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Why Growing Companies Are Ditching Placement Agencies (And What They’re Doing Instead)
Why Growing Companies Are Ditching Placement Agencies (And What They’re Doing Instead)
You Have a Company to Run. Hiring Has Taken Over.
You’re reviewing applications, scheduling phone screens, coordinating interview panels, and fielding cold calls from recruiters, all while your actual job waits. If you have an HR person on staff, they’re likely already buried in compliance, onboarding, and employee issues. Recruiting is a full-time job on its own, and right now, someone who didn’t sign up for it is doing it anyway.
This is one of the most common growing pains companies face, and there are more options for solving it than most founders realize.
Why the Traditional Agency Model Creates Problems
Traditional placement agencies earn a commission, typically 15 to 25% of the placed candidate’s first-year salary. On the surface, it looks like a straightforward arrangement: they find someone, you pay when you hire. But that fee structure creates an incentive problem worth understanding before you sign anything.
When every placement equals a payout, the agency’s financial interest is in closing the search, not necessarily in finding the best long-term fit. That doesn’t mean every agency delivers poor candidates, but it does mean their incentives and yours aren’t fully aligned. Speed can get prioritized over fit, and if a hire doesn’t work out a few months in, the commission has already been paid.
Salary expectations can also get inflated in a commission-based model, since a higher placed salary means a higher fee. Knowing what a role should actually pay, based on real market data, is an important checkpoint in any search. Our guide to salary benchmarking for CPG roles is a good starting point for understanding how benchmarking works in practice.
The Hidden Cost of DIY Hiring
For companies without a dedicated internal recruiter, hiring often defaults to whoever has bandwidth, which usually means the owner, the CEO, or an HR generalist who’s already at capacity.
The direct costs are obvious: job board fees, time spent reviewing applications, interview coordination. The indirect costs are harder to quantify but often larger. Leadership gets pulled away from revenue-generating work. Roles stay open longer than they should. The hiring process lacks consistency because no one person owns it end to end.
For companies in a growth phase, especially those that have recently closed funding, the cost of a slow or inefficient hiring process compounds quickly. You need people in seats, and the infrastructure to get them there usually hasn’t been built yet. If you’re evaluating whether to build that capacity in-house or bring in outside support, this breakdown comparing full-time HR versus fractional HR costs is worth a read before you decide.
What a Structured Recruiting Process Actually Covers
One reason hiring feels so time-consuming is that it involves more parallel tracks than most people account for until they’re in the middle of it. A well-run recruiting process typically includes:
- Writing and posting job descriptions across the right channels
- Active outbound sourcing for candidates who aren’t applying
- Reviewing and screening inbound applicants
- Managing employee and board referrals
- Coordinating interview scheduling and candidate communication
- Benchmarking compensation against market data
- Keeping the process moving so strong candidates don’t go cold
When one person is managing all of that alongside a full workload, something usually gives. Understanding the full scope helps clarify why dedicated recruiting support, whether internal or external, tends to pay for itself in time saved and quality of hire.
This is also a big reason why the HR generalist and recruiter roles often get confused. They’re different skill sets, and asking one person to cover both usually means neither gets done well. Skills-based hiring is changing how some companies think about this distinction entirely.
How to Evaluate Your Options
If you’ve decided you need external recruiting help, the most important thing to evaluate isn’t the firm’s track record. It’s how they’re compensated.
Commission-based models create the incentive misalignment described above. Retainer-based models distribute risk more evenly and tend to align the recruiter’s effort with your timeline. Hourly models with cost caps offer the most transparency, though they require a recruiter experienced enough to work efficiently.
Regardless of the model, the right questions to ask any recruiting partner are:
- What does your process look like from day one to offer?
- How do you handle candidates who don’t work out?
- Who manages candidate communication, and how often will I hear updates?
- How do you benchmark salary recommendations?
- What’s the actual cost if I hire quickly versus if the search takes longer?
The answers will tell you a lot about whether their incentives match yours. If you’re also evaluating broader HR support needs beyond recruiting, this overview of HR management consulting can help you understand where outside help tends to add the most value.
Is Dedicated Recruiting Support Right for Your Stage?
Not every company needs external recruiting help, and not every company that does needs the same kind. A few questions worth asking honestly:
- Is the person managing hiring at your company actually equipped to run a full recruiting process, or are they doing their best with limited bandwidth?
- Are open roles staying open longer than they should because the process isn’t moving?
- Is leadership spending significant time on hiring that could be spent elsewhere?
- Have you used agencies before and been dissatisfied with the results or the cost?
If the answer to most of those is yes, it’s worth exploring options, whether that’s building internal recruiting capacity, bringing in embedded support, or rethinking how you use external partners. For companies thinking through what HR should look like at their stage more broadly, this guide on HR outsourcing costs breaks down what companies actually pay and what drives the price.
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