Coming out of recession: Will the recruitment industry change?

[Paul Jacobs]

It has been a tough year for the recruitment industry. I've seen some of my colleagues and members of this community close their businesses down, drop their hours, lose their jobs or change industries. Many corporate recruiters shifted across to other HR roles. I've seen recruitment agencies unbundle their recruitment services and drop their fees, offer flat rates, and increase their guarantee periods. Some of the cowboys have left the industry. Many companies have thought about where costs can be saved and re-evaluated their recruitment and advertising approaches.

OK, things appear to be getting rosier, and many companies are looking to the hiring side of the equation again. Are we going to see the recruitment industry advance / change or go back to how things used to be? (not implying it was all negative, there were positive things).
Will agencies raise fees and re-bundle the unbundled - and will the market be OK with that?

Will YOU be doing anything differently in your agency, company, career or choices as a result of the recession?

[Kevin Chappell]

A very interesting subject.... After nearly 30 years in the industry, this has been by far the sharpest and deepest and we have seen some top brands mortally wounded or reduced to a shadow of their former selves. I have heard that some of the internationals were considering leaving our shores. A 40-60% reduction creates casualties. As mentioned, the positive is that many of the cowboys (and cowgirls...) have gone. Going back to how things were? I hope we don't. As an industry, we should be embarassed as to how we have operated (very little work for incredibly high fees), and this is the opportunity to advance in a professional and fair way, and create a service that is valued - and that means doing it differently around process, charges, and who we employ as an industry. The problem that many have had with unbundling is that it exposes us for what we really do, and how unimaginative we have been in that that is all we can do. A potentially new client said to me the other day that their new preferred rate was 15% from a number of suppliers (internationals I might add...), and after spluttering into my coffee, I suggested that if they (a large Government entity) were paying more than 7-10% or thereabouts, or a comparative flat fee, then they were being ripped off. So if you are those suppliers and have had that call recently, blame me!

Doing things differently? We already are and have been for some time. We ensure we engage highly experienced people (ten years plus), offer more than just "recruitment", be innovative, and charge much much lower fees than those we consider our competitors.

This is not meant to be self-promoting Paul, but you did ask if we are doing anything differently! We are, and will continue to do so.

[Chris Story]

Hi Kevin, I agree with a lot of what you have said and I too hope we dont want to go back to the days of the "OK Corral" (although I think we may in some sectors).

I must say though I get a little bit annoyed with other recruitment companies telling their and our clients what is a fair rate or fee. I value the service I provide (as do my clients) so charging 15% (or more) sits well with me based on the work I know me and my team put in. A client should be able to assess whether they are getting value for money from their recruitment partners.

Hiring experienced consultants, being innovative and offering more than "recruitment".......and you want to charge less??

Maybe we will agree to disagree....but I wish you luck all the same.

Cheers

[Kevin Chappell]

Hi Chris,

One of the issues we face is that we have not added value and that is why we are faced with change or extinction. It's not about being cheap, it's about charging what is reasonable - and fair. Experienced consultants will get the "job" done much faster and more effectively, so the reality is less time, less cost. The funny thing is that everyone is discounting to get business. All we are doing is laying it on the table that this is how it really is going to be and that it is unlikely that we will go back to the "good old days" - clients are too savvy for that now.

Good luck on getting your 15% or more, but I'd say categorically that these days are numbered.

[Chris Story]

Hi Kevin

I love a challenge.......I will come back to you in 12 months and let you know how I have got on. We may work in different markets (we are very specialised) so I feel my optimism is still quite realistic based on the skills-short market I operate in. Maybe the "loser" buys lunch =)

As you rightly say, adding value is the key. Those who do will prosper, those who dont, well, lets just wish them good luck (and good-bye).

All the best

[Andrew McNaught]

I think this year has made me look at what I'm worth to an organisation. In the past certain recruiters actions were overlooked as they were billing a lot and clients were desperate to get good candidates at any rate. The market was hyped with clients being told they had to "act now" to avoid losing candidates. Agency rates and starting salaries were negotiated with the fee in mind. Round pegs were being forced into square holes with recruiter pressuring people into hiring on 50/50 decisions.

How do I know? During the downtime this year I've been surveying my clients and asking about the best and worst service they have had, the results have been dissapointing for the industry ...sometimes even hilarious.

I think a solid, thorough recruitment process based on a long term business relationship does not need to be discounted in price. As long as the service is consistent, reliable and delivers.

[David Palmer]

I think it will have to change fundamentally.

The single biggest problem is the perceived lack of value for money. Clients often resent the Fees being charged for what looks like a simple CV database search. Fees often seem randomly derived. Why is it 18% .
They go along with it because there is no agency market alternative but it does store up resentment.

So what should happen?

If you have a “special relationship” with your client, great you’ve probably earned it, you can agree Terms as you like.
If on the other hand you are speculatively filling roles on an ad hoc basis you should charge the market rate. It might be 15%,10% or 8%; market rates move all the time. So how do we find the market-rate? One that all parties are agreed is fair?
Well I would suggest you need a market mechanism through which speculative recruitment is delivered. Shares are traded daily at market rates determined by the stock exchange which responds to levels of supply and demand.

www.vacancy-clearing.com is designed to do the same for the recruitment sector.

Employers advertise their Job Vacancies and publish an Offered Fee
Agencies submit suitable CVs to earn the Offered Fee.

If the Fee Offered is too low, CV traffic will be low.
If the Fee Offered is increased CV traffic will increase.

Once you have reached an optimum market price, everyone’s happy.

[Ross Clennett]

Unless recruiters offer excellent value-for-money then clients will be motivated to invest in creating their own internal recruitment capability. The decreased cost of such recruitment tools as CRM's, profiling tools, and candidate sourcing through social media as well as the increased effectiveness of such tools means that recruitment agencies will have to be more niched and more innovative to stay ahead of the game.

The bar has been raised and will continue to be raised higher and faster. The recruitment agencies who operate on the 20th century recruitment agency business model won't be making sufficient profits for much longer.

[Max Armbruster]

I think that the biggest change that is happening is not the economy, which will continue its up and down cycles, but rather the explosion of social networking and other online screening tools that will help to enhance the relationship between job-seekers and potential employers. Videos, online referrals, online tests, and more and more self-selection...

That results in cheaper and better recruitment hopefully, and the recruiter that will remain on top are the ones that are going the extra mile in making their candidates "earn it."

[Kunal Malhotra]

It has indeed been a different year... tough I don't know? but different definitely... I agree with some of the commentary below that having unbundled our services (whether internal or external) we've realised how much value we actually add... and for a lot of recruiters I have come across in my career so far ... I'm afraid to say that they don't add much... they are mostly the ones who don't stay in the industry too long...

I think to advance in any industry you first need to take stock of the learnings since inception... make them as fundamentals and then measure your advancement from there... I'm not sure if you'd agree but a lot of recruiters don't even know where/what these fundamentals are... one question I ask is why is the threshold to get into our industry so low? shouldn't there be some structured learning before an individual can get to call themselves a "recruiter"?

[Paul Jacobs]

The discussion in Bill Boorman's inaugural online Australasian radio show is of relevance to this thread. Listen to the recording below.