What's changed in recruitment since the crunch?

As a relative outsider to recruitment, I was wondering if anything has changed in recruitment?

I know things are tough but is everyone just waiting for the good times to return, for things to return to normal or has anything significant happened to change how the industry works?

I never fully understood the business model. It appears to reward poor performance. The higher an employers staff turnover, the more business a recruiter gets. It seems a bit strange and I genuinely welcome a more detailed explanation.

When something as big as this crunch hits an industry, where incomes reduce by 50% or more, you would normally expect something fundamental to change. This is because a slight reduction in price isn't going to be enough. A radical change to the business model is almost expected.

So what can we expect to see change in the recruitment industry? What change to the business model can we expect?

Views: 125

Comment by Charles Van Heerden on September 29, 2009 at 2:01am
Interesting question Martin. Firstly I am noticing (in Australia) that the good recruiters are weathering the storm and will be stronger and better. As companies are managing costs a lot of recruitment will be done by corporate recruiters (the biggest competition). In my view there should be a shift away from fees based on % of pay, to a fixed fee structure, linked to retention guarantees.

It is possible to reduce the cost of recruitment and improve the quality of placements (reduced turnover) but it is not easy and takes real commitment, building a real partnership between employers and recruiters.
Comment by Ken Forrester on September 29, 2009 at 11:28am
That is a great question that career recruiters are asking!

You are correct; there will be a radical shift in the recruiting model when the economy does turn around. Three reasons:

A multitude of new technology vendors have entered the talent acquisition space; recruiters now have more tools to find better resumes, faster and cheaper.

Most corporate recruiting departments have been significantly reduced because of limited hiring; they may not be replaced because the processed recruitment functions can now be outsourced to lower cost vendors located in India.

There will be an emergence of the third party recruiters. Not in the traditional fee for performance model, but in a consultative advisory model where they will package the products of recruitment vendors as solutions to clients talent acquisition and retention problems.
Comment by Michael Glenn on September 29, 2009 at 1:41pm
Companies will have to get creative to target candidates. When the job market picks up, it will do so in spikes at first followed by a mass exodus for the door. Corporate Recruiters are being challenged to help find and retain people and be held accountable for bad hires.
Comment by Randy Levinson on September 29, 2009 at 3:17pm
Martin, what will change and what should change may different altogether. I think what WILL change is a reliance on more and more metrics being pulled out of recruiting/staffing organizations so that the people at the top can do an assessment based on those metrics to either beef-up or lean out the organization. This is a touch challenge because unless you are doing very deep-dive metrics and allowing for the nuances of every kind of role and recruiter then you are going to get highly generalized data that will only be good for expense reduction and not fundamental recruiting/staffing improvement.

What SHOULD change is that the business needs to build a stronger and more understanding profile of their recruiting/staffing organization and do more listening to than directing the workflow. There is a way to understand the process and optimize it for stronger results, but it is likely to need a lot more information and expertise than any set of numbers can provide. So understanding the fundamental value and expertise of the organization and listening and implementing what they have to say is what should happen.
Comment by Ross Clennett on September 29, 2009 at 6:07pm
To stay relevent all recruiters need to incorporate more assessment science into their candidate referrals. Given the increased accuracy, speed and ease of use as well as the decreased cost of these tools I don't believe that just interviews and reference checks are good enough any more.

Martin makes an excellent point - the way in which external recruiters charge for their services will change as clients seek more value and more choice about which aspects of a recruitment service they would like to purchase 'unbundled' and how they wish to pay for such services.
Comment by Martin Gibbons on September 29, 2009 at 6:10pm
Thanks all,

I am really delighted with the genuine response to this question that every one has provided so far. I felt an empathy for the suggestion by Charles Van Heerden as I think it will require a change in business model.

Your comment, Randy about what will change and what should change was spot on too.

Thanks again for such a genuine response to this genuine question.
Comment by Martin Gibbons on September 29, 2009 at 6:15pm
Thanks Ross Now you are talking. This is quite a radical shift. Do you think the industry is up for it? Thanks for the comment.
Comment by Kevin Jenkins on October 3, 2009 at 6:29am
The primary value that a recruiter used to offer was finding candidates for their clients and selling candidates on their client's opportunities. Everything else was added value. Fast forward to today, now finding candidates and selling them on their client's opportunities is the added value part and everything else is the primary value. The reality is that finding people today is very easy to do thanks to the internet and the abundance of resources and tools available. Anybody can do it. And companies have access to the same internet tools as recruiters do. Consequently, recruiters will need to redefine their value proposition to remain competitive in this rapidly morphing industry.

I think there are several key areas where this new value will manifest itself. For all intents and purposes, recruiting as we once knew it, is obsolete. And the future looks bleak for recruiters who don't augment their value proposition with some combination of the following benefits.

Niche recruiting.

The recruiting industry as a whole was becoming a commodity. What was once a very generalized and uniform industry is now starting to become more fragmented in response. This fragmentation is the result of a visible trend in high specialization recruiting. Recruiters will need to find a niche to stay competitive. It will be the recruiters who are subject matter experts with singular focus in a narrow space that will be the most valuable in the near future.

Unfortunately, finding a niche is very difficult. If you choose the wrong one, it's not easy to reestablish yourself in another. After all, the whole value of having a niche is long term exposure and staying power in a given area. Nonetheless, being identified with a niche is a necessity for any recruiter with an eye on succeeding in the business long term.

Network equity.

Tomorrow's recruiters will need to have colossal networks to offer any realistic value to their clients. By virtue of their relationship with a recruiter, clients will expect to gain equity in a highly valuable network.

There are so many important reasons for this and it's beyond the scope of this blog entry to cover them all. Suffice it to say, that recruiters with substantial networks can source better quality candidates and do so in a fraction of the time when compared to recruiters with negligible networks.

A large network will also bolster a recruiter's image and repute. A large network instantly conveys the impression of good standing within the professional community. Unfortunately, due to years of declining sentiment toward recruiters in general, a good reputation must be quickly established in order to overcome general recruiter resistance on both the client and candidate side.

Web 2.0 expertise.

For most recruiters, the extent of their internet tools proficiency is running Boolean search queries on job boards. That simply won't cut it anymore. The days of earning high fees for being the first in line to present low hanging fruit to clients is, thankfully, grinding to a halt.

Recruiters will need to master the use of web 2.0 tools to be able to offer any realistic value to their clients. They will need to be expert social networkers and cyber sleuths. Unfortunately, learning this technology is daunting and presents a steep learning curve for earlier generation recruiters. Sadly, I think web 2.0 is going to wipe this group out. But that's the hard reality.

Job Marketing.

Without question, a job marketing strategy is an essential aspect of any recruiting initiative today. Amazingly enough, this basic and vital recruiting function is rarely ever provided by recruiters and search firms. Recruiters will need to be able to write compelling job ads for their clients that stand out from all the others online. This adds a creative aspect to recruiting that was never required before in a traditionally conservative sales oriented industry. Without question, new generation recruiters will need to have creative mojo in the area of job marketing to be truly valuable to a client. They will also need to be savvy enough with web 2.0 to choose the right marketing channels in order to ensure their job ads reach the right candidate audience.

Long gone are the days of dull requirements-intensive job descriptions that describe the person who will do the job. Job ads of the future will describe the job and the opportunity inherent in it. They will need to communicate the job value proposition in a creative and compelling way. Companies will expect their recruiters to provide this service. Recruiters who are not creative by nature and lack strong marketing skills will need to outsource this process in order to survive. Clearly, job marketing will be part and parcel of recruiting services in the future.

Hiring process support.

Fact is, managers have a full-plate supervising the people they already have. Needless to say, most aren't enthusiastic about single-handedly managing the process of hiring new people as well. And for good reason. Considering that much of the hiring process is project management and documentation related, these activities lend themselves well to being delegated. Support in this area can provide tremendous value to a manager and I believe we will see some form of hiring process support commonly bundled with professional recruiting services in the future.

Some of these activities will include the consultation and documentation necessary to create a performance profile, writing the job ad, comprehensive candidate screening, interviewing technique coaching, assessment advice and tools, facilitating reference gathering and background checks, on-boarding support and a long-term performance evaluation roadmap.

Performance-based fee structure.

The Performance Payouts fee structure will become the industry norm. Performance Payouts means paying recruiting fees for a new hire's success on the job, not for a recruiter's success in finding the candidate. The key difference being that recruiting fees are paid for new hire results instead of candidate potential. Performance Payouts is a ‘try before you buy' fee structure in which incremental payments representing a percentage of the total recruiting fee are spread out over a specified period of time and paid only as new hires reach calendar milestones. I think it is safe to say that the days of large lump sum fees payable 15 days after a candidate's start date is coming to an abrupt end.

I believe those are several of the most dramatic changes that we can expect to see in the evolution of professional recruiting services. I look forward to hearing what others think?
Comment by Martin Gibbons on October 3, 2009 at 7:20am
A big thank you to Kevin Lenkins for a fantastically complete and detailed response. Kevin I would love to talk to you some more off line if possible.

Kevin has really confronted the issue - "The world has changed and recruitment will need to change with it".
Comment by Kevin Jenkins on October 3, 2009 at 7:37am
You're welcome. Thank you for posting a topic that gave me the impetus to write such a complete piece. I now have a blog post for my website ;o) Feel free to contact me anytime.


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