What is the future of the recruitment industry?


There are some unusual, unpredictable, disruptive things going on.  The status quo is being challenged, our assumptions being questioned, that which we knew to be true undermined.  World order is being turned upside down.  Much of it we cannot answer, its scary, exciting, it creates opportunity.  Some people are grabbing it, some people are stood frozen, helpless, like a rabbit in the headlights.

Take retail.  The traditional model is under enormous pressure.  Look at HMV.  It has no substantial high street rival and yet it is in ruins.  We all know what happened.  Itunes.  We download our music.  Online rivals don’t have the additional costs that come with staff, utilities and town centre property.  Online, the world is your shop window.  The internet now accounts for £1 in every £10 we spend shopping.

The business press is full of its usual doom and gloom and focusing heavily on retails woes.  Yet look at the success story that is ASOS.  UK sales have risen by 59% in the last three months.  International sales at ASOS have risen 159%.  So what is it that ASOS is doing that many other retailers aren’t?    They have taken a traditional model and applied technology to deliver a better experience for customers at a better price.  It has become the “one stop fashion hub” for 15 to 25 year olds (and older!).   This month they launch a fully integrated Facebook store.  Brilliant.

I should confess here, I hate shopping.  I have about a one hour shopping tolerance, therefore online is a lifesaver for me, clearly I am biased.  In the spirit therefore of balance, lets talk Books.  I love them.  Give me a bookstore and a coffee and I am a happy man  My local Borders had a Starbucks and I had no mobile signal in the store.  I used to hide out in there.  My refuge has gone.

The kindle was Amazon’s biggest selling item in the UK last year.  My wifes 79-year-old Grandmother has one and she loves it.    We can read at the touch of a button and its brilliant.  Even for a book lover like me.

So what about the recruitment industry?  In 2007 recruitment in the UK was a £27 billion business.  In 2010 it was £19 billion.  At the same time employment levels have dropped from 72.6% to 70.3%.  Clearly we have had extremely challenging economic times and unemployment has increased significantly, but to the extent that we have lost 30% of our market?

Historically the value in a recruitment business was in its database.  That and its people.  What distinguished one recruiter from another was the calibre of candidate on its database and the ability of its people to deliver the right candidate to the client.  We protected that database as if our lives depended on it, rightly so.

Now that database is published to the world.  Facebook, Twitter, Linkedin.  The world is connected.  Our ability to filter, to cut through the noise, is still of enormous value but increasingly employers are becoming smarter at filtering for themselves.  75% of hires in investment banking are direct hires.  The CiPD evidences 72% of vacancies never make it to the public domain.  Never a truer adage not what but who you know.

What is going on here?  The times they are a changing.  The recruitment industry has not changed its model for 80 years.  Innovate or die.  It is time for revolution.

What will we look like in five years time?  Historically we were a bricks and mortar model.  Is this still necessary?  We are still a handshakes, face to face business, but increasingly we can reach an ever wider pool of talent virtually.  How will this effect the customer experience?

I have some views, too many for one blog post.  It occupies my mind virtually every waking hour.  I am taking steps, making plans to address it ( Watch this space ).  In the meantime, what is the future of the recruitment industry?  HMV or Itunes?  What will be the recruitment equivalent of ASOS?

This is an important debate for an industry that I love.  I would love to hear what you think.

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14 Comments

Filed under Recruitment

14 responses to “What is the future of the recruitment industry?

  1. Chelsie

    Hiya,
    Think you are right. This is such a key time for recruitment (agency), especially those who have hung onto their databases as their main usp for so long. Whilst social’s main strength is its accessibility to all it will also become its main weaknesss. Everybody will be chasing the same candidate. Selling the opportunity, headhunting and maintaining exclusive candidate networks will be where recruiters will make a difference. (and where they are already doing so)

  2. Judith Mallard

    I really like your writing style and of course the content is a given. Kudos.

  3. Shaun Durham

    Hi Lee,
    Interesting discussion points as always. To me, the one word that comes to mind is ‘credibility’. Because there are no barriers to entry in our industry – anyone with a broadband connection, laptop and mobile phone can start ‘recruiting’ – we need to think about how we add value in a market where candidates are no longer a scarce commodity. Recruitment has to be seen as more than a ‘sales’ play, and much more intergrated into (an outsourced?) HR function – I am thinking of succession planning and talent banking.
    It amazes me that in these days of omniprescent social media, most of our referrals are grounded in a locality and sourced through ‘real world’ networking events. Perhaps that will change when the next generation of leaders emerge.

    Shaun

  4. Mike Bath

    Hi Lee

    Another great post. Without being able to address all of your points, I’d add the following.

    There is at least one crucial difference between recruiting and retail in that the recruiter’s ‘product’ is actually a person who will have their perceptions of their experience, and for whom a recruiter can create value. My CDs & DVDs (probably) don’t give a hoot about where I buy them from, so from the product’s perception there is no differentiator between retailers. (There is for the product’s manufacturer, but that’s a different issue. ) From personal experience, there is a vast difference between the way different recruiters treat their candidates and I always felt that this was Hudson Cooper’s USP: the fact that HC people made me feel that they cared as much about my next job as I did.

    Your comment about being a handshakes, face-to-face business also made me smile as I’ve come across many recruiters who made no effort to meet me as a candidate and, in some cases, had clearly never even spoken to the client, except perhaps a brief conversation with the HR function. This brings me on to another point that many recruiters seem to miss, that is that the HR function very rarely actually make the hiring decision. A recruiter can create value for a candidate by really finding out in depth about the job spec and the likely success factors. You will rarely get this from an HR department, but are only likely to get it from talking to the actual person who will make the hiring decision. A lot of recruiters that I’ve met are not doing this.

    As a potential recruiter, you are correct in that social media and the growth of the web in general gives me perhaps more direct access to candidates than ever before. If I want to advertise for an audit manager in Wiltshire I can get someone to put an advert on our webpage that, if I use the right keywords, will bring me to the attention of anyone who types ” Wiltshire audit” into Google. What social media (or the deluge of CVs I’d get from placing that advert) doesn’t yet give me is a 3-D picture of the candidate. Even the best CVs will only tell me if a person can do the job: it is not likely to tell me if they will do the job (aptitude vs. attitude), nor whether they will fit into my team. Quite how the industry can/should respond to this last challenge I’m not sure.

    Mike

  5. Lee, a belated Happy New Year to you.

    The recruitment industry in 5 years time? I have to give his a go. Here’s my take.

    1. Traditional bricks n mortar recruitment will survive, but only in corresponding bricks n mortar industries. Owning a database will still be critical in those industries where the candidates do not produce electronic content as part of their working day. In humanspeak, this means agencies servicing blue collar work will continue to survive ‘as is’.

    2. It’s over for generalists – permanent white collar agencies will go vertical market to survive disintermediation. However, this will mean specialising yet further into micro-niches. Agents who know their mini market will still be able to trade on having a ‘book of candidates’, but only if they focus 100% on a very narrow area of specialisation – try to be more general, and they’ll be out competed by someone who knows the market better.

    3. Temp / Contract agencies will survive, but will provide value not so much as a source of candidates, but as an essential payroll / administrative 3rd party outsource. Margin will trend downwards as a consequence, and the recruitment job will be more aligned to credit control than sales.

    4. Polarisation of the industry – mega corps vs one man bands. The medium sized recruiter will either be absorbed by the big players who can provide greater efficiency savings, or be eroded by losing their talent as individual agents walk away with their assorted social networks to start up on their own.

    5. Genuine innovation will come from outside the industry – recruitment marketplaces, video interviewers, vacancy distributors & walled gardens will take significant industry share from the agencies & job boards. Take a look here for some of the players who might make it: http://wisemansay.co.uk/category/interviews/

    Anyone else got 6:?

    Keep up the good work, and best wishes all for 2011.

    Regards

    Hung

    4.

  6. garethmjones

    Hi Lee

    Great thought provoking post. To be honest, like you I have many thoughts and views, and yes too many for one post! Innovate or Die was the title of a piece i wrote for Recruiter magazine and there are numerous posts on my blog about this subject. Perhaps we should meet up and chat them through over coffee?!

    On this subject, all i can say is that the industry is not one for innovation. the signs of our extinction have been there for years but the industry, in the main, remains in denial. Not all recruiters are bad, but a huge amount are, including many of the big guys. Low barriers to entry, a totally inappropriate sales focus etc etc has led to the industry eating itself and being seen as something most corporate recruiters want to take out of their mix.

    I cant agree with Chelsie “Selling the opportunity, headhunting and maintaining exclusive candidate networks will be where recruiters will make a difference.” That’s not innovation. You cant maintain an exclusive candidate network, not now! Wake up and smell the social media coffee people!

    The good news is that organisations are always going to recruit – recruitment itself is actually getting more strategic and exciting from a professional and career perspective. The bad news is that the space for the traditional agency or search business is shrinking rapidly and it will never return.

  7. Great post Lee and very interesting.

    HMV do have an online store, but struggle to compete with competitors based in VAT free havens. They even spent a fortune creating a social network (getcloser.com) which failed miserably. They also have to cope with the biggest factor, which is that people don’t buy music anymore, they share it. An interesting comparison don’t you think? A database is to recruiters what music once was to HMV, and it’s not far behind.

    The pace of change in our industry has been fierce for the last five years, and it’s picking up further still.

  8. Hi Lee -many interesting points. As with other sectors there is a need to keep up with the pace of change and expectation in the market place, both with candidates and clients. The value of a skilled and experienced search specialist will lie not just in their networks (direct and indirect) but in their ability to carry an effective triage of the thousands of potential candidates that could be considered for any position. So a good combo of old style methodologies, combined with new techniques will be necessary.

    I would personally like to see stronger barriers of entry to the profession (like accounting) where a basic standard qualification is mandatory before any individual can set up shop. I had some shocking encounters last year with new arrivals to the sector. Will they survive? Who knows!

  9. Hi,
    I have suggested elsewhere that there needs to be more cooperation and trust: form expertise networks, work with competitors, do split-fees, issue a kite marks, support video CVs, encourage innovators, think beyond next month.
    However I wonder what % of the industry cares?
    Think of all the recruiters that only ever see the business as a short-term fix. They’re all gone by 27. How do we make it a career. Reducing emphasis on cold-calling would help.
    How can we do this?
    Finally the number of recruiters needs to reflect the amount of demand otherwise you get a feeding frenzy. I would like to see a simple barrier to entry that would stop companies taking on anyone that can steam up a mirror. A £1000 annual license fee would cut a huge chunk out of the tail. and the better Recruiters would get that back and more from the benefits it would bring.

  10. A huge thank you to you all for your comments and contributions. Much for me to take in to account. Thought provoking, insightful, intelligent. If only I could manage the same with the blog posts!

    Thank you once again, I really do appreciate it.

    Lee

  11. Yes good debate Lee well done and I suspect it isn’t over yet.
    One question I think it’s useful to start with is: “Why would a company use a Recruitment Consultant?”
    If, generally speaking, In-House consultants can do the job as well (if not better in terms of cost, control, talent pools etc!) why use an external Recruiter?
    Answers may include:
    1. Not all companies want to carry the fixed cost of In-House,
    2. Search is easier to pull off 3 rd party,
    3. The best Recruiters are really very good.
    So where does that leave us?
    The agency market shrinks, big companies will use In-House and external Recuiters are left with the rest.
    …and if that’s the case the sector will have to lose a lot of consultants and set up some way to capture what’s left of demand because the smaller companies that don’t opt for In-House will be harder to track.
    I’d be interested in your thoughts.

  12. Hi Lee.

    The recruitment industry, as it is, doesn’t have a future. But it has so much potential I could cry. For starters, imagine what a great reputation could do for an industry which still manages to pull in 19 billion with a crap one?

    A complete change in business model and a more collaborative approach would make the world of difference. The potential for new revenue streams is astounding . . . such untapped potential.

    What’s going to really give a recruitment company a future is a focus on understanding the key problems, issues and challenges faced by candidates and clients.

    Imagine having products and services available that solve each one? Recruiters must become innovators and their ideas listened to. Once they are given the freedom to be creative they can identify, create and act on opportunities to solve client and candidate problems – taking away their pain instead of adding to it.

    For the recruitment industry to have a positive future, it’s time to stand out amongst the ones that seem determined to stand still. This is an industry on the verge of greatness – if someone’s brave enough to take on the challenge.

    The recruitment industry can’t possibly survive staying as it is. Someone will stand up and insist they do things differently in their organisation. They’ll eliminate internal competition in favour of a more collaborative approach. Recruiters will become a team of innovators, always looking for where they can add value to their clients, customers and the company they work for. They’ll share knowledge openly and work as a team to create value for clients, candidates and the organisation.

    The company that’s brave enough to act now, will not only survive, but thrive and create a new future for the recruitment industry. Who knows, in the future, they may not even be called recruitment companies . . .

    Ahhh . . . that’s better, just realised I’ve been carrying that little rant around for the past 6 years. Thanks for the opportunity to share.

    • Hi Annie

      Glad to have been able to provide the release for your rant! An impassioned plea for innovation in the industry which I loved. Thank you!

      I would love to hear more about what specific ideas you might have (assuming of course I am not asking you to break any commercial confidences!). Do you have any particular suggestions that you would like to see implemented? Initiatives that would greatly benefit the customer and as a consequence the industry?

      Thanks again for joining the debate. It is I feel one that may run and run!

      Lee

  13. You are welcome Lee!

    I’d love to share specific ideas with you and your audience but it would be completely unprofessional and negligent of me to do so. A couple of reasons:

    Firstly, companies pay me thousands of dollars a year to help them come up with unique strategies focused on delivering more benefits to clients, candidates and staff while also increasing their profits. I honour that commitment wholeheartedly to keep our work confidential and give my clients a unique advantage to keep them 10 steps ahead of the competition.

    Secondly, when I work with a client, we follow a clearly defined process to identify the right strategy for that particular company. It would be remiss of me to suggest specifics without having a clear understanding of a particular company’s goals and current situation.

    There is however, merit in highlighting that recruitment companies who invest in creating their own, innovative and unique approaches to recruitment, will effectively eliminate any competition and give the rest of the industry the impetus to change.

    There is a certain reputation that comes with the old approach to recruiting so if that approach stays the same, so will the industry’s reputation. The question is, who’s brave enough to do things differently?

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