For many clients Outsourcing makes good business sense, however when thinking of recruitment, does that still ring true for the consultancies themselves?

Outsourcing of recruitment is becoming outmoded for some consultancies, as new technology makes establishing an in-house recruitment function a real option (i.e. In-sourcing), with efficiency enhancements and excellent potential Return on Investment.

For many years consultancies have been supporting their clients’ ambitions to focus upon core business, and Outsource IT, call centres, recruitment and the like to 3rd party specialists. This was comically demonstrated in the BT TV commercials featuring Gordon Ramsay trying to fix his IT, whilst chaos overtook the kitchen, and the Michelin stars fell from the wall.

For many clients Outsourcing makes good business sense, however when thinking of recruitment, does that still ring true for the consultancies themselves? Consultancy is inherently a people business. Consultancy firms understand best what type of people will fit in well with their teams, brands, and what qualities will wow clients. Consultancies already have networks of contacts; understand their markets, competitors, and know how to apply technology for maximum business benefit. So why do they pay agencies between 15 and 25% of a consultant’s annual salary in commission for using those self same capabilities to find new people?

For example a consultancy wishing to hire 40 staff per year would spend over £300k on hiring fees from agencies. In addition to this, they would make a substantial investment in management time in briefing several agencies, filtering large numbers of (sometimes unsuitable) CVs, and interviewing many candidates. The efficiency of this process is very dependent upon the agencies ability to understand the consultancy’s requirements, and their willingness to only forward candidates that are truly suitable. From experience the quality of candidates varies enormously between agencies. The true cost of recruiting those 40 staff is more like £500k.

Consequently, when considering In-sourcing recruitment, the Return on Investment calculation becomes interesting. The cost of setting up a recruitment web site, search engine optimisation, advertising and job board subscriptions have all substantially fallen in recent years, and would now require an investment of around £100k. To make these assets sweat a couple of recruitment specialists would need to be hired. Such an arrangement could pay for itself in less than a year. However, apart from potential cost savings, the true value of the In-sourcing option is in the quality of the resulting hires, the ability to quickly respond to new skills requirements, and the more efficient use of management time in the recruitment process.

Additionally, as the process of In-sourced recruitment requires extensive PR and advertising, done under the consultancy’s own brand name rather than the agency’s. The result is an increased public profile for the consultancy itself, raising brand recognition for the firm, and sending positive messages to the market about capabilities and growth.

Clearly for consultancies recruiting only occasionally, for specialist recruitment, or head hunting type assignments there is an important role to be played by agencies. However for those consultancies with continuous recruitment requirements, the opportunities presented by lower cost web technologies, resulting in real cost savings, increased brand awareness, and potentially better profiled candidates, means that the option of bringing the recruitment functions back in house should now seriously be re evaluated.