It's an age-old question. Should you work with third-party recruiters when you are building your company? We've spoken with hundreds of companies that currently work or have previously worked with recruiters/headhunters so we've learned a lot second-hand from their experience. And a lot of third-party recruiters and recruiting agencies are Entelo customers so we've spoken to them about their strengths and weaknesses and where they feel they best serve their clients.
Here's a quick summary of some of the pros and cons we've heard from folks:
Pros
No upfront hard costs - The appeal for many folks that work with recruiters is that they don't have to pay anything upfront (this is for contingent search, retained search is different of course). For early-stage companies or companies that are otherwise cash-strapped, the thought of only having to pay out when you make a hire is very appealing.
Strong signal of availability - When you get a resume from a recruiter, you assume that this is person is actively looking for a new job and interested in your company. Many companies don't feel they have the time to sort through passive candidates and so like the signal of availability recruiters bring them.
It is important to note though that just because you receive a resume from a recruiter it doesn't mean that person is necessarily interested in your company or even actively looking. Less scrupulous recruiters will float resumes and then only after you've expressed interest, flip to getting the candidate excited. Personally, I'd fire any recruiter who did that but it happens all the time.
Legwork on initial portion of hiring funnel - For busy individuals, having a recruiter manage the initial portion of the interaction can be nice. That said, the best recruiting organizations don't leave much of this to recruiters. They know that they can do a more effective job of scheduling, interacting with the candidates, etc.
Cons
Incentive misalignment - Your goal is to hire great people. A recruiter's goal is, generally speaking, to get you to make a hire. There's a potential misalignment of incentives present there. Often recruiters will sell you on a candidate but when you bring the person in for an interview (or hopefully have phone screened ahead of time!) you'll find that they aren't a good fit.
Smaller companies are often at a disadvantage - If you're a recruiter and you want to make money, you're going to send your best resumes to the companies most likely to hire those individuals. That typically means larger companies that have more open reqs, bigger budgets, etc. As a startup, you're at a disadvantage because you probably have a higher hiring bar, you're probably filling less positions, etc. So working with recruiters can often be a struggle for early-stage companies.
(Note: There's a hack we recommend which is to pay the recruiter more than their standard fee. It's outside the scope of this post but detailed in our Startup Recruiting 101 blog post.)
Soft costs - There can be a lot of soft costs associated with working with recruiters. Your time might be wasted on having to sift through tons of bad resumes or on phone screens that don't go anywhere. And there's the energy it might sap fighting against recruiters who are pressuring you to move to the next step with someone who you aren't interested in. These soft costs can add up pretty quickly and often not very perceptible.
Hard costs - While the upfront costs of working with recruiters is zero, the overall cost can be quite high. Most recruiters charge 20-30% of first year salary so even for a relatively junior position, this can be prohibitive. We've spoken with companies spending six figures a month on third-party recruiters and while in some cases they are happy, many appear frustrated with the process.
I'll caveat all this advice by saying that these are generalizations and there are many, many exceptions to the rules above. Also, a good recruiter can be worth their weight in gold. We've worked with some that were excellent and a good number of ones who weren't. Do your diligence upfront and don't hesitate to cut the cord with recruiters who you don't feel are doing the job.
