Why ‘agency recruitment’ is totally screwed

The recruitment agency business model is grotesquely dysfunctional.

It is broken.

Yes. It. Is.

Certainly for permanent recruitment.

We are just so used to it, have it so imbued in our psyche, that we don’t appreciated how farcical and damaging it is.

For everybody.

Multi-listed, contingent job-orders benefit no-one.

Clients, naively thinking they get a better service because they get agencies to compete, actually get a far worse service because they are actively encouraging recruiters to work on speed, instead of quality.

Recruiters suffer because even if we want to, we can’t really ‘partner’ or ‘consult’, or ‘value-add’, and in the end we only fill one out of five jobs, if we are lucky, destroying profit in many cases, and the careers of recruiters too, who simply burn out, chasing rainbows.

And, the often ignored fact, candidates suffer the most because they do not get service or due care from third party recruiters, who are too busy chasing mythical job orders in competition with five other recruiters, to actually focus on the candidates needs. That’s right. If recruitment worked like accountants, or lawyers, or doctors, or even real estate agents, where the service provider is not working on each case in competition… our recruiters would work on 20% of the orders they currently do, but fill 300% more! And who would benefit the most? Candidates! Yes candidates, who would no longer be treated like cattle, but rather like crucial partners, as they should.

No wonder candidates are increasingly avoiding job-boards, and recruiters, and transferring their job search energy to web-searching, social media, and other tactics.

Yes, that’s a screwed system all right.

But it is getting worse as recruitment evolves.

Have a look at my wizz-bang chart below (Yes, agreed, I am not a PowerPoint expert. But I did this at my desk at home, late at night after my third bottle of Boags, and trust me, it may not look pretty – but what it represents is uglier still.)

Look at the left circle. It represents all the candidates available for recruiters to place in jobs. Look at the little segment on the right of that circle. That shows the tiny proportion of suitable candidates that recruiters actually access. To this day, most recruiters focus on so called ‘active’ candidates, those that come from job boards, or who are already on the database. There is nothing wrong with these candidates per se, except that they represent only a tiny percentage of the available people. What is more, because they are actively job-searching, they will in all likelihood be working with other recruiters already, or possibly well down another recruitment process.

Which means that you are not likely to place them. You understand that don’t you? It’s not only jobs that are ‘in competition’. It’s candidates too. And in a candidate tight market, a good talent that you have exclusively is a walk-in placement. Do you even think like that? Do you know who you have exclusively? Do you ask? Do you seek to find these people?

Look on my chart at the massive pool of candidates most recruiters do not access. There is your opportunity!

Now look at the right circle. This represents the majority of clients’ commitment to actually filling the job. We all know that most clients do not give their agency recruiter full commitment. That is what the shaded segment represents. Tiny commitment. In fact, many use third-party recruiters as an afterthought, or in competition. The vast majority of the commitment clients give to filling roles, goes somewhere else, such as the internal recruitment team, or using LinkedIn, or their own recruitment strategies.

So right there you have an incredibly dysfunctional situation.

The majority of recruiters access only a tiny percentage of the good candidates, and what’s more, secure only a fraction of the clients’ commitment to filling the job.

What other professional would deal with the customers on such a flimsy premise? Who else would invest the time and resources, that we recruiters do, on the tiny off-chance that a fee might be generated? But it gets a lot worse.

Not only do most recruiters run their businesses on the same basis as someone playing a lottery, they do it in competition with five other agencies. This is ridiculous. Some very significant recruitment companies with massive turnover, still can’t make any profit because such a huge percentage of their staff time is spent on fruitless work that results in no return. In fact many such businesses are now going bust. Their cost base is too high for their income generation ability. And this is why! Their business model is screwed.

And it’s a vicious cycle of discontent. Clients get increasingly irritated because they are dealing with low-level recruiters, who don’t do a thorough job. Ironically the fault for this lies with the client, who asks recruiters to compete on the same job, thereby dumbing down the process. Recruiters get disillusioned, desperate, burnt-out, and take shortcuts, which continues the cycle. And of course worst of all, candidates suffer.

But it’s not all doom and gloom. In the chart above lies tremendous opportunity, if you look for it. The prize goes to the recruiter who can develop strategies to access those candidates in the segment of the circle that are not active. The skill of bringing top hidden talent, that clients can’t find themselves, to the hiring table. That is the Nirvana we should all be seeking.

That is where the fun and the money is. And of course those recruiters who can blend technology with the craft of recruitment, and who can secure a greater percentage of the clients commitment, via retainers, exclusivity, or other partnership arrangements, will differentiate right now, and into the future.

So, the winners will be those recruiters who recognise that the way we work now is terminally dysfunctional, and who act to access the parts of my circles that most recruiters do not.

Excellent! Got that off my chest. Time for another Boags…

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If you enjoy ‘The Savage Truth’, connect with Greg Savage on LinkedIn.

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Comment by Drue De Angelis on March 25, 2014 at 1:18am: Paul, I have no objection to your suggestion relative to "raising the bar" on RecruitingBlogs, but it isn't up to me. I have a very small sphere of influence and where I do, I purpose to encourage others to elevate their games and not fan the flames of the flaws that undermine our industry. Beyond that limited sphere, I have decided to stay out of the banter on this blog. Most people don't care to learn anything new or be challenged as much as they seek to find people who agree with them and congratulate them for what they do. I got back to this blog by accident from LinkedIn where this piece by Greg Savage was shared by one of my connections. I'm amazed at the vitriolic criticism a post like this elicits. I realize that by suggesting to someone that there might be a better way to conduct their business is threatening and to some, even insulting. That just isn't how I think and the people I work with welcome criticism because it is refining. As for me and my participation on this blog, it is a matter of ROI. And the ROI of being on this site is very poor for me. Cheers!

Comment by Theresa Hunter on March 25, 2014 at 12:07pm: I don't use job boards now and when I worked for a big firm I used them only as a way to find a contract candidate or to reach out to the references that were listed on a candidates resume. I did all of my candidate sourcing through cold calls and if I was lucky referrals.

How do you get a client to stop using multiple recruiters? If I did not go ahead and take a JO from a law firm client because they were using multiple recruiters I would be writing this comment on my lunch break from the nearest fast food place. I will tell you a little secret when I was getting ready to sell my house I hated the fact that I could use only one real estate agent I wanted the competition of having more than one why because I felt it would help to sell my house faster because they did not want to lose the commission.

It happens all the time in life. When you go to have something done in terms of repairs or work around your house do you use the first person you call or do you get more than one estimate? Same thing. Why would you expect companies to not do the same thing?

All I am saying is I know most recruiters (not all) rely on job boards, linkedIn and other things to find candidates and to avoid the cold call. That gives me the advantage sort of. : )

Comment by Keith D. Halperin on March 25, 2014 at 12:52pm: @ Theresa: Well-said.

Keith

Comment by PAUL FOREL on March 25, 2014 at 4:20pm: Hello, Greg...

...and no, you did not respond.

My suggesting RecruitingBlogs take a more active role in helping to 'fix' what is 'broken' is not deviating. It is suggesting we bring in all the players possible who are in a position to make change or, at the least, work to improve the Quality of recruitment/recruiters.

As I said, we have a lot of people talking 'about' the system being screwed/broken, etc. but we have no one taking an active participation in actually changing anything.

The Beat Goes On.

Comment by PAUL FOREL on March 25, 2014 at 4:35pm: Hello, Mr. De Angelis,

Thank you for taking the time to respond.

Your post, "...Greg, First, you're exactly right on every point. Anyone who argues against you simply doesn't understand. Second, you are a glutton for punishment by posting your blog on a site teaming with the kind of recruiters who love the business that they're in and can't or won't admit that it is tragically flawed..."

This was not appreciated. Although you wreathed your words, the apparent insult was still apparent, especially since up to that point there were only a couple of us posting. What you said was like someone saying, "..your friend seems nice but is dumb like a rock..."

I think you could have done that differently; especially when you say you have time to comment but do not wish to give time to working a fix.

I do not presume you have time to spare but when you come by and make this kind of comment with no intention of taking an active role in working to fine tune the business it seems you are sitting in the cheap seats.

I also do not have time to burn nor do I worry about the breakdowns in the agency business but it is still true that if everyone who can participate in taking an active role for change were to do so, I'd not be constantly apologizing to clients for their last recruiter experience.

Throwing rocks but not wanting to come over and pick up a shovel...

Well, at least you come right out and say you don't mind making assessments but have no interest in working the problem.

I have put in a call to Mr. Cocca, maybe he can tell me what, if anything he is willing to do to improve recruitment.

There's gotta be someone here who wants to actually work this problem vs. only talking about it.

Thank you again,

Paul

Comment by Keith D. Halperin on March 25, 2014 at 6:11pm

Comment by PAUL FOREL on March 25, 2014 at 6:55pm: Keith,

Exactamente.

Comment by Keith D. Halperin on March 25, 2014 at 8:03pm: Gracias, Senor Pablo...

Comment by PAUL FOREL on March 25, 2014 at 8:19pm: Touché

Comment by Greg Savage on March 26, 2014 at 12:28am: @Theresa, you ask "How do you get clients to stop using multiple recruiters? I am going to assume you REALLY want to know and will be open to learning a new skill. In that case, this is how,

http://gregsavage.com.au/2010/09/21/recruiters-this-is-how-you-sell.... And this will help.. http://gregsavage.com.au/2011/06/08/15-reasons-why-exclusivity-is-i...

I have to admit I am astounded..truly.. to read you arguing for contingent multilisted business model. Your logic in justifying your view is so deeply flawed.. Your example of getting people to "quote on repairs" being a similar scenario is ludicrous. You only get ONE company or individual to actually carry out the work don't you? You don't set 5 of them on the job and pay the one who finishes first.. do you? In fact your example makes my point perfectly. Scout around for the best service provider, select the best one .. and then GIVE THEM THE JOB! That's what you do when you buy, but that is not what you ask for when you sell your service.

I am further amazed that others on this forum leap to to applaud your point of view

Really, I am not trying to be smart.. becuase I clearly am not... but what world are you guys living in? Why are do arrogant to think there cannot be another way? You embody the recruiters in my original article who perpetuate the broken model we often operate under. Except in your cases, instead of doing so because you lack the skills to change..you do so because you actually believe its best!

Good God. Heaven help us....