No company ever failed from having a strong recruitment function, and we are here to help you to compete with the biggest and best brand names out there.