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 PAUL FOREL on March 14, 2014 at 10:43am: Mr. Savage,

If I may...

1. Sourcing is dependent on the recruiter's ability to recruit. That section of your circles that contain the candidate pool that is not accessible is only there based on the inability of a recruiter to access that pool due to their lack of appropriate training. This applies mostly with the Employment Agency recruiter than it does with Executive Search.

2. The issue of a HA giving out the same JO to a multiple of recruiters is the fault of the recruiter base, not the employer. Most any HA (Hiring Authority) would be glad to have a recruiter or two in their back pocket and in fact, amongst the wiser of them, many do. They don't like passing out the same JO to six or eight recruiters any more than we like knowing we have a handful of recruiters breathing down our neck.

Those of us who have a few clients who rely on us/call us first are creating sanity in an insane world.

And by the way- it should be recognized that amongst those six or more 'other' recruiters with the same JO, it is understood that of those six, two dropped out almost as soon as they hung up the phone, two more quit the search after a half dozen calls and that usually only leaves, realistically -in many cases- only a couple of recruiters working the same JO. Not always, but often this is the case, especially in the circles in which I specialize.

3. Respectfully said, candidates are not 'crucial partners'. This is an over-emphasis on the relationship between recruiter/client/recruit-candidate. Do I need to say the obvious- clients -the ones signing our checks- our are 'crucial partners'.

I treat all my recruits/candidates with the respect and care they deserve but my 'partner' is my paying client.

4. IMO, the breakdowns you describe exist in the Agency business due to the model...just as you said.

Too many JO's are solicited without a serious intent to fill them all -think of fisherman with nets instead of anglers with a favorite fly; agency recruiters are not trained in direct recruitment so they can only, as you said, reach out and touch the low hanging fruit; agency management does not really or at least, throughout the agency business, manage and train their staff and enforce discipline and professionalism; etc., etc.

"Physician, Heal Thyself" applies here.

Thank You...

Comment by Keith D. Halperin on March 14, 2014 at 12:40pm: Thanks, Greg. A modest proposal to improve the scenario:

Clients agree to a 30% exclusive with an agency or independent who certifies in writing as part of the contract that they do not have/use CareerBuilder, Craig's List, DICE, LI Recruiter, Monster, Seek (and/or other major boards) either directly or indirectly through RPOs, and if necessary the client will check to verify the claim.

This would separate the pros like you and Paul from the outfits hiring newbies to dial for dollars for board/RPO candidates at 15-20% to clients too ignorant to know of the lower-cost alternatives of getting the same candidates directly.

-kh

-kh

Comment by Greg Savage on March 14, 2014 at 4:59pm: Hello Paul,

Referring to your points...

1. Agreed, that is largely the point of the artcile

2. Incorrect. It is a shard responsibility. Clients are as much as fault as recruiters. I explain that rather lucidly I feel, so lets a agree to disagree.

3.100% incorrect. You may not like the term "crucial partners", but "do I need to state the obvious"? Client sign our cheques, as you correctly point out...because we have access to candidates they can't find themselves. Period. Its about candidates, not clients, and increasingly so.

4. Yes. That is what I wrote

You are right, much of what we now live with in terms of a broken business model is due to the practices, greed, lack of foresight of the 3rd party recruiters themselves. But clients feed this dysfunction by multi-listing job orders and playing recruiters against each other. And change will come from within. Although those that do not change will soon become irrelevant

Comment by PAUL FOREL on March 14, 2014 at 7:26pm: Hey, Mr. Savage...

Thanks for responding...

4. "Change will come from within" I'm not so sure; for some reason the management of employment agencies and contingency search firms seem to really push Volume Everything Except Quality. I don't see that changing any time soon or, at least in my lifetime. I hope you are more correct about this than I.

My perspective is that mediocre clients deserve similarly slanted recruiters. And, while I am busy apologizing for the last recruiter I am also being given a JO. So my crippled competitors actually make me look good.

I really believe the agency breakdown is largely because, generally speaking, there are too many management people who don't insist on professionalism in execution.

4a. Let's address something that needs our attention:

By the way -and this will not make me any friends here- have you seen the number of 'agencies' here who are hungry for split partners?

We know why that is- these are people who know just enough to set up a computer and phone but do not really know recruitment execution in its totality. So, even though they can't recruit, they are hanging banners, collecting job orders they can't fill and of course, they are all 'presidents'.

Now, many may be polite and courteous but how many are actually competent and finish what they start?
IMO, I'll bet half or more of these <5 recruiters are guilty of exactly what your article/blog is all about.

Take away their Internet and they are screwed.

This means, of course, that RecruitingBlogs.com is harboring those exact same recruiters who are pulling our industry down. They are a large part of the reason you wrote this blog, Mr. Savage.

4b. How about- instead of asking us 'how we introduce ourselves' ["a firm handshake and direct eye contact", LOL!] and for every new member who indicates they need their MTV are referred to a course in direct recruitment prior to acceptance for membership?

I saw a blog here recently (I am new here- the blog was several months old) published by one of the members here who showed a total and complete ignorance of how the Contingency and Retained search business operates.

It had more holes in it than Swiss cheese, had only one contributor -Sara with the hat- who asked, mostly rhetorically, I'm sure, something to the effect of "Are You Joking?".

No one from RecruitingBlogs had come along and gigged the publisher for posting such an outlandish blog.

Now, although it can be presumed most of the body of members here saw she had her head ......., no one had called her on this.

Where is the Quality Control at RecruitingBlogs.com?

I said and I was not speaking rhetorically, "Physician, Heal Thyself".

Your article is a good place to start. Why will it be that your blog here will collect dust instead of becoming mandatory reading for all new members?

If when you say, "...those that do not change will soon become irrelevant..." you are referring to the recruiters out there (who embarrass themselves -on a daily basis-) then I will say that, heck, they are already irrelevant.

Thanks very much,

Paul

Comment by PAUL FOREL on March 15, 2014 at 10:40am: Ooops!

I see I meant to say, "...Sandra with the hat..."

One grows old....

Apologies, Sandra...

Comment by Recruiting Animal on March 20, 2014 at 7:25am: I'm not understanding this: "Candidates would no longer be treated like cattle, but rather like crucial partners." Are you saying that the rush to get candidates submitted means that we don't give them enough time to explain their worth? I've worked many retained searches and never noticed that they were any different from contingent ones. And, as headhunters, we never focused on people from resumes banks though sometimes good people could be found there.

Comment by Recruiting Animal on March 20, 2014 at 7:29am: I don't understand it when you say that contingent recruiters can't consult and partner and value-add. What are you talking about exactly?

Comment by Greg Savage on March 20, 2014 at 8:38am: Animal, I am going to give you the benefit of the doubt, in that I am assuming you are actually interested in an answer, so you can learn something, ..rather than an opportunity to argue,,which appears to be your default Twitter style. I don't have time for that.

Candidates are treated like cattle. Who would argue with that in terms of candidate service from the recruitment industry globally.? (not EVERY recruiter obviously). What happens to YOU when you tell someone at a party you are recruiter? Get a lot of love? No, not do I. Most people have a horror story about how badly recruiters treat them in their job search. And I am saying one of the reasons for that is the contingent . multi listed model because it drives recruiters to do so much work they don't get paid for..and candidates get forgotten and get poor service. In fact they often feel humiliated by the process

Re "recruiters cant consult". I don't know if I say that exactly, that but what I am driving at is that a "partnership" requires commitment by both parties (try telling your wife you value your partnership but is it cool to have a few other woman as well). If a job is listed with 4 recruiters, by DEFINITION the client has given at most 25% of her commitment to each recruiter. ( she only has 100% to give..divide by 4). At best. So its not possible (or at least in practical term it becomes likely) that the recruiter will not give commitment in return and therefore you do NOT have a partnership. Of course the recruietsr can and still do add value where they can, but if you have done retained search Animal, and you have done contingent multilisted, you and I both know which type of hard-to-fill order we have sleepless nights about.. and its not the one where the client has given the job to 5 agencies. Right?

So thats what I mean, thats what I believe. If you disagree, cool.

Comment by Alasdair Murray on March 20, 2014 at 9:06am: Dare I ask the question, does the panel think that the longer candidates feel they are getting ignored when applying for jobs, the greater the chance that more and more will simply go direct in the future? I only say that as someone who has never used a recruiter to find me a job. And, to be honest, if I were in a position where I needed a job right now I'd think twice before going through the soul destroying radio silence that so many job seekers seem to receive as the scant thanks for registering with an agency.

Comment by Greg Savage on March 20, 2014 at 9:11am: @Alasdair, you have articulated the great voice of the majority of job seekers. Recruiters are seen as a necessary evil at best (Yes I know there are exception before the indignant chorus jumps in). I am a recruiter, have been for 35 years, I love this industry, but most candidates would avoid us if they could. Indeed many do, trying every other avenue first. For the reasons I explain in the blog

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