Hiring: The Self-Service Lane

A new employer-owned recruitment site threatens to take business away from headhunters.
David KatzFebruary 26, 2002

The economy sputters, sending off an occasional spark into the darkness. Companies announce mass layoffs; others shut down entirely. The new economy, discredited, lies in ruins. Corporate managers desperately cut costs at every turn. A $63 billion-in-assets-company goes belly-up in the largest bankruptcy in history. Everywhere, short tempers and long faces.

Amid this chilly scene of winter, managers at several high-profile companies are out promoting an Internet portal. It’s called DirectEmployers. The question is: At this particular juncture in time, why would any sane executive be flogging, of all things, a virtual portal?

To get the answer, back up 18 months, back to mid-2000. At the time, job boards like and were buzzing with activity. Virtual trading hubs and online exchanges were cropping up almost overnight. Indeed, ventures like the airline industry’s Orbitz travel site, and Covisint, the supply-chain-management marketplace developed by DaimlerChrysler, Ford, and General Motors, began to offer models of multi-employer cooperation on the Web.

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It’s in that era, when the idea of launching a dot-com wasn’t so peculliar, that a group of employers — including IBM, Cisco Systems, and Hewlett-Packard — got the idea for DirectEmployers. Their thinking: to make hiring more technologically efficient, and hence cheaper. It seems even in the go-go days of 2000, employers were still worried about rising recruiting costs. Notes Robin Balsamo, vendor manager for staffing services at Lockheed Martin, a portal participant: “Companies are always looking to cut their cost per hire.”

Bread, Butter, Marginalize

Apparently so. In fact, DirectEmployers sponsors seem to have been so concerned about escalating agency fees and recruitment costs that they agreed to contribute $3.8 million in startup capital for the site, which launched February 19. The E-Recruiting Association, a 22-member, 501(c) nonprofit association that runs the portal, includes a fair number of large-cap, well-known companies. On that list: Abbott Labs, Bank One, Cingular Wireless, Compaq, H&R Block, IBM, Intel, Mutual of Omaha, Raytheon, Sprint, and Xerox.

According to William Warren, executive director of DirectEmployers and a former president of, membership for the site typically runs about $60,000. Backers of DirectEmployers think the site will help them align recruiting practices with the cost-cutting goals of their finance departments.

At Boston Scientific Corp., for example, the cost of going through a placement firm to hire a new employee generally ranges from $18,000 to $24,000. Boston Scientific employs about 14,000 people, and Kevin Fandel, vice president of staffing at the Natick, Massachusetts-based business, says 30 percent of the company’s new hires are placed by headhunters. Fandel believes DirectEmployers’ proprietary index of job seekers will help the company cut that figure in half.

In Boston Scientific’s current E-recruitment strategy, the employment portal sits between mass-market message boards and specialty boards, says Fandel. Those specialty boards do feature postings for senior executives. But could the site ever be used to recruit a CFO?

Well, on the day of its launch, DirectEmployers listed 168 responses to a search under that title. But most mid-career CFOs and other senior corporate executives look to headhunters as their main resources and would likely shun online searches, Fandel thinks. In a few years, however, a new generation of Web-aware executives could be using “the [online] buddy list instead of the Rolodex,” he says.

In fact, executive recruiters themselves are helping to change the mindset about E-hiring, asserts Dan Guaglianone, vice president for global recruiting at Unisys. And in truth, executive recruitment firms like Spencer Stuart and Heidrick & Struggles have developed their own sites over the past few years. To Guaglianone, that’s proof that online executive hiring is catching on. But while some of those virtual services are cheaper than their traditional services, it’s not likely that recruitment firms are going to give away the store. As one industry watcher notes, “They’re not about to marginalize their land-based businesses. That’s their bread-and-butter.”