“How hard can it be?”,  I asked myself as I recently contemplated a bathroom remodeling project. Well, seven hours and three trips to the big box store, local hardware store and plumbing supply store respectively, I decided that “buying” the expertise I needed was, in the long term, going to be less expensive and produce much better results than if I “built” the new bathroom myself.

In my 20 plus years working on both sides of the desk as a recruitment leader within several well-known organizations as well as my years as a consultant, I’ve seen companies both build and buy executive search services.  In fact, I was instrumental in designing extensive in-house executive search function at three organizations, (Arthur Andersen, Huron Consulting and, most recently, Fifth Third Bancorp).  At any point in time within those firms we were hiring as many as 40 executives (partners, principals, EVPs and SVPs) each year.
From my observations and experiences, the spectrum from success to failure is wide, to say the least.  Many companies that have in-sourced and built internal executive search functions have achieved very impressive results. They have also been able to retain and build upon their knowledge capital and successfully built pipelines of talent communities to tap into when new hiring needs arise. That can be difficult to achieve when contracting with a retained search firm on a transaction-by-transaction basis. In other instances, I’ve seen what can only frankly be called disasters when companies try to establish the function in-house, especially if there is no clear strategy, expectations are unrealistic and plans and/or responsibilities haven’t been expressly delineated.
The best way to objectively compare the relative merits of insourced vs. outsourced search is to weigh  the most important criteria critical in the “build” or “buy” decision:

1. The relative costs

Like the weekend home improvement warrior, many believe that building is always cheaper (therefore better) than buying. That can be true if you know what you are doing, but to really understand the relative price tags of in vs. outsourcing, do the math:

  • Compare the costs of employing a senior level recruiter as well as support staff (such as researchers) to using an external service that you can essentially turn on and off.
  • Consider the costs of subscribing to/purchasing the research tools that a well-established external firm typically utilizes.  Note that while social media has greatly improved the ease/speed of all searches, we often hear HR leaders say things like, “Anybody can source with LinkedIn”. That is not necessarily true.  Dozens of sophisticated, hyper-effective, subscription-based tools can uncover passive candidates that over-the-counter tools like LinkedIn are unable to find.
  • Finally, look into executive search firms that offer flexible pricing.  Many search firms have changed how they price – and are often bundling their services to sell activities such as sourcing and pre-interview screening a la carte.

 2. The relative output

Many believe that using in-house resources will produce the same, if not better, results, than buying external expertise.  That can be true, depending on the caliber and experience of the home grown team. Trying to do it “all”, however, is the Achilles heel for many human resource/talent acquisition departments so recognize your limitations in terms of knowledge, skills and time.

In my experience, external firms generally have more resources at their fingertips including years of expertise specific to the type of talent you require, databases and social media expertise and real time insights into the market.  In essence, by using a firm instead of an individual, you are buying the brainpower of a team.

The other consideration is leverage.  By buying externally from a team, you will typically have more resources at your disposal.  And more resources devoted to a single search usually means quicker results. My experience is that the typical “rec-load” for internal executive recruiters might be 12-15 searches at a time.  On the other hand, you would be hard pressed to find an external recruiter working on more than 6-8 at a time. The less time that’s spent on each search; the slower the results.  When you compute the revenue your organization loses each day that an executive position remains unfilled, “cheaper” suddenly becomes a whole lot more expensive!

3. The ease/speed of search and focus

Motivations guide behaviors.  Not always but often external search firms produce results faster because the hiring organization IS the client. External recruiters are not on payroll or being paid by the hour. It’s in their best interest to place and identify candidates quickly and move on to the next project.

4. The cultural component

Much is made of “cultural fit” in recruitment. It’s certainly logical that an in-house employee conducting executive search is more likely to really understand the internal culture and therefore find a suitable candidate with the best cultural fit.  You can also argue that an in-house recruiter is more likely to make a better impression upon a potential candidate than an outside “hired gun”, especially given the high touch, high value nature of recruiting top executive talent.

On the flip side, all other things being equal, this should not be an argument against hiring an external firm.  Most experienced and reputable search firms seek to learn the pulse of the organizations they serve.  During the intake process, their primary objectives should include getting to know your culture. If the external recruiters you are working with don’t ask those questions, then you need to look elsewhere.

5. The strategic component

In my experience, building – as opposed to buying – works best in two, frequently overlapping, scenarios intimately tied to the overall recruitment strategy of the organization: (1) when an organization needs to be really proficient at recruiting for the same type of position repeatedly and/or (2) when an organization is growing so fast that it needs to hire all the people it can to fill certain critical senior roles.
Let me illustrate the first scenario through an example.  Let’s assume you are a global IT hardware firm that sells large mainframes. Having the right senior sales staff with the right connections and the ability to sell multi-million dollar projects is critical.  You are more than happy to pay that “right” sales person more than most people in your C-suite are earning and you will hire as many of these executives as you can find.  This is the perfect scenario to “build” and use an in-house executive search team to invest in search/competitive intelligence; to constantly build talent communities of these executives; to attend the conferences that prospective talent attends, etc. In other words, your in-house team can focus, with laser accuracy, on a targeted campaign that repeatedly gets your employer brand in front of this group of candidates.
As far as the second scenario – recruiting during fast growth – I lived this first hand working for the largest professional services firm in the world.  After their consulting division was split off, my employer rebuilt their middle market consulting practice.  At that time, demand for those services was so great that we sought to hire any qualified individual from any of our direct competitors. We built an in-house executive search function, invested in research and assigned recruiters to focus exclusively on our four largest competitors.  Since we were not recruiting for a specific position, our approach was unique: we were not pitching a job; we were pitching our firm.  Within this initiative, the focus was not on “how many did you hire?” or “did you fill that position yet?”.  We were entirely obsessed with building relationships and getting to know our competition intimately. My team became much more relevant as recruiters because we were tasked with business development, marketing and competitive intelligence in order to sell our brand to these candidates. This, in my opinion, is where in-house recruiting should be focused while recognizing that it always makes sense to buy from an expert recruiter to fill a “critical” or “difficult” position or a time sensitive position.  That’s when external recruiters excel.

Conclusion

The decision to build or buy is complex. Costs, while certainly always important, shouldn’t be the only motivator for deciding on either approach – or even a hybrid approach, for that matter.  Instead, weigh all the considerations listed above, and let the answer to the final question about your strategy trump all others.  Yes, that’s right – overall strategic hiring needs must always prevail.  And, even if you decide to “build”, fill any gaps in your own expertise along the way by buying it from others who have taken that same path before you.

P.S. In case you are wondering about the outcome of my home improvement project, the builder I hired did an excellent job fixing my mistakes and creating a space worthy of one of those before/after TV shows. From now on, I’ve decided that I’ll leave remodeling to the experts!

J. James O’Malley

About the Author

Jim has spent 25 years on both ends of the table, developing HR and talent solutions to align leadership, talent, and business needs.

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Tags: executive search, improve recruiter performance, in-sourcing, outsourcing, professional services executive search, strategic search