Recruiting the right staff is a key component of corporate success – and
arguably even more important for small and medium-sized businesses.
“Recruitment has a huge impact on SMEs because the presence of individuals
is highly felt. It is a high-risk enterprise for them,” says Scott Russell,
director of CPH Consulting, a recruitment outsourcing (RO) firm.
Recruitment, however, can be tricky for SMEs. “They don’t have large brand
names or reputations that attract the best candidates for jobs,” Russell
says. “They can struggle to get attention at recruitment agencies, which may
not send them the best candidates. They usually can’t negotiate volume
discounts so they are lumbered with the fees the agencies want to charge.
Also, senior management have to devote a lot of time to recruiting so the
time/cost factor for them is huge and good candidates can be lost if
managers lack the time needed to follow up interviews.”
Regulation is increasingly an issue. Stephen Alambritis, spokesman for the
Federation of Small Businesses, says: “We’ve had 17 new pieces of
employ-ment-related legislation in the past 10 years or so. Some of it has
veered into the recruitment area and we also have a more litigious culture.
SMEs can struggle to keep up.”
Alambritis and Martyn Hart, chairman of the National Outsourcing Association,
believe that SMEs can benefit from using RO specialists. “Very small
organisations can use trade associations for advice on matters such as the
legislation that affects recruitment,” Hart says. “Once they get to about
250 employees, they have to decide if they need a human resources manager
themselves. Then they have to ask what that will cost and whether the person
will be able to keep abreast of the latest developments in recruiting.”
Some RO operations specialise in SMEs. Russell, of CPH Consulting, says: “We
work with companies that have a turnover of up to £250m a year and have
about 15-150 hires a year.” CPH and the client agree on the recruitment
process to be used for each job and CPH largely uses its own staff to source
candidates. “We try to help clients to sell their organisations, which often
the big agencies don’t do. We get them to present their strategy, growth
plans, service or products and we give all candidates positive feedback to
create a good impression of each company.”
Clients typically sign up for six months to two years. For larger clients, CPH
usually places consultants permanently on site, while smaller organisations
may get a consultant two or three days a week. “Effectively it’s on-site
head-hunting,” Russell explains. “For less senior roles we use job boards
[online recruitment sites] and advertising using the company brand. For all
clients we directly source candidates too.” Agencies charge about 22%-25% of
the base salary, says Russell, but CPH charges a monthly service fee and a
placement fee for each hire, which equals about 12% of the base salary.
Internal referral schemes, whereby staff recommend relatives and friends for
posts, are another way to reduce hire fees and help to increase candidate
numbers. Russell says: “SMEs often don’t have time to develop an internal
referral scheme but we design and manage that for them. We can lift the
recruitment level from internal hires from 5%-10% to 25%.” RO consultants
can also help to educate staff: “We run workshops for hire managers. Often
they have not been trained at interviewing and don’t know what questions
they’re not supposed to ask under legislation.”
Igloo RPO is a small consultancy that specialises in SMEs. Louise Whitehead,
managing director, says: “We work for organisations with head counts up to
250 and have worked for one with only five staff. We provide people on site
as and when required.” The company handles the hiring of everybody from
financial directors to receptionists. “We often do the foundation work for
the position, from writing the job description to advising on the salary and
conditions.” Igloo’s charges average about 12.5% of the base salary per hire.
Large RO organisations are also turning their attention to SMEs. Carlisle
Managed Solutions, which works for big companies such as Friends Provident
and Ernst & Young, introduced its On Demand service to provide
flexibility for businesses of all sizes. “Companies can buy our services as
and when they need them,” says Katie Wingfield, head of On Demand. “If
they’re recruiting 10 people in a year they may want the whole service, or
they may want us just to design a job profile, plan an assessment day or do
the interviews at the offer stage.” Carlisle charges a project fee based on
the work to be done rather than a percentage of the annual salary, and
Wingfield says this typically adds up to less than what recruitment agencies
charge SMEs.
While the variety of RO providers and services available is useful for SMEs,
they still have plenty to think about when assessing whether to go ahead and
outsource recruitment. “You have to put in the effort upfront to choose the
outsourcer carefully,” Hart says. “Get one that suits the culture of your
business. It’s no use getting a large company whose methods of working
aren’t suitable to SMEs.”
Potential RO providers should be asked whether they work for rival companies
and should be able to explain their working processes clearly, he says.
“SMEs can present a model case and ask them how they would approach it. How
would they go about the search? Would they operate as head-hunters for the
higher roles? How should their success be measured? Which management
meetings would they expect to go to?”
Whitehead advises SMEs to concentrate on ascertaining whether an RO firm
understands their particular markets. “Don’t be afraid to ask about the
experience of the team and get client references. Understand how they will
work for you. Will the account manager look after you or will it be someone
else?” Also, with an SME, the RO staff will need to be comfortable working
with senior management, whereas with big organisations they may liaise only
with lower-level executives.
Flexibility is key to the arrangement, says Russell. “Big RO providers often
present clients with complex and demanding service level agreements, which
an SME may struggle to meet in terms of things such as response and
turnaround times on CV and interview feedback. The RO provider needs to
develop the working processes with the SME over time. The SME has to be
flexible and responsive too.”
Businesses will judge their RO firms on the number of good hires they provide
and the savings they deliver. Russell says staff attrition rate is a good
indicator of success: if the number of employees leaving declines, the RO
provider is doing a good job of matching the right applicants with the
company.
Lightening the load
“We’re saving about 8% of the recruitment costs per hire,” reports Jon Fuller,
co-founder of Centrix, a management consultancy and software company with
about 100 staff. It decided to outsource recruitment to Igloo RPO about 18
months ago.
“We had used agencies and our own staff before we decided we needed something
quite different,” says Fuller. “We need a range of people from sales
managers to software experts. Recruiting is a long process.”
Igloo visits the Centrix offices in Newbury, Berkshire, about once a
fortnight, more if needed, and is involved in all stages of the process,
sourcing candidates and managing any recruitment agencies that may be hired.
Fuller says: “Igloo has a web management process that we can use to keep track
of the jobs. It uses agencies for only about 5% of hires, negotiates their
fees and charges 1% on top of their finder’s fee for managing them.”
Outsourcing has worked well for Centrix, he says. “We have one full-time and
one part-time HR person. Now they can concentrate fully on training and
career management.”
