Most companies hire an agency for the wrong reason. They’re tired, a role has been open for two months, and someone says, “let’s just get a recruiter on it.” Sometimes that’s the right call. Often, it’s an expensive way to avoid looking at what’s actually broken.
Here’s how to tell which one you are.
An agency fixes one kind of problem, and it’s usually not the one you have.
Hiring breaks in four places: not enough of the right people know about the role, you can’t tell who’s good, you can’t close the people you like, or nobody has time to run the process.
An agency is strong at the first and fourth. It can reach people who aren’t browsing job boards, and it takes the work off your team. It does very little for the second and third. If your interviews are inconsistent or your offers keep getting declined, an agency will just feed candidates into the same leaky process faster.
Run a three-week test before you pay anyone.
Post the role properly. Not a copy-pasted JD, a real description with the pay range and what the first six months look like. Ask your team for referrals. Then count.
If you get a handful of qualified people and lose them in your own process (slow feedback, five interview rounds, a manager who ghosts), you don’t have a sourcing problem. Fix that first. If you get almost nobody qualified, or the right people simply aren’t on the market, that’s a real signal that outside help might pay off.
The hidden cost is your hiring manager’s calendar.
Cost per hire gets quoted a lot, but the number is slippery. SHRM’s data puts the median cost per hire at $1,200 for non-executive roles and $10,625 for executive roles, with executive costs up 113% since 2017. Two caveats: it’s a US survey of HR professionals, and these are medians, so they’re pulled down by cheap hires like referrals. Treat it as a direction, not a quote for your market.
What the number doesn’t show is the time your senior people spend screening, interviewing and chasing. That time is real money, and it’s the part most companies never count when they decide an agency is “too expensive.”
Scenarios where an agency will help.
Agencies make sense in a few specific situations:
- The person isn’t looking: Strong senior candidates are mostly employed and happy enough. Someone has to call them.
- The search is confidential: You’re replacing someone who doesn’t know yet, or entering a new market quietly.
- You’re hiring somewhere you have no network: A new city, a new country, a function you’ve never built.
- You have a spike: Ten hires in a quarter and no recruiter on payroll.
They make little sense for high-volume roles with obvious talent pools, or when your own team already knows five people who’d be perfect.
Contingency firms work the easy roles first.
This is the part people rarely say plainly. A contingency firm only gets paid if you hire through them, and they’re usually working many clients at once. So they naturally put their hours into roles that are quick to fill. Yours gets attention if it looks easy and a pile of CVs if it doesn’t.
A retained firm gets paid for the work, not just the outcome, so they can afford to spend weeks on a hard search. The trade-off is you pay before you know it will land. Retained generally suits senior or hard-to-find roles. Contingency suits roles with a decent pool where speed matters. Neither is better in general. They’re built for different jobs.
The options people forget.
An agency isn’t the only outside help:
- A freelance recruiter on a project basis. Cheaper and more flexible, but quality swings wildly, so ask for names of recent clients.
- A fractional head of hiring for a few months to build the process, then hand it to your team. Good when the real gap is know-how.
- Recruitment process outsourcing for steady, high-volume hiring, where an outside team runs the whole pipeline.
- An in-house recruiter, which makes sense once you’re hiring steadily all year instead of short bursts.
Five questions that expose a weak agency.
- Who exactly will work on my role, and how many other searches do they carry?
- How fast do you send the first profiles? (Candidates within a day usually come from a database you could search yourself.)
- What happens if the hire leaves in six months?
- Do you speak to every candidate before presenting them, or forward CVs?
- What are the terms if I find someone through my own network during your search?
Get the answers in writing. Vague answers now become arguments later.
