What is Direct Sourcing?

While attracting and retaining top talent has always been a cornerstone of successful business, the way that companies are connecting with workers is changing. The COVID-19 pandemic, coupled with a fragile business landscape and rising unemployment, has exacerbated the need for contingent workers. This has led to a shift away from traditional recruitment methods, with companies utilizing direct sourcing as a means of quickly filling vacant roles. 

Key Takeaways

1. Direct sourcing is the process by which an employer develops its own candidate pool to leverage contract, casual, or freelance workers — known as contingent workers. 

2. 90% of HR professionals anticipate that their company’s contingent workforces will grow or remain the same size in the next three years. 

3.  Direct sourcing often results in cost reductions, faster hiring, and the ability for companies to engage with proven talent.

4. The top direct sourcing solutions include Managed Direct Sourcing, Freelance Management Systems, Talent Marketplace, and Talent Network. 

5. Alternatives to direct sourcing include external recruitment, employment agencies, and active sourcing on job boards and social media.  

In recent findings published by the HR Research Institute, 90% of HR professionals anticipate that their company’s contingent workforces will grow or remain the same size in the next three years. In addition to these findings, many employees are choosing to prioritize flexibility over stability, opting for project work rather than long-term service with a single organization. Consequently, it’s hardly surprising that direct sourcing – or hiring from pre-screened talent pools – has grown as an alternative to traditional recruiting and staffing methods.

Direct sourcing meaning: What is direct sourcing? 

As a concept, direct sourcing has existed for as long as companies have hired people. It is the process by which an employer develops its own candidate pool to leverage contract, casual, or freelance workers (otherwise known as contingent workers).

For more information on contingent workers check out What’s the Difference Between Employees and Independent Contractors?

Direct sourcing, which is occasionally referred to as “self-sourcing” in the recruitment industry, can help to remove a company’s reliance on third-party staffing and recruitment agencies. This often results in cost reductions, faster hiring, and the ability to engage with proven talent. 

Direct sourcing allows a company to save time and costs by filling its vacancies with contingent workers. These workers can include past contingent workers, manager referrals, silver medalist candidates (worthy applicants who just missed the mark on a previous job posting), returning retirees, and boomerang employees (those who return to work on a contingency basis for a company they have previously left).  

One caveat regarding direct sourcing: While it is simple in concept, effective direct sourcing is often more complex, and involves a combination of organizational readiness, technology, and program management. For companies that wish to take advantage of direct sourcing, they should consider how to use it as part of a wider recruitment strategy, and take the necessary time to build and maintain their talent pool. 

What are the benefits of direct sourcing?

There are significant benefits to be gained from direct sourcing your contingent workers. Here are five of the key advantages that direct sourcing can provide your business: 

  • Direct sourcing offers major cost savings associated with contingent workers
  • Cost savings are regarded by many companies as one of the most significant benefits of any direct sourcing strategy. Direct Sourcing offers greater flexibility during the talent acquisition process, thus making it simpler for companies to bring recruitment functions in-house. This form of in-house recruitment also makes compliance processes run more effectively, which can result in short-term and long-term cost savings. 
  • Direct sourcing streamlines the hiring process
  • By sourcing from a readymade pool of talent, workers can be engaged quickly and easily, on an “as-needed” basis. This helps companies to speed up hiring, which means that new talent can perform their roles with increased productivity and minimal downtime. Compare this to the typical restrictions of a staffing agency – such as the time it takes to create job descriptions and interview qualified candidates – and it’s easy to see the appeal of a direct sourcing method. 
  • Direct sourcing ensures you connect with proven candidates
  • Talent pools that are already engaged with your organization deliver a dependable pipeline of skilled, pre-vetted, and proven workers. Additionally, when a company has a pre-screened pool of vetted talent, they’re able to turn to personnel that they trust; whom they know can get the job done.
  • Direct sourcing helps you form better relationships with top talent
  • Direct sourcing allows companies to foster stronger relationships with top talent who work for them on a contingent basis. Companies can also rate the performance of candidates and quickly identify the strongest contingent workers within their talent pool. This enables them to keep top talent engaged between projects – so that they can more easily encourage workers to return once an opportunity arises.

The top four direct sourcing solutions

Before a company can implement direct sourcing solutions, they need to establish which method is best for their business. Here are several direct sourcing solutions for a company to consider:

  • Managed Direct Sourcing
  • This direct sourcing solution refers to the use of third-party staffing suppliers such as recruitment agencies and PEOs (Professional Employer Organizations). Managed Direct Sourcing enables you to grow and engage your branded talent pools as a managed service, filling your contingent job requisitions with qualified candidates on-demand. 
  • Freelance Management Systems 
  • Due to the influx of people choosing to work freelance, there are now many platforms using technology to help you manage your direct sourcing. These platforms – including WorkMarket and Shortlist – provide robust solutions that take care of storing talent, posting projects, filling the projects, managing your onboarding, and invoicing. 
  • Talent Marketplace
  • The gig economy has created a worldwide marketplace of workers with specific skills for hire. In addition to B2C talent marketplaces like Toptal, law firms and other professional services groups, academia, and R&D units often have informal talent marketplaces. This is where senior professionals can connect with the best junior employees and vice versa. There are also formal talent marketplaces that develop around functional areas or managerial roles. Large companies with a formal talent marketplace include Facebook, IBM, and American Express. 
  • Talent Network
    A talent network is much the same as a talent pool or talent community or talent pool: A group of candidates who have engaged in the process of finding work with your organization. The key characteristic of a talent network is that it consists of people you already know. These types of direct sourcing solutions can be private (i.e. a Hiring Manager) or open to the company as a whole. 

What are the alternatives to direct sourcing?

While direct sourcing has seen a spike in popularity, there remains a host of alternatives for companies to choose from. These include:

  • Referrals 
  • This is one of the first places that employers should be looking for new talent. Referrals tend to be more satisfied with their work and are also likely to stay with a company for longer. Referrals can also save a company money by removing the need to advertise for positions and hire multiple employees.  
  • External recruitment
  • External sources of of recruitment must be solicited from outside a company. When using external recruitment sources, businesses can use a recruiter’s specialized skills and large candidate pool to make finding external applicants easier. An external recruiter finds new candidates by advertising positions on job boards, websites, social media, or through referrals.
  • Employment agencies
  • These organizations are run by private networks to supply the required manpower for relevant positions. An Employment Agency registers a job seeker (who becomes their client) then contacts work sites with available positions to refer the job seeker for the role
  • Internal ATS systems
  • Companies should focus on specific candidates who have declined previous offers. ‘Silver medalists’ could also fall into this category. An Applicant Tracking System (ATS) helps companies to single out top talent, all while staying abreast of technology changes and allowing different departments to stay connected. 
  • Job boards
  • These candidates are less likely to be a “perfect fit”, although hiring managers may be surprised at how qualified many candidates are. That’s why companies should never discount the value of sponsored job ads or people applying directly to a position. Though the ideal candidate may already be employed elsewhere, they could still be willing to look elsewhere (i.e. an online job board) if the right opportunity presents itself. 
  • Active sourcing
  • This could be through platforms like LinkedIn, Facebook, or Twitter; allowing companies to engage passive candidates and get them interested in a role. Social media channels enable companies to share targeted job content and details about their organization. They also provide a means to share mission statements and hiring processes that help to keep candidates engaged.

Conclusion 

Direct sourcing is defined by companies leveraging their own brand and network to attract and engage contingent workers. That is, they create a talent pool of candidates for temporary positions that arise at their company.

Direct sourcing is an effective way for companies to expand their talent pool and quickly access contingent workers. More recently, direct sourcing has emerged as a viable (and often preferred) alternative to traditional forms of staffing and recruitment. 

There are many factors that make direct sourcing an attractive proposition for employers. These factors include cost savings, quicker time to fill positions, and the ability to maintain talent pools that are filled with available, pre-screened candidates. 

As the only PEO with a dedicated, in-house recruitment team, New Horizons recruits professionals across all verticals. We implement direct sourcing for all our ongoing clients, enabling them to connect with the world’s top talent and establish their compliant operations internationally.

Request a Proposal