The recent RCSA (Australia and New Zealand) International Conference held in Queenstown, New Zealand had a variety of industry speakers and one of the most interesting was Barry Asin, the President of Staffing Industry Analysts who, as the name suggests, compile data and undertake research on the staffing (recruitment) industry on a global basis. 

Here's four facts of particular interest to me:

Fact #1

The global staffing market in 2013 was worth an estimated USD$416 billion (using sales rather than gross profit). 

The contribution per country breakdown saw a top ten that looked like this: 

Fact #2

The three largest staffing companies (by sales) in the world have combined global sales that equate to the combined global sales of the next thirty largest staffing companies. The three largest recruitment agencies, globally, hold a combined market share of approximately 17%, which is the same combined Australian market share that the three largest recruitment agencies in Australia (Hays, Skilled, Chandler Macleod) account for. 

The per country breakdown sees a global top ten that looks like this: 

Fact #3

Employers across the globe spend over $3 trillion on contingent staff of all types. The spend is allocated as follows (2012 data): 

• Temporary workers from recruitment agencies (11% of global contingent worker spend)
• Independent contractors (67%)
• Other types of temporary workers (22% eg freelancers, independent consultants, internal temp pools, fixed term employees, statement-of-work consultants/workers) 

Fact #4

Employer contingent staffing spend through Vendor Management Systems (VMS) and Managed Service Providers (MSP) is the fastest growing segment of the contingent market (annual growth of 23% and 19% respectively). The 2014 market size of each is estimated as follows: 

• VMS (USD$122 billion)
• MSP (USD$82 billion) 

Statement of Work (SoW) is the fastest growing part of each of these markets with growth of 39% in VMSs and 61% in MSPs between 2012 and 2013. 

Barry summarised these major near-term trends as follows: 

• Sophistication: In short this translates to the greater formalisation of recruitment and staffing activities and functions (eg RPOs, off shoring, VMS etc).
   
• Globalisation driven by technology penetration and adoption: The penetration of technology is both rapid and global. Consider that India (with a population of 1.27 billion people) has a just over 900 million mobile phone subscribers. This technology penetration rate is astonishing considering that 72% of the population live in a rural area and the per capita income (on a purchasing power parity basis) is USD$5,350, placing it in the poorest half of countries in the world.
  
  Barry spoke about the rapid movement of business to ‘The Cloud' or as Barry labeled it ‘enablement of cloud-based ecosystems'.
  
  Cloud-driven work services broadly belong to one of three categories; Online Staffing (SIA have identified 145 operators including Freelancer, Task Rabbit, Elance etc), Online Services (eg Work Market, Onforce etc) and Crowdsourcing (eg 99Design, Innocentive, Amazon Turk, WikiStrat etc).
  
  SIA estimate the global online staffing sector is currently (2013) a USD $1.6 billion market. The SIA have made the following estimates of the value of the market in 2020: $16B (conservative), $23B (quite plausible), $47B (aggressive).
   
• Outsourced services: The 2014 Contingent Workforce Buyers survey reported the following under the area Projected Increase in Share of Workforce in Ten Years: 

I don't think it takes much of an analysis to see that the global preference for permanent employees is declining rapidly. 

• Regulation and legislative change: Australia and New Zealand are countries (along with the UK, USA and The Netherlands) that have the legislative consistency that underpins progressive work models. This provides a very solid platform for decision makers in Australian and New Zealand in undertaking comprehensive and long term workforce planning. 

Barry then speculated on four possible longer term scenarios for the recruitment industry: 

He labeled each of these possible scenarios as follows: 

1. Direct Connection: The internet facilitates the rapid escalation of hiring managers directly connecting with talent. There is complete visibility of work history, rates/salaries and work opportunities.

Barry raised the interesting comparison in the USA between what has happened to employment between 2002 and 2012 within both the real estate sector (up 29% from 125,960 to 162,560) and the travel agency sector (down 39% 104,550 to 64,680). This highlights that there is not an inevitable deterioration in a sector's employment prospects due to internet driving ‘direct connection' opportunities between buyers and sellers.

Ultimately what matters is how much value the intermediary continues to provide the end-user and, most critically, how much the end-user is willing to pay for this value, compared to doing it themselves.

The US real estate employment data would indicate that vendors of homes still value what a real estate agent does compared to DIY home sales, far more so than tourists and travellers value what a travel agent does, compared to DIY travel bookings. Certainly available evidence would suggest that although employment in the recruitment industry may not be growing at the pace of some previous years; total employment within the sector is still increasing.

My own addition to Barry's speculation about what Direct Connection will lead to is what I might label Connection Effectiveness where I foresee how assessment technology will enable all competencies (skills, behaviours, motivation) in all workers to be accurately, easily and quickly assessed and ranked. I expect that accurate understanding of jobs and the competencies that drive success in each job will be facilitated by powerful job analysis technology. Ultimately both of these advances will maximise, but never guarantee (we are dealing with non-rational acting humans after all!) the likelihood of a speedy and effective worker-to-job matching process.

Barry listed five potential roles for recruitment agencies in the Direct Connection world:

1. Compliance/employer of record

2. Concierge/guide

3. Niche expert

4. Insurance/risk manager

5. Value chain specialist 

Each of these offerings would require a pricing model different to the current norm (ie contingent fee as a percentage of salary and hourly/daily margin), except maybe Niche Expert. 

2. VMS Everywhere: This long term scenario as speculated by Barry would see 100% penetration of VMS (many models and platforms) within large corporations and significant market penetration within SMEs of ‘VMS lite'. Transparency across all these forms of VMS would enable easy comparison of recruitment agency pricing, order volume, service offerings and overall performance. Inevitably this would have the effect of reducing overall industry margins but due to quality transparency it would facilitate better performing agencies to justify higher margins.

The VMS Everywhere future would put significant pressure on almost all agencies to use cloud based systems that could be easily integrated into the systems of end-user clients. This would enable real time reporting to be undertaken by any authorised stakeholder anywhere, anytime.

3. The Triumph of Talent: This long term scenario as speculated by Barry would see low unemployment globally, highlighted by significant shortages of skilled labour. Technology penetration and use would plateau.

In this scenario the core human skills of recruitment, influencing and negotiating, would be the most valued skills as pressure on agency prices and margins is eased due to the dominant attitude of I-need-this-person/skill-at-any-cost. Procurement takes a backseat as a stakeholder in recruitment as the speed and quality demands of hiring managers win out over process and price.

4. The Good Old Days Again: This long term scenario as speculated by Barry would see the internet dramatically fall out of favour all around the world due to cyber warfare and cyber terrorism as well as privacy concerns.

This situation would appear to be the least likely of the four scenarios but still possible

In considering all of the above and everything else that I heard at the RCSA conference I still haven't changed my view about the drivers of long term success in the recruitment industry. 

These are:

1. Embracing the science of recruitment (while not forgetting the art)
2. Being a talent expert, both generally and in your niche
3. Having a strategic recruitment offering, not just a transactional one
4. Learning from, or replicating, relevant internet business models

Undoubtedly it s fascinating time to be part of the recruitment industry.  

Bring on the future!