Should Startups setup Recruitment Teams?

The objective of this post is to address the question, “Do Startups need to setup Recruitment Teams to support internal hiring requirements?”. During the course of this discussion, we shall look into the hiring techniques among startups and established companies. We will also glance through the pros and cons. If possible we will try the tilt the discussion in a favorable direction.

“When you are good at doing something and not good at doing something else, why not delegate the work you are not good at to someone who is good at” — Anonymous

What are Internal Recruitment Teams?

Recruitment teams are set up by companies to cater to their hiring demands. Team members comprise of full time employees or contract staff, working to fulfill all hiring demands. Hiring is done entirely in-house or parts are outsourced to external agencies.

The objective of setting up internal recruitment teams is to reduce the dependency on external agencies. Having an internal recruitment team leads to long-term efficiency, especially if the company is looking to hiring new people on a regular basis.

As a part of an initiative to offer startups the services of a full-fledged recruitment agency, we reached out to over 175 startups in Bangalore over 10 days. Among the many observations, one stood out. Startups want to attract the best of the talent. You may say, ‘well, isn’t that the objective of any company?’. It is and It is not. It is, in principle. It is not, in action. Let me elaborate. While interviewing candidates, companies ‘intend’ to hire the best talent. But when it comes to hiring, they are either ‘forced’ to hire from

· The available pool, which is only a choice of the best among the available.

· Budgetary constraints which prevent a company from offering a premium for the better candidate.

How startups hire talent

For funded startups, budget isn’t much of a hurdle. What is a hurdle is the internal resources to attract the available talent. Let us look at two scenarios.

A logistics startup recently received funding from notable firms. In the following few months, they set up a ten member recruitment team. This team caters to all the hiring demands internally. No work is outsourced to external vendors.

Another digital startup self-funded itself into a 15 member company. This company does not have an internal recruitment team . As and when they hire, they reach out to recruitment firms for help.

The Question

Who is doing right when it comes to hiring? How do you justify costs vs benefits of internal recruitment teams?

How large companies hire talent

Large Indian and Multinational companies have internal recruitment teams. These teams cater to massive hiring demands that their internal businesses generate. For large companies having mass hiring demands, internal recruitment teams are cost effective. So are employee referrals.

On the other side, employing agencies is an expensive affair. They are expensive because of the one-time placement fees. In the case of volume hiring, this number turns out to be a large cost component for businesses.

Cost impact of Hiring Models at Large companies

Agencies: Expensive

Employee Referrals: Moderately Expensive

Direct Hiring: Not Expensive

Effectiveness of Hiring Models at Large companies

Agencies: Highly Effective 90%-100%

Direct Hiring: Moderately Effective 10% — 20%

Employee Referrals: Not Effective 5% — 10%

Two Cases of hiring at large technology companies

Case A:

A multinational technology company had no or minimal internal recruitment team since inception. It hired in hundreds and employed the services of recruitment firms to identify talent. One day, some one working at this company said, ‘let us set-up an internal recruitment team’.

Today it has a recruitment team in the hundreds. How are they measured? If we have to treat hiring as more than a function, then who owns this function? The leader at the top is only to manage. Are they measured in the same way a software product team is measured?

Case B:

Another technology company walked the same path for some time and soon realized that it does not want to spend any more time on recruitment. It was not their core-competency. Today the entire recruitment function at this company is managed through a custom Recruitment Process Outsourcing (RPO) model. In this model, an independent recruitment firm steps in and manages the entire recruitment cycle for the company. This not only saved time and cost, but also improved the efficiency, thanks to the expertise these these external firm brought.

Is there an ideal scenario?

From the observations, few insights emerged.

There are startups who have a clear road-map, received funding from big firms and have clear plans on headcount numbers needed in the coming months. For these firms, it makes sense to set-up internal recruitment teams. Having these teams provides dedicated support, especially while hiring for similar roles.

There are startups who received funding and are yet to ramp up the team. The skills that these startups look for are niche and hiring is in single digits a quarter. For these startups it makes sense to initially reach out to recruitment firms. Such firms can help these startups fulfill requirements on a time-bound basis.

Startups can also reach out to recruitment companies for specific requirements, rather than end-to-end hiring. Some startups need help only in sourcing resumes, a few need candidate co-ordination help, a few startups need verification help, others need candidate evaluation support. The needs of the startups are varied.

The road ahead

This post is an attempt to evaluate the need for startups to set-up internal recruitment needs. We observed few examples among startups. We also studied now established companies approach hiring.

Unlike established companies, the current hiring demand for startups are volatile. At a time when startups are struggling to become a success, it only makes sense to reach out to experts for hiring support.

A time will come when a startup is no longer a startup, when it starts showing traction, when it has crossed the chasm and is generating revenues on its own engine. Then it makes sense to start asking the questions, ‘Should we set up an internal recruitment team?’

Until then reach out to the experts. Get help.