The Client Side – On The Verge Of A Thriving Environment For Recruiters?

Are we on the verge of the best recruiting market any of us has seen before? Or at least a thriving environment for recruiters? Maybe. Conditions have been incredibly tough for our business, but I think it is entirely possible that we will roll into a great period for our business. Here’s why.



My hope through the last year or so has been that it won’t take much of an improvement in general business conditions for those of us left in the recruiting business to do really well. Looking around the industry, many of us feel that something along the lines of half of us are left from those who were in the business at the beginning of ‘08. I’ve heard some people say they feel we’ll be at 20% to 30% of the total number of people in recruiting when all is said and done. Without a doubt, our industry has been reduced to only the strongest and most committed players and much smaller numbers. So it makes sense that any improvement will provide more business for each of the recruiters left, a bigger piece of the pie.



Recently in a LinkedIn group discussion, Michael Maher added some fuel to this fire for me. His argument was that we are headed for good times because as unemployment improves, recruiting thrives. He provided the following numbers to back up his thoughts.



Unemployment



1999 3.4% — thriving economy‪

2000 3.9%. — thriving economy‪ (.03 uptick in unemployment as recession begins to take hold)

2001 5.7%. — 1.8% rise as recession takes hold

2002 6.0%. — 2.1% rise as recession is in full swing

2003 5.7%. — .03% decline as recovery begins‪ in late 2003

2004 5.4%. — .06% decline from recession high of 6%‪ unemployment rate ‘02

2005 4.8%. — 1.2% decline from recession high of 6%‪ unemployment rate ‘02

2006 4.4%. — 1.6% decline from recession high of 6%‪ unemployment rate ‘02

2007 4.9%. — .05% rise from ‘06 low as economy slows‪

2008 7.2%. — 3.8% overall rise from ‘06 low as recession takes hold‪

2009 9.7%. — 5.3% overall rise from ‘06 low as recession is in full swing (Subprime Mortgage and Credit Crisis compound matters as fear grips business globally)‪



He makes the case that ‘03 through ‘07 were great for recruiting as we came off the highs in unemployment. I always like to take it down from an overall statistic level to what we see happening in individual businesses, a more realistic view for me. If you imagine businesses cutting staff and holding off on hiring through tough periods, they are reducing their operation to what they need to get through that period. That leaves them with a slimmer operation, but not in a great position to grow. This is where we are when we hit higher levels of unemployment. When that bottoms out and they start to look to grow, they have to hire and they have to make key hires which will require recruiting assistance. This doesn’t take unemployment numbers at 3.5% as we see above, it just takes getting to the bottom and starting to recover. Even if the recovery is really long and drawn out, you still have businesses that have slimmed down to the barest level of employment to sustain their business, and then starting to move forward from there. Combine that with a recruiting industry that has been reduced in size by half or more to only its strongest and most committed players and you could have the conditions for a great environment for recruiting.



Todd Kmiec

Todd Kmiec & Associates

todd@toddkmiec.com

Views: 124

Comment by Stacey Bledsoe on September 14, 2009 at 9:54pm
I agree with your assessment of what is going to happen. I already see things "picking up" in the Birmingham area. Based on my own experiences and what I have heard others say, I think there will be a lot of people move on to other companies when consumer confidence is on a steady upswing. Even if they were one of the "lucky ones" who didn't get laid off, there are a lot of people who have a bad taste in their mouth from what they have seen go on inside their organizations.
Comment by Joshua Letourneau on September 15, 2009 at 10:45am
Todd, I just wrote a long comment here, but it was lost. There used to be 'edit' functionality here . . . I guess it's gone now.

I agree with the assessment of 50% to 70% of our overall recruiter headcount being gone. I wrote about this a while ago on FOT ("What Led To The Recruiting Industry's Current Grapefruit Diet . . ...."). In a comment, JD then asked who was gone, however the list of recruiting cadavers is too long and expansive to list.

And while I agree hiring will pick up soon, I'm not entirely in agreement that Exec Search of Direct-Hire fees will pick up proportionately to other services. Staffing Spend will pick up, and we will benefit from that, but there have been subtle shifts over the last 24 months that will make a mark on our industry. RPO is on the rise, and so are several 'consulting services' that are yet to be proven. The point is that the overall spend may be picking up, and while the pie is growing, we may have to innovate to grow, or even maintain, our 'piece' of it.

For example, not all firms are now charging 25% per search; rather, some are charging 7% to 10%, with half due up-front in the form of a 'co-tainer'. Would this be ideal for one-off searches? No way. However, what about a nationwide search for 100 professionals with the same profile? Perhaps. Margins would obviously be down, but would you rather sell 100 Toyotas or 1 Aston-Martin?

I mentioned the shifting business models I'm seeing back in RBC's chat room (way back in the start-up days with RBC), and it was interesting to see the resistance of some that only see what we do in one light (the 'you-make-hire-and-immediately-pay-us' model). Of course, my intent was not to offend, but to build awareness of trends I'm seeing . . . but I digress.

My point is that it's helped me to keep an open mind instead of only looking for square pegs to put in square holes. Ultimately, this is just some food for thought - it's up to do the dishes of this recessionary fallout.

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