What is direct sourcing in recruitment?

Direct sourcing in recruitment is the practice of an organisation engaging talent directly, without the need for an intermediary recruitment supplier. Direct sourcing in recruitment often refers specifically to contingent workers and requires an organisation to manage its own direct talent pool.

In this guide:

  • Direct sourcing versus direct work engagement
  • What benefits does direct sourcing offer?
  • What challenges does direct sourcing bring?
  • Fitting direct sourcing into an effective talent strategy
  • What tools do you need to manage directly sourced work engagements effectively?

Direct sourcing versus direct work engagement

The recruitment landscape is continually evolving and adapting to new workforce channels and engagement types – as highlighted in Staffing Industry Analysts' Workforce Solutions Ecosystem. Here's how to understand the differences between Direct Sourcing and Direct Work Engagement.

Direct Sourcing
This is a recruitment strategy. It refers to a directly sourced talent pool of contingent workers, freelancers and contractors that bypasses intermediaries.

Generally, the objective of a direct sourcing strategy is about centralising the route to this population of contingent workers and increasing the efficiency of engagement. Over time, the best workers are identified and re-engaged reducing time-to-hire and reducing the need to go out to more expensive staffing channels.

A direct sourcing contingent workforce program can also be managed by an organisation's main staffing company's MSP (Managed Service Provision).

Direct Work Engagement
This is a category of workforce channels. It encompasses the broader topic, and includes other engagement types, such as statement of work and independent contractors.

What benefits does direct sourcing offer?

Direct sourcing offers three main benefits:

Reduced recruitment costs
By directly re-engaging existing talent, managed in private talent pools, an organisation can reduce the cost of recruitment or staffing fees.

Reduced time-to-hire
Re-engaging existing talent reduces the time to hire significantly.

Better long term engagement
The investment in direct sourcing helps foster and create a more compelling employer brand and value proposition. This helps set the organisation up for longer term advantages in attracting the best talent, especially in areas of talent shortage.

What challenges does direct sourcing bring?

Direct sourcing, whilst an efficient and cost-effective method of resourcing, also has some challenges:

Employer brand and value proposition
Attracting and retaining external talent requires investment in employer branding and value proposition. Arguably, some of this burden is removed when working through an intermediary, who also shoulders some of the responsibility.

Increase management overhead
Direct sourcing also requires administrative and process management. When working through an intermediary recruitment or staffing agency, an organisation can be shielded from a large bulk of the admin and process management workload.

A need for tools and software
To manage direct sourcing efforts efficiently, specialist software and tools should be used. On-demand workforce management software capable of handling freelancers, independent contractors and statement of work is a must.

Fitting direct sourcing into an effective talent strategy

When introducing a direct sourcing program, it's important to remember it's not an all-or-nothing approach.

Direct sourcing is just one part of the talent management mix. Organisations will still need to, and should, use intermediated recruitment where it is more cost effective.

Managing a successful talent strategy is about blending all available workforce channels, including recruitment, staffing, contingents and direct work engagements for optimal results and business performance.

What tools do you need to manage directly sourced work engagements effectively?

To effectively manage directly sourced work engagements, there are a number of tools/resources to consider. This list is not exhaustive:

A compelling employer brand
Talent needs to want to work with you, instead of your competition.

Advertising budget and expertise
Promoting and resourcing your projects will require some advertising, especially if you're looking to resource a project where you have limited coverage in your existing talent pools.

A vetting and onboarding process
To ensure its talent pools and direct sourcing engagements are compliant, secure and expose minimal risk, an organisation should have and be able to implement vetting and onboarding processes.

As previously mentioned, direct work engagements need to form part of a blended talent strategy. Deep and insightful reporting on the cost, performance and utilisation of direct sourcing engagements is a fundamental part of understanding their role in an organisation's talent strategy.

Integration into wider HR and Procurement technology
Being able to incorporate direct sourcing engagements into a talent strategy starts with being able to connect systems. Integration between FMS, VMS and procurement/finance is key to ensure the organisation has visibility of its direct work engagements.

Easy-to-use and intuitive software
This is an underestimated factor when considering direct sourcing engagements. In most cases, the adoption and uptake of direct work engagement comes down to how easy the process (and this means software) is to work with.

Many organisations fail here by trying to incorporate or shoe-horn direct sourcing into an existing HR or procurement platform. It is import that specialist direct sourcing software is implemented in order to improve the adoption and utilisation of direct sourcing engagements, incorporating talent pools, freelancers, independent contractors and smaller statements of work.

Useful resources

When do you need a freelancer management system?

Managing your freelancer workforce can be as simple as recording names and phone numbers in your phone book. But there's a point when you need to get serious about managing your freelance and contingent workers.

The Rise of the Liquid Workforce

Gone are the days of the rigid organisational structure, today's forward thinking organisations are adopting a resourcing model that's much better at flexing and scaling.

Attracting contingent talent to your private talent pools

Freelancers, consultants and independent contractors provide a quick, cost-effective method of adding hard-to-hire skills and experience to your business. But what happens when the skills you need aren't already in your private talent pools?