As founders begin to build out their teams, we find they are frequently unsure on what services, if any, that they should use to support in their hiring. In the early days, we believe founders should always lead from the front on hiring, minimising the reliance on third parties until they have built out the core team.
Regardless of scale, you can never replace the founder’s sell in the candidate hiring process, even when you bring in a specialist consultancy. It’s imperative as a founder you build that internal hiring muscle early, otherwise you’re likely to lose out on key talent that makes the difference later on. The most successful ventures in our ecosystem have founders that are radically obsessed with the talent in their business, it’ll always consume a large proportion of your time.
There are so many recruitment landmines as a founder, and if this is your first rodeo, it can go wrong very quickly. On one side, it’s very easy to build a dependency on recruitment consultancies, an expensive and unscalable habit. However, it is also fair to say some founders fall into the trap of wasting too much time on vacancies that are genuinely tough hires, leaving them open for months on end. At a certain point in time, the personal network of a founder cannot be leveraged further, and with only a certain amount of time in the day, founders must decide on the opportunity cost of running a slow-moving recruitment process themselves or utilising a recruiter.
If you do decide to outsource some or all of the process, it then brings the biggest question of all, who do you pick? As a founder that choice can be a daunting one. With such a competitive landscape, consultancies are understandably in ‘sell mode’, frequently over promising and under delivering. In this post, I wanted to cover what to watch out for as a founder and how to help you pick the right provider for you when that time comes to release the baton of recruitment.
Evaluating your situation
Every recruitment firm has their niche and before you start speaking to options, it’s time to look inwards to work out what you really need. Do you have a refined hiring process internally? How clear are you on skills required for the roles? How many roles need to be filled? What seniority are they? What functions are they?
All of these answers will lead you towards partnering with one of the many solutions being offered in the market. Let’s run through the main ones.
The Options
Contingency Recruiter
A company that gets paid if they introduce you to the hired candidate. This is your most common category of recruitment firm and they usually have clear specialisms, i.e. an engineering-focused recruiter for early stage startups. You are usually within your right to use multiple firms for the same role, however, this is typically counterproductive, and you should aim to use one partner to build a genuine partnership and avoid the risk of dual approaching the same candidates in the market.
Fees typically range from 15% through to 30% of a candidate’s salary. You usually get what you pay for in this regard.
Executive Search
Leadership hiring specialists, depending on the firm from ‘Head of’ through to ‘C-Suite’ placements. They will usually request to be the exclusive hiring partner on the project meaning you cannot use two search firms on the same role. A ‘retained’ firm takes a fee upfront – this is because they work on fewer roles than a contingency firm and thus look to build commitment from their clients early. Therefore, whilst these firms are well placed to hire your future leaders, ensure you have clarity on your requirements, and have a partner you trust can do the role – you pay retainer fees to multiple recruiters.
Fees typically range from 25% through to 35% of candidates salary.
Embedded Talent Acquisition (ETA) / Recruitment Process Outsourcing (RPO)
Either one or multiple individuals that embed into your organisation to help you hire multiple roles over a short period of time. These individuals are familiar with setting up processes and embedding themselves into an organisation quickly, usually with fast ramp up times. The most common scenario for this service is you have raised funding and need to hire 10+ roles quickly and lack the internal team capacity to deliver on them. The benefit of this option, over an internal TA team is if you’re doing a hiring ‘sprint’ rather than consistently hiring over a longer period of time. If you anticipate volume hiring will extend over 12 months, this service is usually a poor choice.
RPOs usually charge a monthly retainer, varying considerably depending on the seniority. But expect to pay a 20-50% premium on the recruiter vs hiring someone permanently in-house. Sometimes there is a lower monthly fee, with some additional fees around placements.
Fractional Head of Talent
Hiring a contractor for 1-3 days each week who will run your hiring processes and build upon your internal systems. These individuals will usually support 2-3 startups at once and can bring strong expertise outside of the core hiring requirements you have. Usually, this option makes more sense as a startup if you have 1 or 2 roles live at a time and therefore don’t require the full-time internal hire but have ambitions to grow consistently over time.
Fractional Heads of Talent charge a day rate or monthly retainer.
The questions you must ask as a founder
When evaluating these options, ensure you have a few options to pick from and compare. I always say, you need to buy into the individual recruiter, not the firm they represent. Just because a recruitment firm has a good reputation, doesn’t mean you should blindly trust an individual within it.
Therefore, make sure you meet the person that would actually deliver the work. It is very common, especially in the executive search world, for a Senior Partner to show up on a pitch, only for a Junior Associate to actually deliver on the project – not what you want!
This also applies to track record, some firms will collate their collective track records into one overview. Ask the person delivering on your role what roles they’ve specifically hired that are similar. Would the firm be willing to connect you with a customer to share their experience? If not, what are they hiding?
Lastly, ensure there is clarity on cost and fee structure. There are plenty of ways to price a recruitment process and in my experience, you’re best to set a fixed fee as a startup. If you have a variably % fee the incentives simply don’t align and you might be presented with profiles that are too senior for the position.
Conclusions
It’s never easy when you hand over the reins of recruitment over to a third party but hopefully, this article is useful to founders exploring this for the first time. Take time and care around finding the right partner for you. If you are navigating this for the first time and have additional questions please feel free to reach out for a conversation!