Are you struggling to make quality hires in 2023? You’re not alone. According to a ManpowerGroup survey, 77% of employers reported difficulty filling roles this year.
The same survey found that 37% of organisations plan to bring in more contract or temporary workers to address the skills gap they’re facing. Leveraging contingent labour instead of relying solely on permanent hires can help organisations to access talent and remain competitive. It can also bring additional benefits like shorter hiring processes and increased workforce flexibility.
But companies that want to access these benefits need to find efficient and cost-effective ways of sourcing contingent talent — like direct sourcing. In this article, we’ll share seven of the main benefits of direct sourcing, to help you decide if it’s the right solution for your organisation.
What is direct sourcing in recruiting?
Direct sourcing is a talent acquisition strategy that involves a business leveraging its own brand to source high-quality candidates for contingent or freelance roles. By bypassing middlemen like staffing and recruitment agencies, companies that opt for direct sourcing solutions retain full control over how their organisation is represented.
Direct sourcing involves sourcing candidates from two talent pools: an internal/known talent pool, and an external/unknown talent pool. An external or unknown talent pool might include candidates sourced through staffing suppliers, talent marketplaces and freelance management systems. It might also include passive candidates you have identified and targeted with an invitation to join your contingent talent network
A known or internal talent pool, on the other hand, is made up of professionals who have already engaged with your brand in some way. This might include:
- Previous employees
- Previous contractors or freelancers
- Retirees who are willing to take on occasional work
- Referrals from employees and hiring managers
- Runner-up applicants from past job searches
Each of these people is vetted and assessed, and gives their permission to have their details kept in your database of contingent candidates.
Direct vs. indirect sourcing
The opposite of direct sourcing is indirect sourcing. This is when a company sources workers through a third party like a recruitment agency or staffing firm. However, opting for a direct sourcing solution doesn’t mean that you have to do it all yourself. In fact, there are plenty of external providers (like CXC) who can work with you on your direct sourcing solution.
The difference is the way candidates are recruited. Indirect sourcing might involve an agency using its own brand to find and attract candidates. In some cases, agency workers might not even find out the name of the hiring company until later on in the process. Direct sourcing providers, on the other hand, use the power and recognisability of your brand to source, attract and recruit candidates on your behalf.
Working with a direct sourcing provider is a great solution for companies that don’t have the internal resources to manage an extensive database of on-demand talent in-house. Companies that provide this service are equipped with the tools, technology and know-how to source and attract the right talent on your behalf.
Although direct sourcing is a relatively new method of talent acquisition in the contingent workforce world, it’s common when hiring for permanent roles, where it’s known as recruitment process outsourcing (RPO). RPO is when a company outsources all or part of its recruitment process to an external company. When this type of relationship exists for contingent roles, it’s called either direct sourcing or contingent RPO.
7 benefits of direct sourcing
Considering using direct sourcing to source candidates for contingent or freelance positions? Here are some of the benefits of direct sourcing that you could see using this method.
- Decreased time to fill
Direct sourcing involves creating a ready-built network of engaged contingent talent that you can tap into whenever you need to. That means that you can bypass the headhunting stage, significantly reducing time-to-hire (T2H).
Many direct sourcing providers will also help you to simplify and streamline your compliance vetting processes, prepare for new recruits in advance and provide support for new workers.
- Cost savings vs. the traditional agency model
While working with recruiting or staffing firms can be a useful way of sourcing contingent talent, it can also be expensive. One of the biggest benefits of direct sourcing is that it cuts out the middleman, significantly reducing recruitment costs by creating a closer relationship between your organisation and the workers you need.
It also allows you to access talent that may otherwise have been lost to you, such as previous employees or contractors and past job applicants. This can result in a significantly smaller cost per hire, since you already have these candidates in your network and don’t need to source them.
Plus, working with a direct sourcing provider can help you to standardise the process of sourcing contingent workers. This helps to reduce HR costs in the long run by ensuring your processes are consistent and giving you full visibility over your contingent workforce spend — which often spirals out of control in large organisations.
- Access to a private pool of independent talent
When you use a direct sourcing solution, you have access to a unique pool of pre-vetted candidates — many of whom are already engaged with your brand. Unlike when you post a job ad on an open platform or an external job board, you won’t need to compete with other companies for their time and attention. You also won’t need to spend hours wading through responses from freelancers and contingent workers that you don’t already know will do a great job for you.
- More control over your employer brand
When you work with a recruitment agency or staffing firm, you realistically have very little control over how your brand is presented to candidates. Plus, if a candidate has a bad experience with the agency, this is likely to reflect back on you and your employer brand. One of the benefits of direct sourcing is that you’re in full control of how your brand is presented. Even when you work with an external partner, they’ll be experienced and skilled in representing their clients’ brands in the most positive and authentic way possible.
- Improved retention and loyalty
A direct sourcing solution can help you to ensure a continuous pipeline of available talent throughout the year. A direct sourcing provider can help you to improve your candidate experience and ensure that you’re providing value to the candidates in your network, even when they’re not actively working for you.
This means that you have the potential to significantly boost retention and loyalty from contingent workers. And as an added bonus, there’s no need to lose valuable talent once a project is over. A good direct sourcing strategy includes ways of keeping past workers engaged and redeploying them when another suitable project arises.
- Smoother onboarding
One of the most important benefits of direct sourcing is that it allows you to build a pool of pre-vetted contingent talent, who are already engaged with (and even loyal to) your brand. These may be past employees, people who have contracted for you in the past, or even previous job applicants who scored highly but weren’t quite right for a particular role.
This level of familiarity with your company means that you can expect a faster, more streamlined onboarding process, which can significantly shorten the time it takes to get new hires up to full productivity.
- Reactivity to market changes
Another major benefit of direct sourcing is that it allows you to build flexibility into your workforce. Building a continuous pipeline of pre-qualified talent enables you to quickly react to market changes, increasing and decreasing your workforce as required. It can also help you to quickly find and deploy niche or specialised talent.
Key success factors when using direct sourcing for contingent labour
There’s no one-size-fits-all approach to direct sourcing. Every company is different in terms of size, hiring needs and budget. And a good direct sourcing provider will work with you to define the best strategy for your company in particular.
However, there are a few key factors that play into any successful direct sourcing strategy, which you should be aware of before you enter an agreement with a provider.
- Brand leverage: The defining factor of direct sourcing is that it leverages a company’s brand to attract and engage candidates. It’s important to talk to your direct sourcing provider about how they will represent and leverage your brand.
- Workforce planning: For direct sourcing to work, you need to have a clear idea of your company’s existing talent needs and how these will evolve in the future. When you have this vision in place, you’ll be able to work with your direct sourcing provider to hire in advance of your future contingent staffing needs.
- Engagement strategy: A key part of direct sourcing is knowing how to engage your candidate pool, even while they’re not actively working for you. Companies need to develop a strategy for continuously engaging candidates. You can even automate parts of this process to save on time and cost.
- Technology: These days, there’s a wealth of talent acquisition, recruitment marketing and talent management software available, which can be deployed in direct sourcing. This technology can provide valuable analytics and make it easier to engage with candidates.
Discover CXC’s direct sourcing solutions
Even organisations with extensive contingent talent needs sometimes avoid direct sourcing because it sounds like too much work. And, while building an extensive, private pool of contingent talent doesn’t happen overnight, you don’t need to do it alone.
There are many experienced providers who can manage your direct sourcing programme for you — like CXC, for example. These companies will use your brand to identify and attract candidates, and then select, assess and vet them on your behalf. Direct sourcing providers might also offer services like secure and compliant payroll processing, as well as workforce management and compliance support.