Time-to-Fill vs. Lost Productivity
The longer a position remains unfilled, the more it costs the company in lost productivity, delayed projects, and overburdened teams.
- Internal Talent Acquisition: Internal teams often have multiple responsibilities beyond recruitment (e.g., managing HR processes, employee relations, etc.). As a result, they may take longer to fill a position, especially if they are stretched thin. Depending on the complexity of the role, the time-to-fill could extend for weeks or even months. This extended hiring process leads to opportunity costs like missed project deadlines, decreased team morale, and additional strain on existing employees covering the vacancy.
- Recruiting Agency: Agencies, on the other hand, are focused solely on recruitment. They typically have a pre-screened pool of candidates and established networks, enabling them to fill positions much faster. The shorter time-to-fill reduces the costs associated with vacant roles, as the position is filled before it negatively impacts operations.
Example: If a key position remains open for 60 days with an internal team but an agency can fill it in 30 days, the company recoups a full month of productivity by working with the agency.
External Sources: gigexchange Murray Resources
Cost of Bad Hires
Bad hires are expensive. The costs include training, onboarding, and severance pay, not to mention the indirect costs like team morale and wasted time. Hiring mistakes can be particularly costly for senior roles or positions that require specialized skills.
- Internal Talent Acquisition: Internal teams may lack the specialized industry knowledge or market insights that agencies possess, increasing the risk of hiring someone who isn’t the right fit. Bad hires can result in having to go through the hiring process all over again, doubling the investment in time and resources.
- Recruiting Agency: Many agencies offer guarantees or a replacement if the hire doesn’t work out within a certain period. This reduces the risk of costly hiring mistakes, saving the company money in the long run. Agencies’ industry-specific expertise and ability to vet candidates more thoroughly often result in better long-term hires.
Example: A company might spend months onboarding and training a bad hire, which can cost upwards of 30% of that employee’s annual salary, only to repeat the hiring process again. An agency mitigates this risk by providing better-vetted candidates and offering guarantees.
External Sources: It Motives Murray Resources
Direct Hiring Costs
- Internal Talent Acquisition: Although internal teams do not involve paying an agency fee, their own operational costs add up. This includes salaries, benefits, tools (e.g., recruiting software, job boards, and LinkedIn subscriptions), and time spent sourcing, screening, and interviewing candidates. All of these have to be factored in when assessing the total cost of hiring.
- Recruiting Agency: While agencies charge a fee, typically a percentage of the candidate’s annual salary, this fee often balances out when considering the reduced time-to-hire, the quality of candidates, and the lower likelihood of needing to rehire. Agencies also handle most of the recruitment process, meaning the internal team can focus on other strategic HR functions rather than time-intensive sourcing and screening.
Example: A company may spend $5,000 to $10,000 on job board postings, HR software, and staff hours per hire with an internal team. If an agency charges a 20% fee on a $100,000 salary, that’s a $20,000 investment—but if the agency fills the role twice as fast and with a better candidate, the long-term cost savings far exceed the upfront expense.
External Sources: Talos 360 gigexchange
Opportunity Costs
While internal teams are focused on multiple tasks (HR functions, managing existing employees, performance reviews), recruiting agencies are laser-focused on filling open positions. The opportunity cost of diverting internal resources to the recruitment process can be significant, especially when high-level employees are required to spend time in interviews or evaluations.
- Internal Talent Acquisition: Senior executives, team leads, and managers may need to invest substantial time in the hiring process, detracting from their core responsibilities. This can be particularly costly for small or mid-sized companies where leaders play crucial roles in day-to-day operations.
- Recruiting Agency: Agencies manage the bulk of the recruitment process—handling sourcing, vetting, and initial interviews—which reduces the opportunity cost for senior management and other internal staff. This means key decision-makers spend less time interviewing unqualified candidates and more time focusing on strategic priorities.
Example: If a manager making $150,000 annually spends 20% of their time on recruitment for a 3-month period, that’s a $7,500 opportunity cost. An agency that can fill the role more efficiently frees up the manager to focus on high-value tasks.
External Sources: It Motives gigexchange
Specialized Expertise
- Internal Talent Acquisition: Internal teams may have general knowledge of various positions within the company, but they may lack the specialized understanding required for niche or highly technical roles. This can lead to longer hiring cycles and less accurate matches.
- Recruiting Agency: Agencies often have specialized recruiters who are experts in particular fields, such as engineering, finance, or IT. Their expertise enables them to find better-suited candidates faster. For highly specialized roles, an agency can be more effective in identifying the right fit, saving the company from potential rehiring costs.
Example: A company looking for a highly specialized data scientist may spend months with an internal team trying to find the right person, while an agency with technical expertise can identify and secure top talent within a fraction of that time.
External Sources: gigexchange Murray Resources
Summary: Cost and Time Comparison
Factor | Internal Talent Acquisition | Recruiting Agency |
Time-to-Fill | Longer due to multitasking and broader responsibilities | Faster due to focus and pre-established networks |
Productivity Loss | High due to longer vacancy periods | Lower due to faster placement |
Cost of Bad Hires | Higher due to lack of specialized vetting | Lower with agency guarantees and better vetting |
Direct Hiring Costs | Salaries, tools, time, resources (can add up) | One-time fee, but fewer internal resources used |
Opportunity Costs | High due to time spent by leadership in recruitment | Lower due to agency handling recruitment process |
Specialized Expertise | Generalist knowledge; may lack niche expertise | Specialized, leading to higher-quality hires |
Conclusion:
While internal talent acquisition teams are valuable for ongoing recruitment needs, partnering with an external recruiting agency can be more cost-effective for specialized, time-sensitive, or high-level positions. The agency’s ability to reduce time-to-fill, minimize bad hires, and leverage specialized expertise often results in faster, higher-quality hires that save companies money in the long run. The costs of extended vacancies, opportunity loss, and hiring mistakes can far outweigh the fee associated with using a recruiting agency.
Darrel Chambers is a seasoned expert in the staffing industry, boasting nearly two decades of experience. Working his way from talent recruiting to founding a recruiting solutions company that specialized in the Engineering, Land Development, and Energy sectors. His deep understanding of these industries and their unique talent needs has positioned him as a leader in the field.
Currently, Darrel serves as a vertical leader for Alliance of Professionals and Consultants (APC), where he operates on a national level. In this role, he leverages his extensive experience to help clients solve complex talent problems, ensuring they have access to the top professionals needed to drive their businesses forward. Darrel’s expertise and leadership have made him a trusted partner for companies looking to navigate the competitive landscape of talent acquisition.
