Do it yourself

The latest HR Big Thing from
America has hit the UK shores. Known as internal recruiters, these permanent
employees dispense with costly external agencies and allow the organisation
more control when hiring staff. By Nic Paton

Mark Baker, recruitment
manager at network and telecoms consultancy Net2S, is one of a growing band of
"internal recruiters" being appointed by UK firms, importing a
concept from the US that has been gaining popularity in recent years.
"Companies feel we can perform a better, more professional service than
some of the agencies. We are less expensive and, at least for small and
medium-sized companies, I think we will become more prevalent," he says.

Internal recruiters,
or "staff specialists" as they are known in the US, first appeared
about 13 years ago. Now some 60 per cent of technology firms there use an
internal recruitment function in some shape or form, including well known names
such as IBM, Lucent Technologies, Cisco Systems and Nortel Networks. It is also
used by the top five accountancy firms in the US as well as management
consultancies, financial institutions and a raft of other corporations.

While not unknown in
the UK – with firms such as Compaq having long-established equivalents in place
– the concept is still relatively immature over here. But according to Steve
Davies, a former IT recruitment specialist who has set up Recruiters Onsite, it
is set to grow.

"If you look at
the history of recruiting in the UK, most companies have traditionally gone for
third-party recruiting through a consultancy to find their staff. Internal
recruiting allows a company to take control of its own hiring," he says.

Companies looking to
establish IR are taking their recruitment function back in-house. Unlike using
an external agency, internal recruiters are permanent employees of the company,
specialists that have set up a bespoke agency within its own walls.

"Internal
recruiters are committed not only to hiring staff, they look at their career
development plans, staff retention and how recruitment is managed and
organised," says Davies.

They will have the
ability to work with agencies, if necessary, and put together a
competency-based interview framework, design assessment centres and establish
psychometric testing for interviewees, he adds. On average, a recruiter spends
half the time simply trying to find the right people to fill vacancies and the
rest interviewing, drawing up processes and making recommendations, Davies
estimates.

But he argues that
businesses will also find that, as soon as the initial investment of hiring
recruiters and setting up the function is cleared, they can make considerable
savings on their recruitment bill by lowering the total cost per hire. "I
had a client who was spending £19,000 per hire on agencies, advertising on
websites, interviewing and so forth. Using IR he was able to cut this to
£7,000," he claims.

Other key benefits
include a higher percentage of job offers being taken up, freeing managers to
manage the business and, crucially, a much closer relationship between
recruiter and employer.

The concept applies
equally to large, medium or small companies, offering benefits regardless of
whether a firm is looking to hire 15 people or thousands, says Davies.
"You have the accountability. If you are a big company it is difficult to
use a lot of agencies. And if you are a small firm, do you really want to spend
your day recruiting when you should be growing the business?

"Small and
medium-sized firms could find IR useful because they often do not have the sort
of recruitment processes in place that an IR specialist can establish."

Net2S’s Baker has
already cut the company’s recruitment costs since he was appointed last June to
set up an IR function. His team has expanded to a second person, with a third
due to be appointed. The team recruits and trains in-house, and is aiming to
appoint about 75 people this year, bringing the workforce up to 120 by the end
of this year.

"I do not run on
a set budget, as such, for recruitment. But I have a budget for each month in
which I keep a record of my spending," he says. In January, he spent about
£6,000 on Internet and press advertising, with a further £2,500 in February and
£4,000 in March.

By comparison, to
outsource recruiting even a junior member of staff – say on a 20 per cent fee
of a £20,000 salary – would cost about £4,000 per hire. "We are recruiting
about five or six people a month, so it does make sense," he says. The
company has offices in Paris, New York and Chicago, where there is a much
greater reliance on internal recruiters than in the UK. The Paris office, for
instance, has nine internal recruiters.

"My personal
experience is that in the US you tend to have an internal recruitment team but
often they are just a buffer between the business and the agencies. They make
sure the interviews are arranged and the line managers are protected,"
says Baker.

He sees his role as
being more proactive, using his in-house knowledge to help the business get the
right people it needs. "It is refreshing to hear direct from a company
rather than going through an agency," he adds.

But there are pitfalls
to IR. Davies concedes that having an in-house recruitment function means that,
for managers, it can end up as simply another part of the business to worry
about. Or when businesses both using IR merge, there is then the question of
which team to keep.

More pertinently, if
there is an economic downturn the firm is either stuck with another fixed cost
or has to go through the costly redundancy process. "If there is a downturn,
you do not want to have a recruiter sitting around being paid
£40,000-50,000," says Davies.

Until last December,
Katherine Day was an internal recruiter for US technology giant Nortel
Networks, working as resource manager for network operations delivery for
Europe, the Middle East and Africa, out of the company’s Maidenhead office. The
group has about 50 internal recruiters in Europe – half of them at Maidenhead –
hiring about 8,000 people a year. In the US, its internal recruitment function
is three times as large.

The recruiters focus
on a particular division of the business, she says. "Instead of managers
having to spend their time on the phone to agencies, sifting CVs and
interviewing candidates in the first round, they can get on with their jobs.
Recruiters are also able to negotiate better because they know the agencies
inside out."

The total cost per
hire was about £1,000, she adds. Recruitment through and external agency would
have cost Nortel 15-20 per cent of the base salary of each applicant. But the
economic downturn in the US and collapsing confidence in the high-tech
"new economy" on both sides of the Atlantic took their toll and Day
lost her job at the end of the year.

She says, "In
October, everyone was hiring recruiters. They hired all these people and they
have now fired most of them. The problem is that they have gone from one
extreme to another.

"Come Q3, Q4 or
even Q1 next year, when everything will go back to the way it was, they will
have lost all these recruiters and will have to start hiring again. In January
or February next year, everyone will start panicking."

It is this lack of
flexibility over IR that could put some managers off the concept, especially if
the indications are for a cooling in the economic outlook, says Alastair
Wright, global head of strategic resourcing at HR consultancy Empower.

Wright, as HR director
at Digital, now Compaq, set up the company’s resource service centre – an IR
function by another name – 10 years ago. He says, "If you are starting up,
you need a business which keeps fixed costs low and variable costs high.
If  the market downturns and you are
faced with problems, you do not want to be laying off employees."

The concept also goes
against the trend of managers looking for increased flexibility and
casualisation in the workplace. Wright says, "One characteristic of the
market at the moment is that it is uncertain. Instability is in the future of
the market for the next few years. If you cannot predict the business, you are
going to keep your variables as high as possible."

A £20,000 salary, for
instance, still costs an employer about £50,000, and the cost of laying off
recruiters, along with the management time that goes with it, is high.

Nevertheless, the
element of control that IR gives can be attractive, says Sue Taunton, a
freelance HR consultant and former project manager for NatWest, who specialises
in setting up and designing recruitment functions for clients.

"Businesses quite
like that comfort, that there is someone there they can trust. By going
in-house they can maintain and retain control. The pull of the business is to
have it done internally. But it is not giving them flexibility," she says.

Larger organisations
often prefer the one-stop-shop approach that IR can bring. But with the
economic cycle appearing to be turning, it is likely that many companies will
be looking for flexibility in the short term at least, she adds. "I think
outsourcing is likely to become more prevalent, then it will loop around and
people will be taking it back in-house again."

Internal recruiters do
not have to be in conflict with external recruitment agencies, says Mark
Brewer, a partner at recruitment agency Frazer Jones. "They are
knowledgeable and enormously helpful to external recruitment companies. There
are organisations where the internal resource function does not get on with
external recruiting firms. But they are very much in the minority," he
says.

"Dedicated
resource functions have been around for years. Organisations that need to
produce a significant number of new hires and need that process managed
effectively have had internal recruitment."

One possible pitfall
with IR is that it can put another layer between the incoming employee and the
employer, adding another extended line of communication, he says. "But you
have to accept that a good organisation is going to use whatever means it can
to deliver the right people on the right timescale."

Another potential
downside is that, in an intensely competitive environment, headhunting
top-flight staff can prove problematic if you are a fully signed-up employee of
one of the companies involved, says Mark Knapper, a director at recruitment
agency Aquinas. "No organisation can search directly with another. At the
search level, I think it is very difficult. It would be likely to lead to some
sort of conflict but in volume recruitment it could be very good. But they do
need to ensure they have the processes set up internally."

Businesses also have to
recognise that moving to an IR function may not be the be-all and end-all. Most
corporations, if they move in this direction, inevitably end up using a
mix-and-match approach. Where necessary, they often end up tapping into the
expertise and knowledge that an external recruit agency can still provide,
Knapper argues.

"If you say you
are going to slash your recruitment costs by just taking it all in-house, it is
not going to work. An in-house recruiter’s database will never be as extensive
as a specialist’s," he says.

But Davies at
Recruiters Onsite is confident that IR will catch on in the UK. With the chill
economic winds beginning to blow in from the US, however, he declines to put
his money on how prevalent it will be in five years. He says, "Three years
ago you would have said that, within a couple of years, most companies would
have been using it. But because of recent fluctuations in recruitment it is now
difficult to say.

"It is a time and
cost thing. If you are prepared to develop the infrastructure, you will see
benefits in the medium term and definitely in the long term."

Should IR become the
norm, recruitment agencies will increasingly find themselves becoming
headhunting specialists searching for the top-flight candidate, perhaps the
chief executive, finance director or chairman, he says.

"There will
always be a role for recruitment agencies. Most companies will still have to
spend some on agencies. I would not have set up this business if I did not
think it would become more prevalent. At the moment, what we are seeing is just
the tip of the iceberg."

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