The way the job market operates has changed dramatically over the last few decades. Once upon a time, employers filled vacancies by placing advertisements in newspapers and magazines, waiting for applications and resumes to roll in. Recruitment agencies acted as intermediaries in some cases, but they still operated under the same system. "Talent management" referred to managing employees once they were hired, and turnover was less of an issue because employees prioritized long-term, stable employment; they feared losing their jobs and having to start the job-hunting process all over again.
In the mid-1990s, online job boards were the first stone dropped into the talent pool that created a ripple effect we're still feeling today. Over time, technology came down firmly on the side of job candidates, giving them greater access to information and unprecedented connectivity. The increased exposure to opportunity and the trending decrease in unemployment has placed the onus for persuasion squarely on the shoulders of employers and recruiters.
Today's employers must often hunt for talent, not the other way around. This shift has been the catalyst for a relatively new form of hiring called direct sourcing.
What is direct sourcing?
In simplest terms, direct sourcing is a method of talent acquisition wherein a company acts as its own recruiting agency. Rather than hiring an outside agency to find candidates or placing ads and waiting for talent to come to them, companies take the initiative to actively search for qualified candidates to fill vacant positions. They do so by scouring available sources, reaching out to candidates, and doing their best to entice those candidates to throw their lot in with the company's brand.
More specifically, direct sourcing can refer to the growing practice within companies of hiring consultants, freelancers, and other members of the contingent workforce to provide skilled services for projects or contract work. Businesses may hire these workers on a one-time or recurring basis, depending on their needs. As they find candidates who fit the bill and prove themselves, the pipeline of available talent grows and feeds itself. These workers can also become ambassadors and recruiters for the brand, assuming their experience with the hiring company is a good one. When a mutually beneficial relationship is established between the two entities, it has an indirect but undeniable impact on company turnover, as we'll explore further.
Why is direct sourcing on the rise?
Direct sourcing has not only become a popular method of talent management – it has nearly become a necessity, as skill shortages are common and competition to attract the best candidates is high.
In 2018, 40% of global business leaders stated that skill shortages were restraining company growth. Budget, time, and retention are also factors, as direct sourcing can have a positive impact in all three areas by reducing recruiting time, cutting out the middleman, and thereby doing the following:
- Lowering hiring costs
- Increasing efficiency
- Reducing turnover
- Decreasing the risk of hiring mistakes
Another explanation for the exponential growth of direct sourcing is the changing mindset of the potential employees themselves. Due to a variety of economic and demographic factors – such as past recessions, current technology and the influences of social media – workers now value flexibility, upward mobility, work-life balance and greater control over their careers, rather than the stability that characterized past aspirations. This new set of priorities has been the catalyst for the booming independent workforce. As a result, savvy companies have adjusted to the new normal and positioned themselves as "clients of choice," rather than "employers of choice."
Almost all change is uncomfortable at first, but not nearly as uncomfortable as the long-term results of refusing change. As employers wrap their minds around the idea of direct sourcing, they'll find it can be a positive change for employers and workers alike. One of the common problems that a good direct sourcing solution can mitigate for a company is the age-old trouble of high turnover.
Common reasons for employee turnover
Reasons for employees to leave their jobs are almost as numerous as employees themselves. Turnover will always be a reality of doing business, but some of the reasons for exits are also areas where embracing this new talent management strategy can help.
These are four common reasons why traditional employees might leave their place of employment:
- Other companies can offer them more.
- They are burned out.
- They leave to start their own business.
- You hired the wrong person.
Let's look at how the direct sourcing of independent professionals can have a positive impact on your employee turnover rate in each of these scenarios.
Turnover reason 1: Other companies can offer them more.
Now that the job market is essentially a buyer's market – and skilled employees know it – people can afford to spend time looking over the fence. Moving up can mean moving out, and for the right offer, an employee will do so.
Money isn't the only incentive, though. According to Dan Marzullo of TINYpulse, your employees may also be lured away by "more flexible schedules, more perks, more benefits, and more of just about everything else."
Hiring from a contingent work pool can reduce this risk. Independent contractors don't work only for you. They agree to your contract terms, and depending on their area of expertise, they can work for other clients at the same time (for instance, if they're freelancers), or they're free to check the greenery of other pastures once they've completed their gig or contract with you. It's a no-lose situation for both parties, as everybody is on the same page from the outset regarding the length, scope and pay for the work. Another plus is that the pool of available independent workers is large and stable. Spend Matters' 2019 analysis of the U.S. contingent workforce estimated that it had as many as 50 million workers at the time, and that number is growing.
Turnover reason 2: Your employees are burned out.
Fifty years ago, it wasn't unusual for people to stay at their jobs for decades and retire with a pension and plaque. Longevity, stability and loyalty were the order of the day. Burnout must have been an issue back then, as people are only human, but expectations were wholly different. One kept a stiff upper lip, took it on the chin, and kept running the rat race, because one was lucky to have gainful, steady employment.
But the environment, mindset and expectations have changed. For one, with the rise of the internet, jobs have become more demanding and fast-paced, leading to faster burnout. More jobs are available and fewer people have the skills to fill them, so for candidates who have sought-after abilities and are feeling antsy, the world is their oyster. They know they can move on, so they do.
Direct sourcing from the deep well of capable independent professionals can be an answer to this problem for both the company and the employee. Contract, freelance and gig workers tend to have their fingers in several different pies, so they get to sample a greater variety of work experiences. They enjoy the flexibility, the variety, and the control they have in their careers, and you don't have to worry about them getting burned out because they don't feel stuck. [Read related article: 3 Tips for Managing Independent Professionals]
Turnover reason 3: Employees start their own businesses.
It isn't uncommon for people to begin their career at an entry-level job and work their way up so they can learn the ropes and eventually go out on their own. Entrepreneurship is high, thanks in part to the 2008 recession when unemployment was rampant, with many people forced to create their own ways of earning a living since they couldn't find typical 9-to-5 jobs. That necessity became the mother of invention, showing people that multiple sources of income, including small businesses and side gigs, can be more lucrative than one steady job. That comparatively new mindset has led to high turnover in many industries.
Why not take advantage of the trend? When competent workers venture out to peddle their own genius, they add to the growing collection of talent you can choose from for your project work. The more independent professionals out there, the better for your direct sourcing needs. Their desire to run their own show becomes the reason you hire them, instead of a reason for them to leave. They appreciate the work, you benefit from their expertise, and everybody is better for the arrangement.
Turnover reason 4: You hired the wrong person.
Unfortunately, poor hires are simply part of the deal. People may misrepresent themselves, your culture is not always a good fit, and sometimes it's nobody's fault and simply doesn't work. No matter how it plays out, the cost of a hiring misjudgment is high. The hiring and training part of the talent management process represents a significant time and money investment; turnover is the death knell of your return on that investment.
Direct sourcing can decrease the risk of hiring the wrong person, because hiring on a contractual basis for specific projects assumes that the contractor already has the skills you require. Training costs are kept to a minimum. The onboarding process is also less expensive, as benefits packages are usually reserved for permanent, full-time employees. If you do end up with somebody who doesn't quite fit the bill, you're not obligated to rehire them. On the other hand, if you bring in somebody who is truly remarkable, you can add them to your direct sourcing go-to database. Talent management becomes much easier when you have a reliable source of tried-and-true talent.
As with any form of talent acquisition, your risk of bringing on the wrong people is higher if you don't know where to find the right ones. You need to consider background, work history, credentials, and compliance issues with any hire; direct sourcing is no exception.
Plenty of services, platforms, websites, and software are available to support you as you create and implement your company's direct sourcing solution. If you do your research and leverage existing technology like that of VeriKlick, you'll be able to glean the best of what this method has to offer. You can set certain hiring and recruiting tasks to perform automatically, verify credentials, and more. Give people on your team more time to focus on other responsibilities while simplifying the hiring and recruiting processes.