What is ‘value for money’ in recruitment?.

With Health Secretary, Jeremy Hunt’s sound bites all across the news in the recent days, the recruitment industry in the UK (outsourced not in-house) has suffered a withering attack on the perception of value and cost. 

The immediate response from industry figures was an unsurprising ‘backs against the wall’ stand-off stressing that the government is looking for a scapegoat for the burgeoning NHS spend on external recruitment fees.

Where does the truth lie in this recruitment war ground and how does a client (the NHS in this instance) view value for money from recruitment spend?

Value for money

Most clients will always use cost as a means of determining the value of a service provider but all companies have a different perception on what is good value for money.

During my first few years at Park Street People, I sourced an IT Director for a global marketing agency; the salary was £75,000 and the end fee charged was £18,750 (25%). The fee level was agreed upfront and resulted in a successful search within a fair and reasonable timeframe. To many clients who have gone through periods of driving down recruitment costs, this fee could seem high and to certain companies, exorbitant.

After three months, I contacted the client to gauge how the individual had settled in; the feedback was superb and he’d made a significant impact to the IT function already. Within 18 months, he’d saved the company well in-excess of the £18,750 fee and had become an integral part of their organisation. The client felt they had received excellent value for money and would be happy to spend a similar value again to attract a high calibre individual who’d make a genuine impact to their business.

When you look at an entire industry spend, does this change the perception of ‘value for money’ when engaging with recruiters?

The NHS’s recruitment spend

£3.3bn is an eye watering sum of money to most individuals, but how much value for money is obtained from this figure?

It is common knowledge there is a shortage of nurses and doctors in the UK. Simple economics states where supply is low and demand is high, costs will increase. Both recruiters and the individuals they supply are aware of this fact and this has driven up recruitment costs for the NHS.

There can be no doubts thatan agency nurse costing the NHS £2,200 for a 12-hour shift, and a doctor £3,700 for a 30-hour shift sounds unreasonable. However, what were the circumstances surrounding those shifts? Were they situations where the hospitals in question would’ve suffered tremendously through not having the agency workers in place? Where you are literally dealing with ‘life and death’, if those two individuals significantly assisted in the smooth running of the hospital’s operation, the argument could be shifted to say value for money was obtained.

I have a friend who works solely through agencies who supply to the NHS; she frequently works ad-hoc shifts of varying lengths but is just completing a 6 month role which is the longest singular contract she’s worked in five years. When I’ve asked her about why she works in this fashion, alongside the flexibility it affords her (she loves to travel), she stresses that financially, she’s simply much better off working through an agency as she attracts a higher value for her work than if she were a permanent member of staff. She feels she gives value for money for the services she provides and works well in partnership with the recruiters who supply her. How many other NHS workers are there who have the same opinion and don’t see the benefit of engaging in a permanent contract?

Who’s right?

Taking the above points into consideration, the answer to the ‘value for money’ question clearly lies somewhere in the middle of the arguments from either side of the warzone.

To obtain real value for money, NHS management needs to play a much stronger part in limiting the unrealistic bloating of off-framework agency spend. There needs to be meaningful dialogue between key stakeholders (NHS and agencies) to understand what are the current realistic charge levels for the supply of doctors and nurses. Off-framework spend (where costs have spiralled) is exacerbated by NHS trusts not identifying suitable workers through their framework suppliers which should be at the correct charge levels to attract suitable workers on a frequent basis.

Put in other commercial recruitment terms, this is similar to when a client has a PSL (preferred supplier list) in-effect. This group of recruiters struggle to source for a specific hire which leads to the company extending their search to a 2nd tier group of recruiters. An efficient company will respect that charges are likely to be higher than their PSL recruiters but should still be conscious of cost escalation and should have caps in-place to ensure spend still sits within budgets.

Recruiters supplying to the NHS also have to recognise the role they have in building fair and reasonable cost structures which ensure a ‘win, win’ scenario is achieved for all parties involved. Costs will always be dictated by market factors but the supply of candidates shouldn’t lead to excessive cost bloating; businesses should always manage fee negotiation taking an ethical approach constantly asking the question will my client derive genuine value from hiring this individual.

The NHS needs to recognise they need to incentivise agency workers to want to become permanent members of staff again. Whilst this will lead to higher salaries being paid, it will drive down the need for reliance on temporary staffing which in-turn will cut the demand which will limit cost increase in this area of recruitment.

What are your thoughts on ‘value for money’ in recruitment? Do you feel clients should make sure they know the fixed budgets they have to spend before they engage with a recruiter on a temporary hire?