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 Alasdair Murray on March 20, 2014 at 9:17am: I actually like the idea of someone representing me in my career. Indeed, I know a recruiter, a long term friend and former client of mine who has made a very successful business out of doing just that in the IT business in the City. However, my observation would be that 15-20 years ago, when I was the account director at recruitment advertising agencies and looking after a whole range of recruitment consultancy accounts that ranged from the biggest in the world to the one man and his dog in the local high street, they all had these things in common - the need to put out the right messages and attract the best people and the need to keep those people onside throughout their career in the knowledge that one day they to might become a client of some influence and, if not, a bit of a money spinner every time they were looking for their next move. I sense there has been a huge shift in thinking and culture though, and that these days it's very much about the one off hit and only taking notice of the candidates perceived to be the best chance of making a fee. Of course, it would be unfair to say the whole industry thinks that way, but I'd wager a lot more do than back in the day when some agencies spent a whole lot more on their recruitment communications (one client of mine spent £1.5m and i ran a team of five to look after just that one account) but also invested a lot more time in effort in looking after the people their campaigns brought in.

Comment by Keith D. Halperin on March 20, 2014 at 2:54pm: @ Greg: "Candidates are treated like cattle." I have problems with this statement, as it is an unfair and negative comparison for the cattle.

@ Alasdair: Paradoxically the less someone needs a contingency/retained recruiter to help find them a decent position, the more likely they are to have success/be engaged with one, and the more they need one, the less they are likely o be successful/be engaged by one. This ties in with Greg's comment statement:

"Recruiters are seen as a necessary evil..." Again, I have a problem with this: (In your case and that of other in-demand or otherwise easily employable people) recruiters are not "necessary". There are some situations where a 3PR may be able to get you an interview which you otherwise wouldn't and that would be very valuable to you, but if that isn't the case, you should remember that with a 3PR, you come with typical 20-30% price tag attached to you that you don't have if you go direct to the employer. If two candidates were equal and one came with a premium price attached and the other didn't, which do you think most hiring managers would pick? You do the math.

Keith

Comment by Pamela Witzig on March 20, 2014 at 4:22pm: I find it interesting that the focus here is on benefits to candidates and not clients. My clients are my partners, not the candidates. That doesn’t mean we don’t treat candidates well. But our clients pay our fees and we’re working for them. We don’t post on job boards or crawl them for resumes, so we aren’t in the group you presume most recruiters reside – but where you say we should be (agree there of course). Our “candidates” are industry professionals we stay in touch with and their referrals. I think recruitment is DEvolving with online activity. But then, we didn’t run classifieds or advertise in trade publications “back in the day” either. Old school, with some great technology advantages now, does the trick. Scout out the people employers want to hire. Ad responders are a weak pool of candidates. I don’t believe clients pay us “the big bucks” for low hanging fruit. And I have no desire to plow through the same recycled resumes as hundreds of others. Yes, by the way, we are largely a contingency firm.

Comment by Alasdair Murray on March 21, 2014 at 4:19am: If you had no decent candidates, you'd have no fees, thus candidates indirectly pay your fees. And surely you're working for them too, no?

Comment by Greg Savage on March 21, 2014 at 4:35am: @Alasdair. Yes... and Yes. Incredibly many recruiters have not yet understood this truism.

Comment by Alasdair Murray on March 21, 2014 at 4:36am: I know, amazing isn't it? Makes me angry as clearly many recruiters view the candidates as secondary in importance whereas in fact they are the lifeblood, the pipeline to fees, of every recruiter.

Comment by PAUL FOREL on March 21, 2014 at 11:26am: Alasdair,

No, sorry, you do not pay our fees, indirectly, as you put it. That is like saying a baseball coach 'indirectly' catches fly balls or a waiter indirectly cooks restaurant menu items. Nice try. Settle for puffing yourself up by telling us how uniquely qualified you are, instead. Now that is something for which you can take ownership.

And, no, we are not working for you- we work for the person signing our checks, the client/Hiring Authority.

You are half the puzzle but don't think you are the driver to the recruitment process. Suggesting we are working for the candidate puts the candidate in control and that is not going to happen, at least, not on this planet.

And any recruit with attitude can be replaced with my spending more time on the telephone. The last thing I need is a recruit who thinks s/he is in charge.

If I recruit you, I will be sure you are interested in my client's opportunity and will watch out for you the best I can but no way are you leading the process. Just because I am shepherding you through a process does not suggest or imply I am 'working for' you.

I notice you say, "..."If you had no decent candidates, you'd have no fees.." Well, there is no such thing as not having 'decent' candidates as long as my dialing finger continues to operate.

For someone who recruits occasionally, you seem to have the dynamics of the relationship amongst the search consultant, the client and the recruit turned around.

And although Greg has his opinions, saying what he does not make it so.

Comment by Alasdair Murray on March 21, 2014 at 11:29am: I have recruited directly in the past as an employer, but never used recruiters to find me work. I've always managed to do that myself. Clearly different recruiters have different ideas about how important the candidate is. Possibly why I've never chosen to put my career in someone else's hands.

Comment by Pamela Witzig on March 21, 2014 at 11:43am: Still interesting. The definition of candidate in these references is apparently job seeker. We don't "have" decent candidates. We find them. So we are not working for them. They weren't looking for work. We are looking for them. So here it is not about working the "available people" and "serving their needs." A different model altogether and one it seemed Greg was suggesting.

Comment by PAUL FOREL on March 21, 2014 at 11:55am: Hey, Alasdair....

I agree that one should watch out for themselves. There are many like you who have not needed/not used a search consultant to get the next best job/career opportunity. I usually think people like yourself are amongst the best quality people out there since you are well regarded and are referred by peers who are happy to facilitate your next job move/be associated with you. Obviously, if you are a dunce or a pill, no one would want to be seen in the same selfie as you.

Now, in my world, if I am recruiting someone and they agree the opportunity sounds right, I am doing them a favor as a consequence of my recruiting for a client. I'm going to facilitate their getting promoted, a next-better job, etc.but it is important my recruits understand I am the Candy Man and they are along for the ride.

Mind your manners and I will get you all the way into the HA's office so you can pitch yourself and get hired.

I have had candidates who see me as nothing more than the taxi getting them to their destination. I don't mind. It is their credentials and capacity to produce I seek not necessarily a warm and fuzzy relationship. Now, if a candidate has attitude that I am concerned is representative of how they are with everyone or at least, most people, then I have to reconsider whether that person is, in spite of this, a viable candidate.

So it is strictly a 'scratch my back and I'll scratch yours' relationship.

Are you 'important'? Yes, of course and as I said, you work with me, allow me to control the vertical and I will do my best to see you are rewarded for allowing me to represent you.

But Step outside the lines (as I describe them on the front end) and we are through.

I can't control the process and lead it to a happy ending if I have a candidate who does not realize they need to leave the driving to me.

Thank You, Alasdair.