Employee Recruitment: Internal Recruitment vs. Consulting

Hiring employees! It's quite the puzzle, isn't it? If you've ever tried to find the perfect candidate, you know it's like finding a parking spot at rush hour. Instead of a spot, we're searching for a unicorn developer, and instead of navigating city streets, we're sifting through LinkedIn. Ah, the joys of recruitment!

Many companies often face a choice between internal recruitment and consulting. In my view, it's like choosing between cooking dinner at home or ordering takeout. Sure, home-cooked meals are healthier (and often cheaper), but sometimes you just don't have the energy to stand at the stove. Especially when your company is growing faster than a line at a Starbucks drive-thru on a Monday morning.

Let's figure out when it's worth rolling up your sleeves and cooking... I mean, searching for employees on your own, and when it's better to call for HR delivery.

First, a bit of theory. Our model considers the following factors:

EV (Employee Value) - Annual value of an employee (or how many cookies they bring to the company's jar) 
Tint - Time to fill a vacancy with internal resources (in days) 
Text - Time to fill a vacancy through an agency (in days) 
S - Annual salary of the employee 
C - Agency commission 
I - Internal recruitment costs (including premium LinkedIn subscription you swore you'd use)        

Now, let's look at how to calculate what an employee actually costs the company. I'm still tinkering with this part of the formula; it definitely needs to be tailored for each business segment and position. But, in my opinion, it's a bit more interesting than the ROI, which is about as exciting as watching paint dry.

So, EV (Employee Value) = (R × P) + (I × M) - (S + B + T + O)         

Where:

R: Direct contribution to revenue (how much bacon they bring home) 
P: Productivity coefficient (from 0.8 to 1.2, where 0.8 is me after a holiday weekend) I: Indirect impact on revenue (for example, how many bugs they squashed before they became "features") 
M: Impact multiplier (1 minimal impact, and 2 maximal impact) 
S: Annual salary 
B: Bonuses and benefits (yes, even the fancy coffee machine counts) 
T: Taxes and insurance contributions (because adulting is fun) 
O: Overhead costs        

Now let's look at how much money we're losing while searching for our unicorn:

Opportunity cost for internal hiring: OCint = (EV / 365 × Tint) + I 
Opportunity cost when using an agency: OCext = (EV / 365 × Text) + (S × C)        

Let's consider an example to understand how this works in the real world. Imagine we're looking for a senior dev with an EV of $200,000 and an annual salary of $120,000. Internal search will take 60 days, consulting promises to do it in 30 with a 12% commission. Let's assume internal recruitment costs of $8,000 (those LinkedIn InMails aren't cheap, you know).

OCint = (200,000 / 365 × 60) + 8,000 = $40,767 
OCext = (200,000 / 365 × 30) + (120,000 × 0.12) = $30,411        

Here, the savings already amount to $10,356. Not too shabby, right?

But let's make an important point: this model isn't the Holy Grail of recruitment. It's more like a GPS for hiring – it points you in the right direction but won't parallel park for you. Of course, not all consultants work for such a percentage, not all can close in the fastest time. But imagine you didn't hire a key developer for an important project on time. The project stalled, deadlines are burning hotter than the latest TikTok challenge, and clients are unhappier than a cat in a bathtub. In the end, the lost profit could exceed the cost of services of not just one, but five consultants!

Moreover, remember that you can hire several recruitment agencies simultaneously. Generally, you only pay for results, and in return, you get a candidate pool bigger than Texas.

When to call in the HR SWAT team (i.e., consulting):

• When you need an employee "yesterday" (or faster than Amazon Prime delivery);
• When you're looking for a unicorn with 10+ years of experience in a technology that's only 5 years old;
• When you need to fill a high-paying position, and each day of downtime costs more than your entire office's yearly coffee budget.

When it's better to rely on internal recruiters:

• When your processes are smoother than a fresh jar of Skippy;
• When you have more time than a sloth on vacation;
• When it's important that the candidate fits perfectly into the corporate culture (for example, understands why we don't talk about Bruno).

In conclusion, I want to emphasize once again: this model is not a dogma, but a tool. Use it to better understand your costs and benefits, but don't forget about common sense and the specifics of your business. And remember: sometimes spending a little more on the right hire now is like investing in Apple stock in the '80s – it'll pay off big time in the future.

Good luck in your search for those rockstar candidates!