Is recruiting online cost effective?
When in need of recruiting a new talent for your business, you may ask yourself whether to call a recruiting agency or do it yourself using online job boards.
I asked it myself too and then wrote this piece, hoping it to be enough comprehensive to help you in the choice of the right recruiting channel for your case.
I won’t go through the pros and cons of different recruiting strategy, but I will provide you with an economic comparison of two different channels: the “traditional” headhunting and Linkedin.
How traditional headhunting works
One of the traditional channels to source talents is the headhunting agency, still widely used in many cases (I will show you the money-related reason why this channel is still used and when).
Basically, when you approach a headhunting agency, apart from agreeing on the brief of the hunt (i.e.: your need and hence the profile of the person you’re looking for), you commit to paying a certain amount of money once they found the right person for you.
The headhunting agency fee is generally one monthly gross salary of the employee. Therefore, the most qualified person you’re looking for, the greatest his gross salary and the greatest the agency fee you pay.
Here you can find what you may expect to pay based on the annual gross salary of the person you’re looking for.
The cost of recruiting through job boards (Linkedin)
On the other hand, there’s a do-it-yourself approach to recruiting your next talent. And, to do it entirely by yourself, you need to use job boards to attract candidates.
One of the most popular job boards is Linkedin, especially for the talents you may need for a digital business.
Recruiting occasionally on Linkedin works in a way similar to a performance marketing campaign. You pay a Cost per Click to display your job post.
Based on the success rate of the whole recruitment process, you can determine the cost of the hire. Such cost can be compared with the cost offered by the headhunter.
To give a feeling about the potential cost per hire of a Linkedin campaign, I have analysed it along the two main dimensions: the CPC, assumed here ranging from 1 to 5 euro or dollar, and the campaign success rate, assumed here ranging from 0,5% to 2,5%.
The CPC and any other figures we see here can be in any currencies without impacting the result shown. While the success rate is the percentage number describing the number of clicks needed by the job post to find the right candidate. For example, a success rate of 1% means that you need 100 clicks to find the right hire who would sign the hiring contract.
When is to choose which channel?
Now that we investigated the costs of traditional headhunting vs. Linkedin job board, the question is about when to choose one sourcing channel rather than the other.
There are qualitative considerations about the two approaches which can be done, for example about the alignment of the candidates to your needs. But assume for a while you can get the same perfect hire from both channels. Which channel should you choose?
To help you make your choice, I have crafted a graph showing you the savings you can obtain from Linkedin vs using a headhunter.
Be careful, because what’s included in the graph above are just the direct costs of the two processes. But, when you have a headhunter, such direct cost corresponds to a full service. When it comes to Linkedin, you should pay effort of yours or your employees which has to be taken into account as an indirect cost.
What we can roughly get from the graph above is that the greater the gross salary of the candidate, the greater the buffer of time you can spend yourself in managing the search and selection process and therefore Linkedin may result in a convenient choice.
The lower the gross salary of the candidate, the better would probably be to outsource the recruitment process.
This is, of course, my opinion on a complex topic. But, still, this opinion can help you make yours.