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Headhunters get the ax
did not like seeing this article on CNN.Com this morning...
As companies cut back on hiring, fewer job openings are reducing the demand for recruiters.
NEW YORK (CNNMoney.com) -- In another sign of a weakening job market, headhunters are scouting out jobs -- for themselves.
Nationwide, only 3.5 million people were added to payrolls in November, vs. 4.2 million in the previous month, according to the most recent Job Opening and Labor Turnover Survey. With far fewer openings out there and companies trying to cut costs from every angle, demand for recruiters is drying up.
"The industry is facing some serious challenges," said Paul Bernard, a veteran executive coach and career management adviser who runs his own firm.
Last week, Google (GOOG, Fortune 500) announced it was laying off 100 in-house recruiters in response to its reduced rate of hiring in the current economic climate.
"Given the state of the economy, we recognized that we needed fewer people focused on hiring," Laszlo Bock, vice president of people operations, wrote in a post on the company's blog.
In most cases, a recruiter or headhunter is hired by a company to fill open positions. Recruiters are then paid a hefty hiring fee, which is typically 25% to 35% of the first-year salary of the new hire. Some companies keep recruiters on the payroll, as is the case at Google, to fill positions as they become available.
But as the job market tightens, companies are finding it harder to justify those steep costs.
"The situation is really quite bad," admitted David N. Schwartz, head of executive search firm DN Schwartz & Co in New York. "There are very, very few retained searches out there at all," he said, referring to companies paying headhunters to fill open positions.
Schwartz, who focuses primarily on the financial services sector, said that after nearly 16,000 people lost their job last year in that industry in New York alone, "no one is hiring."
Even in other industries that are still growing despite the recession, such as healthcare, more employers are relying on networking or online postings to circumvent steep recruiter fees. "The traditional avenues of hiring are completely gone," Schwartz said.
A new route for recruiters
In order to stay in business, headhunting firms are going to have to be creative, Schwartz suggested. And that means focusing less on hiring and more on other services like coaching and career development.
Paul Bernard says he has received a lot of calls recently from recruiters trying to find employment as career coaches.
But in addition to restructuring their roles to adjust to the current job market, headhunters will have to drastically cut their fees, he said, to meet other companies' cost cutting goals.
"It seems like we're working twice as hard for half as much," said Dave Sanford, the executive vice president of client services for Winter, Wyman, a staffing firm based in Waltham, Mass.
But headhunters can still play a crucial role in today's market, Sanford said. Job openings, while few and far between, now solicit thousands of responses, bombarding employers with too many choices.
"Because everybody is so hungry they're jumping on everything that's moving," Sanford said. "That excellent candidate is buried under 999 other ones."
And that's where a recruiter becomes almost a necessity, because of their ability to sift through applicants. "What we can do is really go out there with a very specific rifle shot in the marketplace," said Sanford. To top of page
As companies cut back on hiring, fewer job openings are reducing the demand for recruiters.
NEW YORK (CNNMoney.com) -- In another sign of a weakening job market, headhunters are scouting out jobs -- for themselves.
Nationwide, only 3.5 million people were added to payrolls in November, vs. 4.2 million in the previous month, according to the most recent Job Opening and Labor Turnover Survey. With far fewer openings out there and companies trying to cut costs from every angle, demand for recruiters is drying up.
"The industry is facing some serious challenges," said Paul Bernard, a veteran executive coach and career management adviser who runs his own firm.
Last week, Google (GOOG, Fortune 500) announced it was laying off 100 in-house recruiters in response to its reduced rate of hiring in the current economic climate.
"Given the state of the economy, we recognized that we needed fewer people focused on hiring," Laszlo Bock, vice president of people operations, wrote in a post on the company's blog.
In most cases, a recruiter or headhunter is hired by a company to fill open positions. Recruiters are then paid a hefty hiring fee, which is typically 25% to 35% of the first-year salary of the new hire. Some companies keep recruiters on the payroll, as is the case at Google, to fill positions as they become available.
But as the job market tightens, companies are finding it harder to justify those steep costs.
"The situation is really quite bad," admitted David N. Schwartz, head of executive search firm DN Schwartz & Co in New York. "There are very, very few retained searches out there at all," he said, referring to companies paying headhunters to fill open positions.
Schwartz, who focuses primarily on the financial services sector, said that after nearly 16,000 people lost their job last year in that industry in New York alone, "no one is hiring."
Even in other industries that are still growing despite the recession, such as healthcare, more employers are relying on networking or online postings to circumvent steep recruiter fees. "The traditional avenues of hiring are completely gone," Schwartz said.
A new route for recruiters
In order to stay in business, headhunting firms are going to have to be creative, Schwartz suggested. And that means focusing less on hiring and more on other services like coaching and career development.
Paul Bernard says he has received a lot of calls recently from recruiters trying to find employment as career coaches.
But in addition to restructuring their roles to adjust to the current job market, headhunters will have to drastically cut their fees, he said, to meet other companies' cost cutting goals.
"It seems like we're working twice as hard for half as much," said Dave Sanford, the executive vice president of client services for Winter, Wyman, a staffing firm based in Waltham, Mass.
But headhunters can still play a crucial role in today's market, Sanford said. Job openings, while few and far between, now solicit thousands of responses, bombarding employers with too many choices.
"Because everybody is so hungry they're jumping on everything that's moving," Sanford said. "That excellent candidate is buried under 999 other ones."
And that's where a recruiter becomes almost a necessity, because of their ability to sift through applicants. "What we can do is really go out there with a very specific rifle shot in the marketplace," said Sanford. To top of page
Views: 163
Replies to This Discussion
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Permalink Reply by Jeremy Hatfield on
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This makes sense! Less need for the middle man if there are no jobs to distribute. It would be smart for recruiters to diversify their knowledge and skills as much as possible until the economy turns around.
If recruiters are recruiting themselves like the article might suggest you would think recuiters have the upper hand right? We have the ultimate network and connections to the job market! Or maybe recruiters will use an alter-ego and act like the person their "recruiting" is someone else then themselves to get the job! Haha just some food for thought!
Great article, thanks John.
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Permalink Reply by Adam Peterson on
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This article brings up a great point. As companies are cutting costs across the board, they are evaluating the value proposition of paying recruiters a "hefty hiring fee." Whether it is coaching, career development, screening abilities or something else, for recruiters to get paid what their value is, it seems time to re-define to the customer population what that value is - considering that by their actions of looking elsewhere, they are questioning it.
This exact same pressure is being put on service based industries across the board that are either cutting costs (effectively admitting they were previously over priced) or re-defining their positioning and value.
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Permalink Reply by Claudia Faust on
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I'm curious - what jobs have recruiters historically migrated toward in previous slow economies? I mean, if they leave recruiting for a paycheck, where have they gone?
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Permalink Reply by Nate Fischer on
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Yes, raised my eyebrow a little this morning. . .
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Permalink Reply by John W. Riley on
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thanks for the follow up, it kind of ruined my morning when i read it on cnn.com too, but like Rochelle said above, it will come back. i am not really to worried yet since companies will always need our services.
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Permalink Reply by Maureen Sharib on
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I wrote something on this today over on ERE.
"...this may be a good time to do it if you ever thought of it before." ~ Rochelle
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Permalink Reply by Dan Nuroo on
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I have to agree with Adam, I think the ability to articulate your own personal (and your companies) value proposition is essential now days, even better when you can relate that to the business need/pain in the form of an easy solution. That said, this was an opinion formed during the tech wreck in '01, I work as an internal function now.. maybe things have changed.
John W. Riley said:thanks for the follow up, it kind of ruined my morning when i read it on cnn.com too, but like Rochelle said above, it will come back. i am not really to worried yet since companies will always need our services.
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Permalink Reply by Sarah Fraser on
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Yes, I agree, recruiters will find some other form of sales roles to get into.
With all due respect to recruiters they are not HR professionals they are sales agents. Many businesses find them an annoying third party anyway.
I have tried several of them to fill junior accounting roles and 95% of the candidates sent to me from the recruiter have not been suitable. Even if we weren't in a tough economic time it's best for companies to hire without them anyway.
Tell me this. How possibly can a recruiter know what a company is looking for in a candidate? They have no idea of organizations best interests and are simply looking for commission.
Some companies get sucked in to their sales pitch of how it saves time and money which is total rubbish and most employers know this.
That is my opinion from an employer’s perspective. I have many friends looking for work that have even less respect for this industry.
Sarah
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Interesting point of view Sarah, whilst some of it is tough to argue with, there are some points, I would like to cover... firstly, I feel you are only talking about Third Party Recruiters, correct? but I could be wrong.
"With all due respect to recruiters they are not HR professionals they are sales agents." and this is a bad thing? I am an internal recruiter, I have been an agency Recruiter... and yet I still maintain that what I do is sales.... My job is to make money for my organisation... I think that is everyone's responsibility isn't it? I sell my company to the world, I may not sell my products but I sell the vision of the company to interested parties. HR may have all the warm and fuzzies in the organisation, yet they still have to sell the vision, the direction and the policies to the people of the company, maybe we should call it internal sales huh? I also sense a higher pedastal for HR professionals in your conscientiousness.. why? What is so special about an HR professional? In my world.. Recruitment sits in between HR and Sales, and we now have our own part on the org chart and Management team.
"Many businesses find them an annoying third party anyway." TRUE. but so what... I find it annoying doing my taxes, going to the dentist or even grocery shopping.. but you have to do them.
"I have tried several of them to fill junior accounting roles and 95% of the candidates sent to me from the recruiter have not been suitable. Even if we weren't in a tough economic time it's best for companies to hire without them anyway." = I can't argue with that, without that I have no job... but I warn you, there are differences between an HR person and an HR person who wants to Recruit, sure you can post an ad and process the response, however finding that candidate, and then closing that candidate really does need a different skill set.
"Tell me this. How possibly can a recruiter know what a company is looking for in a candidate? They have no idea of organizations best interests and are simply looking for commission." - Really? A detailed job brief for one... a skilled Recruiter can ask the right questions to ensure they aren't working solely off a job order or position description, ie tough to define culture in a job description, but a cultural fit has to be one of the biggest reasons for making a hire. Organisational best interests, goes 2 ways.. sure there is a commission focus, but hey, if the client dies.. so does the recruiter.
"Some companies get sucked in to their sales pitch of how it saves time and money which is total rubbish and most employers know this." - I always loved this... most HR Professionals I know hate Recruiting with a passion.. would rather put their head in an oven than Recruit. Would prefer to be writing policies on chewing gum in the office than dealing with external people trying to get into your company. Recruiting then takes a back seat to afore mentioned policy and takes longer and longer.. Everything cost money, your time, HR's time etc, sifting through 1400 resumes for a junior accounting role would take forever.. costly... but hey each their own.
"That is my opinion from an employer’s perspective. I have many friends looking for work that have even less respect for this industry." = From my employers opinion, (and trust me, my CEO dislikes TPRs with the best of them) I know this.. there are less than reputable people in every industry, and there are heaps in this.. I have met and heard the legend of many... however, when someone has been out of work for a while, cannot get the responses from applying to job boards, I'm sure they will find a way to find some love for that Recruiter who finds them that role or employs them directly. A defined value proposition, if delivered... works wonders.
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Permalink Reply by Michael Saulnier on
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Claudia Faust said:I'm curious - what jobs have recruiters historically migrated toward in previous slow economies? I mean, if they leave recruiting for a paycheck, where have they gone?
In the dot-com implosion around 2000 - 2001, many went into the "hot" areas... mortgage lending, real estate sales, and other sales roles...
This economy doesn't have as many "hot" areas.
Michael
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staffUP partners have the benefit of our model which provides them with 90% of the profits generated on the placements they make... with only three active contractors on billing... assuming a staffUP partner developed the order and filled it... they would make over $6,000 a month if the average pay / bill was only $40/60. If they can get just 5 people on billing they make $10,000 a month... every month their contractors are on an engagement.
In high demand areas like ERP development or Medical IT consulting... the profits can be double this.
With just 5 contractors on billing at $80 / 120... we would be sending them over $20k per month.
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Then, when the market finally starts to improve, we have incredible upside. Anyone getting 50 contractors on billing as a staffUP partner will enjoy over a million dollars per year.
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Michael Saulnier
staffUP
877-482-8777
staffUP @staffUP.com
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