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Headhunting goes in-house as firms cut costs

Stymied by a slowdown, both at home and abroad, companies are evolving new strategies to stay afloat and slash expenses.

business Updated: Feb 07, 2013 21:55 IST
Himani Chandna Gurtoo
Himani Chandna Gurtoo
Hindustan Times

Stymied by a slowdown, both at home and abroad, companies are evolving new strategies to stay afloat and slash expenses.

Instead of hiring headhunters from outside, firms ranging from rugged shoe maker Woodland to Internet gear giant Cisco India and software service firm Wipro are turning to in-house executives and those hired from leading global consultancies such as Heidrick & Struggles, Kelly services, Hewitt Associates, Randstad Holding, to recruit talent. This saves them from hefty commissions and fees they have to pay when there are company-to-company partnerships.

The trend, which is a common practice among global biggies including Coca Cola, Pfizer, Google, Microsoft and others, is fast gaining popularity domestically as well.

“Due to the increasing cost pressures and deadlines, most leadership decisions are moving in-house. By adopting such a practice, companies avoid about 30% of the fees paid to consultancies per hiring,” said S. Varadarajan, executive-president, human resources, at Tata Teleservices.

Sample this: A consultancy asked to fill a strategic position, mainly at levels below top C-suite jobs, may earn over Rs 1 crore by filling four such positions. “The salary paid at such levels will be around Rs 80 lakh-Rs 1 crore, where the consultant will charge around 25% of salary — the company loses Rs 25 lakh in one go. The sum could be saved by appointing salaried staff,” said Varadarajan.

The movement from consultancy firms to clients is around seven-fold more in India than the global average, according to estimates by Kelly Services, a US-based staffing solutions provider. While the permanent recruitment industry in India is estimated at Rs 3,000 crore, the search industry commands a market size of Rs 600-700 crore.

Woodland India is building its own internal recruitment staff by selecting 35% of staff from global consultancies.

“Earlier, over 75% of hiring happened through consultancies, mainly to catch executives heading operations abroad,” said Sreekanth K Arimanithaya, chief human resources officer, Britannia Industries. “Today, the same 75% is handled by internal teams to save cost and time.”

However, the task replacing chief executives or board members is still being assigned to leading search firms. “We use outside recruiters but only when they are absolutely required-for confidential searches or extremely specialised jobs,” said Amol Dhillon, vice-president, strategy and planning, Woodland India.

Consultancies, however, are not complaining.

Headhunters are now scaling down their charges as they face a crunch. Against the earlier practice of charging the traditional a third or a quarter of a candidate’s first-year salary, some recruiters are charging 15% or less, dropping extra administrative and reimbursement charges they once commanded, or are accepting fixed payments.