To outsource or not to outsource:

When and why to work with external recruiters

The first thing founders must do when they get their funding is hire the right talent — and there’s no substitute for a founder’s role in recruiting. As a founder, you know what makes the company tick. You also get immediate feedback and can figure out what resonates or doesn’t with candidates, and you can quickly pivot. Most founders rapidly get good at recruiting. That’s a good thing because, as a founder, you never stop recruiting, from initial funding to exit.

While founders must become adept recruiters themselves, there are situations when it’s critical to tap into outsourced experts who can help. Founders often tell me they are wary of using recruiters, but the fact is that sometimes it’s the better option. Understanding when to outsource recruiting (and when not to) is a key aspect of a founder’s role. Equally important is knowing how to effectively manage the recruiter/agency relationship.

Here’s a summary of what founders should know to ensure they are equipped to handle this crucial aspect of the recruiting process:

• Communicating passion and vision: Founders are uniquely positioned to communicate their passion and the company’s mission, making a compelling case for potential hires. Those initial conversations can help you refine your pitch in a way that resonates and attracts the right people.

• Minimizing costs: By handling recruitment internally, founders can avoid the fees associated with external recruiters, which can be substantial, particularly for startups or smaller companies with limited funding or wanting to extend their runway.

• Building internal capabilities: Founders who engage directly in the hiring process can develop essential talent assessment and recruitment skills, which will be invaluable as the company grows.

• Obtaining greater control over the hiring process: Founders maintain complete control over the hiring process, allowing them to adjust strategies quickly and effectively in response to changing business needs or market conditions.

There are distinct advantages to outsourcing to professional recruiters. Founders often spend a lot of time looking for the right talent, which takes away from running the company day-to-day. Recruiters, however, can often get the job done quickly and bring:

• Access to broader networks and talent pools: External recruiters often have extensive networks and access to a vast pool of candidates, including passive candidates who may not actively seek new opportunities but are open to the right offer.

• Specialized databases: Recruiters usually have access to specialized databases and tools to identify candidates with specific skills and experiences crucial for niche roles.

• Industry insights: Professional recruiters often possess deep insights into specific industries and job markets, providing valuable information on competitive salaries, benefits, and other employment trends. For example, I often see founders struggle to hire the right marketing talent. There are so many different types of marketing: product marketing, go-to-market, lead generation, partner marketing, and so on. A recruiter can help you understand what you need, and what skills they typically see in candidates. A seasoned recruiter can help you match your needs to the right candidates.

• Focus on core business functions: By partnering with external experts, founders can focus on core business activities like product development, customer acquisition, and strategic planning, which are essential for driving business growth.

Given that both founder-led and outsourced recruitment have unique advantages, it can be challenging to know when to choose which option. Here are four key factors to consider:

• Budget: Start by assessing financial constraints and the ROI of each approach. If you’re trying to extend your runway or burning too much cash, you might consider keeping the recruiting in-house.

• Speed requirements: Assess the urgency of the hiring need. External recruiters might accelerate the process if a position needs to be filled quickly to meet project deadlines or capitalize on market opportunities.

• Impact of vacancy: Consider the cost of vacancy, such as lost productivity and increased workload on existing staff. Faster recruitment might justify the cost of hiring through an agency.

• Internal capabilities: Do you have the capacity and expertise to manage the recruitment process effectively, especially if scaling rapidly or hiring for multiple positions? Often, having a subject matter expert in the area you’re recruiting for but unfamiliar with can be helpful. Typical situations involve executives or niche engineering roles.

Different types of recruiters

If you decide to hire a recruiter, remember that there are different types, each using various business models. Depending on what you need, one might be better than the others. For example, you can hire embedded recruiters. You hire them for a set number of hours per week or month. This is an ideal scenario for you if you need foundation-building and recruiting. With an embedded recruiter, you get someone who can help you set up your processes and your applicant tracking system (ATS) and show you the ropes every step of the way.

Another option is a contingent recruiter. In this case, you pay a fee only if someone is placed. The benefit is that you don’t lose anything if someone is not hired. However, the candidates are often shown to multiple companies, and you get minimal advice. You see this model most often in junior-level roles.

You can also retain a recruiter. You commit to one recruiter and fee, often broken into three installments: at the beginning of a search, a few weeks into it, and after it’s completed. You risk losing the fee, but often, these are more consultative processes. You’ll see this mostly in executive searches.

Finally, there’s the option of a container recruiter — a mashup of retained and contingent models. With a container, you engage the recruiter or agency for a small percentage of the new employee’s first year’s salary. They earn the remaining percentage once the hire is complete. I find this a good compromise: It gets the agency or recruiter involved in getting the hire right. Meanwhile, most recruiters give you helpful services while they are working on the hire because they have been paid a small amount up-front.

Managing a recruitment agency: critical considerations for founders

As with any other relationship, it is vital to define clear objectives and expectations: Define what you need in the role. What is the problem that you are trying to solve? Establish your expectations regarding the recruitment process, timelines, and communication frequency. Make sure these expectations are understood and agreed upon.

Next, be sure to choose the right agency. Select an agency specializing in your industry or the specific roles you need. Review their track record and ask for case studies or references. Also, ensure that the agency’s recruitment philosophy and processes align with your company’s values and hiring practices.

Remember to define a communication plan and stick to it. Set up regular check-ins to discuss progress, candidate status, and any adjustments needed in the strategy. You should at least meet once a week to deep-dive. Also, plan to check in within 24 hours of talking to a candidate to define the next steps. This helps keep the recruitment process transparent and aligned with your needs.

Negotiate terms flexibly: Be proactive in negotiating terms that allow for flexibility, such as trial periods for candidates, replacement policies for unsuccessful placements, and service scalability according to your company’s growth and changing needs.

There’s no more critical role than building a solid team that can drive your company’s success. It helps to understand the tradeoffs between founder- and recruiter- or agency-led hiring. Understanding the different types of recruiters and how to work with them effectively is vital. The payoff is worth the effort: all successful startups start with the right talent and a skilled, winning team committed to your endeavor.