We speak with a lot of organizations and agencies alike that have a “needed this person yesterday,” level need for niche talent. By the time they’re reaching out to us, they know they need help finding top-level HubSpot talent but hadn’t anticipated the need to invest in a recruiter to help, the need hit at the wrong time of year, or the budget didn’t correlate with the timing (does it ever?). And in today’s candidate market, it’s harder than ever to find "the one." So we’re going to break down how to budget for, justify the cost of, and even prove the ROI of tapping on the shoulder of an external recruiter to help you find that human capital.
Budgeting for the Cost to Retain an External Recruiter
The best advice we can give any client is to anticipate at least one more hire a quarter ahead of where you anticipate business spiking if you're an agency scaling to serve new business, or ahead of needing internal resources to amplify your marketing and sales teams’ productivity. Often, the lead time alone needed to find the right-fit candidate is more than needed, and this will help you allocate funds to retain a recruiting team to help ahead of the curve vs. only allocating funds for the time they hit payroll. When budgeting, it’s always beneficial to allocate around $5,000 or more to retain a search 1-2 months ahead of the anticipated hire date, then in the quarter or month the resource is anticipated to start, allocate for a proper salary along with around 20-35% (the industry norm) of their salary for your recruiting fee depending on the pricing model of your partner.
Justifying the Cost of an External Recruiter
We know what you’re thinking… I already have to budget a much higher compensation than prior years’ budgets in order to get the level of HubSpot talent I’m looking for. Now adding 20-35% of that number to my budget eats into my resource funds. We completely understand that. But, allow us to break down the cost of recruiting internally vs. retaining a recruiter because we’re really talking about the cost coming from one ledger or another regardless.
First, consider all of the soft costs associated with allocating your resources internally to recruit top talent:
- If you already have an HR team or People Operations function, consider what they could be doing with their time to improve employee satisfaction and retention if they were focused on learning and development, culture, career development, benefits and total rewards, compliance, general HR, and more vs. recruiting? Actively recruiting would at least become 50% of their role aka costing you 50% (at minimum) of their salary to pull them off other efforts that can grow your business and teams.
- If you do not have a current dedicated resource such as a recruiter or People Operations Manager, consider the amount of time you’ll be investing in another internal resource to lead the job set-up, listing and search as well as the amount of time to screen resumes, and schedule interviews. In the first interview stages, you’ll want to allocate time enough for your resource to screen at least 10-15 ideal applicants for up to 30 minutes each in order to find around 4 prime candidates to proceed to the next stages. If you’re like many of our agency or small business clients, oftentimes the onus of the search lands on the owner/CEO as well as top leaders in the firm due to how critical the right culture and role fit of the person joining the team is for a lean organization, especially for revenue generating roles.
- Also then consider the cost of the hiring manager and hiring committee’s time spent with second and third round candidates, which is usually a one hour interview time slot per about 2-4 candidates, times each resources’ hourly rate to be pulled out of their role.
- Consider the time these resources are pulled away from their deliverables, driving the company forward, and generating revenue
Now let’s consider all of the hard costs associated with building your in house recruiting function:
- Consider the cost of hiring a recruiter in house. The average salary for an entry-level recruiter in the US is $52,000 and that’s before calculating the employee tax and total compensation. And if you’re talking about needing niche, tenured talent, this entry level recruiter must have some magical negotiation powers and relationship building skills.
- If you do not have a dedicated People Operations function and are considering hiring for this role vs. a dedicated recruiter, be prepared to budget between $70k-$115k for People Operations Managers. The investment is well worth it as this level of candidate is traditionally more of an HR generalist with talent acquisition experience atop common focuses such as learning and development, culture, organizational structure, people management, general HR admin, and more depending on their past experience. However, if you plan to utilize this resource for recruiting, as mentioned above, be prepared to scale down their capacity by up to 50% at a minimum when actively recruiting.
- Applicant tracking systems (ATSs) are a critical component to manage job postings and application submissions. These systems provide the capability to list jobs to job boards and your website, notate feedback with the hiring committee, sort candidates, filter candidates, and automate follow-up for a more streamlined way to communicate, reducing frustration of the recruiting lead, and allowing for a great candidate experience to protect your brand. In regards to cost, implementing ATSs like any other software or tech takes much customization, building, and time from an internal resource. The hard costs to implement an ATS can range from $1,500-$6,000 a year for small companies. If we’re talking medium-sized companies, the cost can be upwards of $10,000, $25,000+ for large companies, and can climb up to six figures a year for enterprise organizations. Pricing is typically contingent on the different platforms and the comprehensiveness of their capabilities as well as user counts, and integrations required with other systems.
- Another increasing and sliding scale of a cost to recruit is paying to boost your job listings on different platforms and job boards. Paid spend has proven to increase your quality of candidates three-fold. Usually, you want to budget no less than a paid budget of $500-$1,000 per job listing per month (or $18-$32/day) to draw in more qualified candidates. Now, this number can increase based on the niche keywords you want to target, the tenure you require, and more. Budgeter beware.
Considering all of the soft and hard costs associated with recruiting in-house, it’s easily justifiable to keep your internal resources focused on delivering value to your organization, and trust an external recruiter to deliver more high-value resources to your team, helping you keep your momentum. But we don’t just think you can justify the cost, we actually think there’s more value to tapping into the external experts.
Understanding the ROI of Investing in an External Recruiter
Beyond budgeting for a recruiter, and justifying the cost, the biggest factors to consider are the caliber of candidates that an external recruiter can bring to the table, and the return on investment of an external recruiter based on the level of candidates brought your way.
For example, in an agency setting, if you pay a recruiter X% of a top candidate’s salary, but that candidate is client-facing, and can deliver X% more capacity than a junior-level candidate due to speed and knowledge, then you can increase the anticipated revenue this role can manage helping to scale your team and improve client retention rates. This ensures that investing in a higher caliber candidate and paying a recruiting fee more than pays for itself in the long run. So instead of stressing the fee, consider the revenue generation of the role with a more tenured candidate by using simple formulas such as an increased productivity rate could yield their percent of increased hourly capacity times your hourly billable rate or in a sales scenario think about their revenue generation equaling a higher average deal size in dollars times a higher number of deals closed/won, etc. Talk about an ROI.
Now we probably have you asking why external recruiters are able to boast the ability to bring in higher caliber candidates. The answer is simple. Our business is to continuously cultivate a community of candidates within our niche ecosystems, and our time is dedicated to finding passive candidates vs. waiting for candidates to apply. Some recruiting firms simply repost your job listing, but HubSearch for instance prides itself on building a database of candidates, a rapport in the HubSpot community, and our recruiters actively reach out to passive candidates specifically for your role.
When you’re considering an internal resource to recruit for your vacancies, you’re probably envisioning a role leveraging traditional or inbound recruiting. Post the job, and wait for the candidates to come to you. Now that’s okay, you may get your person, but you’re now only waiting for the active candidates that stumble upon your listing. Actively searching candidates only make up for about 30% of the global workforce, leaving you with a much smaller talent pool. With recruiting firms, we’re actively leveraging outbound recruiting strategies to bring your opportunity to passive candidates, which make up for 70% of the global workforce aka a much bigger pool of candidates. Most often, these passive candidates are highly sought after top performers that aren’t looking to exit their current roles unless the right opportunity and advancement presents itself, so these candidates aren’t going to actively apply to your job listing. Not to mention, in the current job market, everyone is hiring, and digital marketing talent itself is in high demand. We are even currently seeing this talent sector experience a negative unemployment rate! This means it's going to take double the effort to find those candidates, costing you double the resource time if you’re recruiting in house, whereas retaining a search is a predictable cost, and time isn’t a component… we look until we find you the right-fit individual(s).
Protecting Your Investment in Top Talent… Don’t Churn and Burn in the first 60-90 days
Now here’s one other kicker we’d like to present to you. We like to think past the recruiting continuum here at HubSearch. We don’t stop at the offer letter. We support you and your selected candidate through their exit to their onboarding phase by coaching, checking in, and offering you a 90-day guarantee.
That’s an extra safety net to ensure that you’re getting that dream candidate you paid for, and white-glove service from your external recruiting partner. On the flip side, if you have no time to leverage outbound recruiting strategies in house, and you’re filling a position with a semi-right fit candidate, you run the risk of spending way more than a recruiter’s fee if the new hire churns in the first 90 days due to wrong-fit. External recruiters can accelerate the timeline AND bring you the high-value candidate, and if you’re working with a partner who offers a retention or replacement guarantee like we do here at HubSearch, the risk is near minimal. So if we break down the numbers, the risk of churning a new hire can cost you 1 to 2x their salary due to decreased productivity, lost productivity due to additional time-to-fill, new hire recruiting costs, equipment, and time spent training and onboarding and you’re left at square one. That’s 1 to 2x the initial salary allocated, an empty seat, and your internal resources starting over again, whereas you could snag a guaranteed placement at a fraction of the churn loss on top of all the other soft cost savings from choosing to avoid in-house disruptions. Now that’s a well protected investment of your time and money!
Selecting Your Path
Deciding whether to take on job searches in house or to hire an external recruiter is a major business decision. The additional cost to allocate for the external recruiter is always a decision point for my businesses, however it’s often not considered how much time and cost it takes to invest in leveraging internal resources to take on the accountability of recruiting. Not to mention, recruiting is a crafted skill that gets better with practice, time, and of course as your network grows. So it’s paramount that before writing off investing a percent of a salary fee, it’s considered that the amount invested internally can range up to 1-2x your ideal candidates’ salary. However, if your growth can justify keeping a recruiter busy all year-round, then it's understood that the ROI can justifiably shift back to hiring in-house. Then the question becomes will X% (again depending on your partner's pricing model) of all hire's first year salary outpace the salary of the recruiter, and the cost of an ATS and promotion of the job listings.
Beyond the investment, we also understand that trusting an external party with the ability to hire for your culture is a huge responsibility. So beyond analyzing the cost, we also highly suggest considering the partnership and the values alignment of your external recruiter, and their understanding of your business and niche talent needs.
In all seriousness, whether HubSearch or another external partner is the one to help you on your search for top digital marketing talent or not, we hope that you’re able to see the holistic value in finding a right-fit external partner to help you with your search if you can’t afford NOT to invest the dollars vs. the time or resources to find your “needed them yesterday,” rockstar.