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Beyond the Pitch

5 Tips to Consider Before Hiring a Recruiting Firm

Hiring the right talent at the right time is critical to building a successful company. Building an outstanding team with the right skills and values is among the most important responsibilities for every entrepreneur.

For most positions, a startup simply cannot afford the fees typically charged by a recruiting firm; however, in rare circumstances, hiring a recruiter might be a fit.

Here are five tips to help entrepreneurs evaluate when and how to use a recruiting firm.

1. Is the investment justified?

For certain c-level or technical positions, especially in sales or product development, hiring high-impact candidates may be so urgent and important to the company that spending money on a recruiting partner is justified.

But first, get the basics in place. This includes a clear, defined hiring process and a position description that explains expectations and gets candidates excited about working at your company. Create a compensation package, evaluation criteria, and identify who from the company will be participating in the recruiting process.

Second, exhaust every other source of talent first, from your personal contacts and networks to professional organizations to Linkedin and other social media sites. Reach out to organizations that aren’t in your network to expand your company’s diversity. (More suggestions at the end of this blog.) 

Finally, understand the true costs. Recruiting fees are typically 20 to 35 percent of the position’s first year salary and can even include a bonus. Your company will pay a portion of the fee before the search begins. (However, it’s a red flag if the firm asks for the full amount upfront.) The final installment should be due after the search is completed. Weigh these costs against the cost to your startup for every month the position remains unfilled—especially if you believe the right candidate could accelerate sales and revenue.

2. Negotiate for a subset of services or a “startup” rate.

Identify your company’s pain points and discuss an a la carte approach with the recruiting firm to see if you can outsource certain parts. Is it taking too long to identify candidates? In the interest of future business, perhaps the recruiting firm would consider providing a dozen well-vetted resumes for a fee. Are you having trouble getting candidates in the door? Would the recruiter handle the first round of interviews only? Are you losing candidates at the offer stage? Would the firm consider pre-reviewing offers for a fee? Expect less flexibility with a larger national firm than with a local boutique firm.

3. Create a shortlist of recruiting firms that have experience with startups and in searches for jobs similar to your opening.

A great search firm will have a sweet spot. Drill down to find it. What relevant industry focus and experience do they bring? What is their experience with recruiting for startups? How do they source diverse candidates? What is their track record with diverse hires? Can they provide materials on how to conduct an effective search or shape a more effective job description? Does the firm specialize in certain levels of positions (i.e. c-level) or do they accept searches for any level? Who will be assigned to your search? What type of searches do they turn down?

4. Evaluate recruiting firms on their metrics and references.

Whether you choose a local or national firm, or a boutique or large agency, ask about their prior results and check their references. What percentage of searches does the firm complete? What is the average time to close a similar search to yours? What is the average retention rate of the individuals placed? What is their follow-up with clients after the search is completed? What is the percentage of searches unfilled or relaunched, at what price? What do they do to make an unsatisfactory search or experience right? Ask for regional and/or industry references. 

5. Be a partner in the search.

From day one, an effective recruiting firm will become an extension of your organization; however, they cannot be successful without you. Host their visit to your organization. Help their team understand your business. Let them see your culture, talk to your people, even meet some of your customers or business partners. Set up and commit to a timetable. When will you see the first batch of resumes? How quickly will you turn them around? Who from your company will be involved in interviews?

Creating the appropriate recruiting strategy for each open position is essential to a high-growth hiring plan. For certain urgent, high-impact positions, the investment in an external recruiting firm may be worth consideration.

Here are a few potential sources of talent. Do you have others?

  • AngelList
  • Diverse organizations
  • Events – technical meetups, networking events
  • Linkedin
  • Passive candidates from organizations where you have had a phenomenal customer experience
  • Rev1 Ventures Job Board
  • University or college connections and alumni groups
  • ZipRecruiter
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