Scaling a Talent Acquisition Team in 2023 (and the risks)

Building an in-house TA team in 2023

What should we keep in consideration when scaling a TA team and what options do you have when confronting hiring peaks and drops that are so common in Tech and Startup world? 

And finally, how do we still hit our steep hiring targets with limited Talent Acquisition Headcount?

Throughout the recent economic boom, companies have been competing for talent in an environment of widespread candidate shortages and record low levels of unemployment. These trends have also been reflected in the job market for recruiters, in some cases, even more dramatically so. This hiring challenge is seemingly different from some others though, as recruiters are widely regarded as one of the most difficult professionals to recruit.

Following a drop in the number of jobs available during the pandemic, demand for recruitment talent bounced back very quickly – exceeding pre-pandemic levels by April 2021. Interestingly, factors such as job security have become more important during these ‘boom’ years as well – by 21% according to LinkedIn. Making it even more important for hiring companies to demonstrate a long-term commitment to their employees.

From the employer’s perspective, the pace of growth has made it more difficult to hire new (less experienced) recruiters that require a lot of training before they are “fully up and running”.

When looking to build an in-house TA team, companies are more often competing for experienced recruiters, whose compensation expectations have also gone up in a tight market. However, even in the case of these experienced professionals, it takes time for them to fully understand the culture and to become effective ambassadors for a company.

The optimal team size

The other factor that should be taken into consideration when hiring new employees, including Talent Acquisition, is the decreasing returns to the business as the size of teams grows.

There is enough research to suggest that small teams are more efficient. In fact, some of that research specifically points to 4.6 people as the optimal size for a team, largely because of the relational power in the connections between them.

Whether that number is accurate or not, the underlying logic is clear: the more people on a team, the greater the number of connections that must be maintained. A startup with 7 people has 21 connection points to maintain. With 12 people, the number of connections rises to 66.

The larger the number of connections, the more complicated decision-making becomes. Furthermore, the larger a team grows, the greater the risk of ‘social loafing’. This is a phenomenon defined by the fact that individuals will generally contribute less effort in groups, the larger those groups are.

For teams that are fundamental to the business, particularly teams that generate direct revenue, these potential risks may be worthwhile. In Talent Acquisition, where effective outsourcing options are widely available, the more intelligent strategy has proven to be:

Building a smaller, but highly-skilled internal Talent Acquisition team and pairing them with the right technology tools and external services.

“The more cost effective and less risky strategy for 2022:
Build smaller, but highly-skilled internal Talent Acquisition teams and pair them with the right technology tools and external services”

This is especially true, given the risks associated with the volatile staffing needs of startups and other quickly-growing companies.

We have worked with startups that “needed to hire 100 Tech and Product professionals within the next 6 months”. Who then, out of the blue, had to pull the plug a few months later because of unforeseen reasons or pressure from investors. Leaving them with a large Talent Acquisition team that has very few roles to fill.

The Downsize Risks

For companies who have paid a premium to expand their talent acquisition headcount, there may be a secondary cost if it becomes necessary to downsize those teams.

Apart from having to put former employees through emotional and financial difficult times, the direct costs may include severance packages and employee buyouts, and costs associated with legal counsel. But there are other implications that may extend far beyond the direct financial impacts and can affect a company for a long time.

There are many hidden costs to downsizing.

When a company chooses to layoff staff as the first response to economic headwinds, it can send the message to employees that they are dispensable, and of minimal value to the company.

For the remaining staff, there may be a significant impact on morale and productivity, and their level of commitment to the company (they will also read the negative comments on social media). Also, the remaining staff are at risk of overwork and burnout as they have to take on the responsibilities left by their laid off colleagues.

Today, companies compete in an environment of transparency with respect to the way they treat employees. With several websites gathering reviews from employees and candidates, a company’s employer brand can be damaged for years by decisions to cut staff as the first response to uncertainty.

This is also why some of the most successful companies around the world seek alternatives to layoffs.

“Today, companies compete in an environment of transparency with respect to the way they treat employees.”

This is not to suggest that trimming headcount is never the correct decision to reduce costs. It certainly can be in some circumstances. Given the potential negative impacts, however, it makes little sense to run these risks in functions that do not generate direct revenue.

Confronting steep hiring targets with limited TA headcount.

Talent Acquisition leaders are often faced with steep hiring targets, whilst the available Talent Acquisition headcount is limited. Although challenging, a smaller TA team also has it’s benefits.

Leveraging the efforts of a small, experienced Talent Acquisition team with the right outsourcing and technology choices can produce results that are just as good, and frequently better than increasing the size of that internal recruitment team.

When it comes to outsourcing there are several options. Apart from the classic “recruitment agency model”, in which you can outsource the candidate sourcing and guidance for a placement fee, there are 2 other models that more and more companies are adopting:

• Outsource the complete hiring process of specific positions

One well-established and commonplace approach is to outsource part or all of the recruitment process. Whether this is done in a project-based transactional manner, or a full RPO solution, the right partner can increase the productivity of a company’s internal staff, freeing them to focus on higher-value work for the company.

• Outsource only certain parts of the hiring process

Rather than outsourcing the complete hiring process of certain job positions, you can choose to externalise specific steps of your hiring process.

It would be recommendable to look at the steps that are most specialised and/or time-consuming. The idea is to free up your “smaller” in-house TA team and get them to focus on where they add the most value (managing candidates and hiring managers towards hires).

One of the most common steps to externalise is candidate pipeline building. Sourcing candidates and building top-of-the-funnel pipelines are not only time-consuming, but it is also a practice that many senior Talent Acquisition specialists do not see as an interesting part of their daily job.

Sourcing candidates, and nurturing and building relationships with those candidates, takes a great deal of time and attention on an ongoing basis.

An external partner company that focuses on this as its core business allows you to scale up your hiring without having to increase the Talent Acquisition headcount (and avoid the risk of possible future downsizing).

In short, working with an effective external partner to build and maintain candidate pipelines can help a business reduce costs and mitigate the risks associated with growing internal teams, while still maintaining a highly competitive position in the market for talent.

… Especially in Talent Acquisition

As outlined above, competition for recruitment talent has been fierce. Experienced Talent Acquisition staff have been costly and difficult to secure, and it has been difficult, if not impossible, for rapidly-growing companies to invest the time required in onboarding and training inexperienced recruiters.

The decision to outsource time-consuming aspects of their recruitment function has allowed companies to avoid these costs and complexities.

“Competition for recruitment talent has been fierce. Experienced Talent Acquisition staff have been costly and difficult to secure.”

The reverse trend is an important consideration in mid-2022, as an increasing number of signs are pointing to a global recession on the horizon. Companies – disproportionately those in the tech sector – are laying off staff and retracting offers extended to new hires to mitigate their exposure. With fewer positions to fill, if any at all, these companies are looking at their talent acquisition teams as one of the logical first targets for layoffs.

The direct financial costs to these companies may be significant. Moreover, as mentioned above, experienced and skilled recruiters are placing a higher value on job security and stability. For companies forced to downsize, it will be difficult to rebuild that perception.

Final Thoughts 

Global economic trends can shift quickly in either direction and along with the changes in the market for all kinds of talent – including recruitment staff.

A growing business must remain agile as it staffs up to respond to favourable market conditions, and protect itself from the risks associated with letting go off staff in downturns.

Sometimes we tend to forget to look at the long-term risks of building a large Talent Acquisition team. Recent months have shown that the sky is not always the limit when it comes to scaling startup teams. Not even for the well-funded ones.

More and more startup companies state that for them a sensible business strategy is to hire a small team of experienced TA specialists and leverage their efforts with the right tools and external partners.

Claude Loeffen – Director at Nederlia