Managing Search Firms – New Considerations and Complexities

Managing  Search Firms – New Considerations and Complexities

Over the last 10 years of my career I have had the opportunity to design search firm (direct hire) management solutions as someone who has functioned as a staffing operations leader inside a corporation, through a Recruitment Process Outsourcer (RPO)  as well as a Solutions leader for Managed Services Programs (MSP).

The reality is, all three have the same goals in mind however the execution of this process may vary. The following post will take you through the industry evolution, the differences in the approaches and final thoughts.

Industry Evolution

The search firm industry is large, fractured with many large and small players and segmented by type, to include: Contingency, Container and Retained.  Stakeholders who utilize and contract with search firms may include: Procurement, Staffing, Lines of Business and Executive Leadership.  In some organizations, the practice of selecting a search firm to fill a position is well managed through policy and process, in others; it is decentralized and managed through the individual line of business budgetary process.

However as OFCCP requirements become more stringent, spending becomes more controlled and search firm utilization becomes more centrally managed good search firm management practices have caught the interest of internal recruiting organizations, recruitment process outsourcers and now managed services providers.  While reducing costs is the primary motivator for all parties interested, in developing a strong direct hire / search firm management program one must not forget:

–          Policies

–          Process

–          Stakeholders

–          Systems

–          Compliance

Corporate Function

The goal for corporate functions is to put policies in place that centralize the management of this function, place controls around the approval of search firms, manage spend, maintain compliance and provide a consistent candidate experience.

Policies and Operating Procedures will address: Approval practices, rate structures, adding a search firm, search firm disputes, resume ownership, search firm expectations, roles and responsibilities, training and education of all involved and reporting of spend, compliance and utilization.

Stakeholders: Depending upon the level of the search, this program can be executed by the recruiting organization or executive recruitment group, managed by recruitment operations, supported through an applicant tracking interface and contract management performed by procurement.  The wild card, is C –suite searches where the relationships may still exist at the most senior levels of the organizations, hence the need for an executive recruiting team to interface with both the retained search firm, leadership, recruitment operations and the candidate.

Process:  Most search firm practices are managed through an applicant tracking system or an internal executive search firm ATS system.  There are business rules established around resume ownership and rates are negotiated for candidates that are not considered for the primary role, yet are placed for another requisition during an established period of time.  Reports are generated through these systems to evaluate source of hire and spend for trending, planning and budgetary purposes.  Relationships are managed by the recruiting organization as it relates to the contracts and recruitment operations or procurement / contractually.

Systems and Compliance: All direct hire candidates must be tracked against a requisition and follow the same established protocols as all direct / full –time hire positions.  The core system of record than becomes the Applicant Tracking System.   The ATS lets us identify: Has the role been approved for search, the source, distribution to the search firm, resume ownership, search firm notification and utilization of search firm resumes coded within the resume database.

Recruitment Process Outsourcers

It is not uncommon to ask RPO firms to manage the administration of the search firm management function. This includes:

Policies and Standard Operating Procedures: Administration of the policies established as well as standard operating procedures. Serves as the central point person for needs, issues related to selection and contract management of search firm vendors.

Process: The RPO will work collaboratively with the internal recruiting organization, serving as the central point to add or remove search firms within the ATS,  respond to general search firm inquiries or questions, contract management, search firm relationships, training and education, and utilization reporting to internal recruiting leadership .  They may also work collaboratively with procurement to execute standard search firm contracts with competitive rates structures.

Systems and Compliance: The RPO will manage this effort through the Applicant Tracking System, and will monitor compliance associated with utilization, placement, contracts and spend approvals.

While this function may seem simplistic, depending upon the volume this program can have 1 – 2 full time people dedicated to this effort.

Managed Services Programs

Here is where it gets interesting. Managed Services Program focus on the management of contingent workforce, 1099’s and payroll providers through a system called a VMS or vendor management system. A natural program evolution is the management of search firms or direct hires, and the VMS systems are now providing this capability.

Policies and Standard Operating Procedures:  The policies do not change, however with an MSP the roles and responsibilities or the how the work is executed will differ.  Fundamentally an MSP can do the same work an RPO performs, however the approach may differ due to other disciplines outside of HR to include procurement and contingent labor professionals.

Process: MSP/ VMS providers come from an evolution within the contingent staffing space.   Therefore visibility into OFCCP compliance requirements, process, how internal recruiting departments measure search firms from a source, trending and cost perspective may vary depending upon the expertise solutioning this program.

Systems and Compliance: The VMS software providers are selling direct hire as a capability within the system.  This is also the system of record that an MSP will work from to provide the overall service.  The key alert to this process and systems approach is while search firm contracts and candidate submittals can be managed through a VMS, they must also be entered into an  ATS as a source and managed as a candidate.  There must be additional thought work put around – what if we use this candidate for another role, how do we notify those managing this program out of a VMS if all activities are not managed within one system.  Which reporting tool, can really quantify source and spend data?  Who is fundamentally responsible for this program, procurement or recruiting? Does the MSP work from both an ATS and a VMS to run the program?


All three groups can adequately run a search firm / direct hire management program.  However for it to be successful, understand the requirements, company policies, stakeholders and process implications to drive a solution that at the end of the day must do more than manage cost, it must keep the candidate experience in mind as well and compliance within an organization.

Tracey Friend, Consultant,   Brightfield Strategies,,


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