Why you should use — or not use — a recruitment agency as a startup

Bjørn Andersen
recruitment agencies

Someone recently posted a list of 10 uncomfortable truths from a founder’s perspective, with one highlighting that you should never use external recruiters as a startup. As a recruiter, I have to say that I disagree (I would, wouldn’t I!).

I do, however, heartily agree that you should not ALWAYS use external recruiters, and it got me thinking. What are the pros and cons of using external recruiters and internal Talent Acquisition teams (TA)? When should you use external recruiters? And when should you not? What is the correct ratio between external recruiters and internal Talent Acquisition teams (TA)? And most importantly. If you’re strapped for cash, and using an external recruiter impacts your runway in a way that is not insignificant — can you plan and act in a way so that you can avoid the cost of an external recruiter?

Recruiters and TAs each have their individual strengths. Here are my views:

TA team Pros

  1. Never underestimate the value of a strong TA team. If built right, it is the engine that handles most of your hiring.
  2. You can allocate resources internally as you see fit.
  3. Many of the candidates you interviewed today, but for some reason, are not fit at the moment, might be hired tomorrow. Your internal TA team can keep potential hires warm and reconnect when the budget is there or when that one Team Lead role becomes available.
  4. You build essential knowledge internally about processes, compensation, optimal candidate profiles etc.
  5. If your TA team is constantly the right size to handle your current hiring needs, it is definitely a more inexpensive method than an external recruiter.

TA team Cons

  1. Recruitment is hard. Damn hard. I usually say that most people who possess the drive, skills and intellect to excel in recruitment are smart enough to do something else. What makes recruitment so hard is that it is similar to sales in the way that it is binary — either you fill a role, or you do not. Hiring managers will constantly chase you and rarely be satisfied — either there’s a quantity issue (too few candidates) or a quality issue (candidates lack skills). The uncomfortable truth is that your TA team won’t last forever, and it will be a constant battle to keep it staffed.
  2. As an extension of point 1, since recruitment is hard, a lot of the people you hire for your TA team, are not really interested in recruitment. They are passionate about processes, people, strategy and development and see recruitment as a gateway to that. Either they will push for a different role and hitting hard KPIs, or they will tend to shift away from the hardcore sourcing, reaching out to candidates, pitching your organization and the role, towards soft KPIs like candidate experience, diversity and inclusion programs, building processes and improving the tech stack such as choosing a new ATS (applicant tracking system). All vital areas which you need to address. But if you have a TA team of five people, of which five are passionate about processes and soft KPIs, and zero people are interested in hard KPIs such as actually filling roles — you’re in trouble.
  3. Startup recruitment needs tend to change over time and are especially dependent on whether you just raised a round or if you’re halfway between two rounds. Chances are that you might not have the same recruitment needs throughout the life of your startup, which presents the problem of utilization — sometimes you’ll have too few resources and sometimes too many. Too few resources is not your biggest problem, as you can use external recruiters during peak periods, but if you have too many resources, you’ll either bear significant, unnecessary costs or be in a situation where you have to terminate your TA team.
  4. Tooling for TA is quite expensive, and it’s only getting more expensive. Everything from LinkedIn to an ATS will cost you, and the cost will linger even if you no longer have a TA team.
  5. Many of the startups I speak to don’t have realistic expectations regarding the workload a TA can handle. “I just need one TA, who will cover everything from engineering to sales roles on all levels, and who can easily fill five roles per month.” Yes, but no. Finding someone like that is like finding a five-legged lamb — it’s not going to happen. Most likely you’ll need at least a couple of TA’s in a startup to cover the different roles, and a TA is not going to do five hires per month.
  6. If your TA team is NOT constantly the right size to handle your current hiring needs, it is often a much more expensive method than using an external recruiter.

Advise: it’s healthy to calculate the cost of each hire once in a while (staff cost, tech stack, advertising etc.) so you have an idea of your actual spend per hire.

External recruiter Pros

  1. Provided you have the proper agreement in place, external recruitment spend is almost directly proportional to roles filled. If the external recruiter does not succeed, your spending will be minimal.
  2. A reputable external recruiter will be substantially better at filling roles than you will — they do this for a living, all day, every day. They will also be much more knowledgeable about compensation, candidate pool etc. How often do you hire a VP of Product? Or a CTO? Or an Account Executive? You can find the recruiter with the most experience targeting that exact role you’re trying to fill, often resulting in better candidates.
  3. Reduced workload for employers. Using a recruitment agency can reduce the workload for employers by handling tasks such as advertising the position, screening resumes, and conducting initial interviews. It saves you a great deal of time.
  4. You can save a lot of time using an agency that handles the initial steps of the process, meaning that you only get to speak with the best suitable candidates.
  5. Recruitment agencies can conduct thorough screening and reference checks on candidates, which can help to ensure that the candidates presented to the employer are qualified and reliable.

External recruiter Cons

  1. Although recruitment agencies can be cost-effective, the fees charged by some agencies can be higher than the cost of hiring an employee directly.
  2. You may feel that you have less control over the hiring process when using a recruitment agency. However, with good communication, this is most often fine.
  3. Recruitment agencies may need a more comprehensive understanding of a company’s culture, which can lead to mismatches between candidates and the company.
  4. Recruitment agencies may only sometimes provide the best candidate for the position, which can result in additional costs and time for the employer to find a suitable candidate.
  5. Miscommunication or a lack of communication between the employer and the recruitment agency can lead to delays in the hiring process and frustration for both parties.

Insight by Bjørn Andersen

Bjørn Andersen
CEO & Founder

+45 31 54 70 40