2009 Predictions with Jeff Weidner

I think 2009 is going to be a great an interesting year. The thing about recruiting is that in good years you can do much better than almost most anything you are qualified to do and in bad years, well it goes the other way sometimes. It's the good years though that keep the lips smiling and the warm and fuzzies in your gut. In the tough times, it's real important to remember the good. Sometimes it's not so easy but nevertheless it's necessary and certainly we need to think always about the next 365 days - good or bad.

I was talking to Jeff Weidner and we were talking about some of this stuff before you know it, we had a plan so instead of me continuing, Jeff is going to take the floor here with this post.

There is no doubt that the end of 2008 definitely made an impact on a lot of people. And since the holidays fell in the middle of the week, plenty of people have had time to look back and reflect on everything that went on throughout the year. There was plenty to remember, 2008 was a busy year. If December is the time of year to look back and reflect on the year that has just gone by then January is definitely the time to look forward. It has been promised that 2009 will be year for “Hope and Change” and I’d like to share my predictions for 2009.

Prediction # 1

Recruiters that built their social network originally to locate and identify potential candidates will be looking for more ways to leverage those relationships and turn them into job orders and placement fees. So if you are a member on any social network, you can expect to get a lot more phone calls, e-mails, resumes and forward requests from the contacts you've made off all your social networks. Recruiters will be utilizing those networks more efficiently not only to locate and identify potential candidates but also customers. They’ll also be looking for new and innovative ways to reach out and engage with their networks as email campaigns are only so effective and it’s the organizations that can not only attract the membership base but also keep them engaged and coming back that will eventually retain the business.

Prediction # 2

Recruiting and Sourcing fees will decline. Fees will be reduced by two main factors:

a. The first factor will be competition, as it becomes more competitive in the marketplace recruiting firms will become more aggressive in their pricing strategies to win business away from their competitors.

b. The second factor will be a matter of candidate supply and demand. As the candidate supply goes up companies will inevitably lower salaries and contingent fees based on those lower salaries will follow that trend. In most markets, I’d expect about a 5% drop in salaries but it could be as high as 10-15% in some of the most competitive markets. Contributing factors will be A) fewer positions available in the marketplace and B) because of a big increase in highly skilled and qualified candidate to fill the positions due to layoffs. Consequently, those companies that are hiring will have the pick of the litter at a much lower salary cost per employee hired as compared to a few years ago.

Prediction # 3

Since the financial crisis facing the USA is also one that is hitting the entire global community across all sectors and industries I’d expect to see some consolidation/M&A activity of recruiting companies that have a good client and asset base in late spring to early summer. Expansion at the earliest signs of a recovery will be largely dependent on loosening of financing strings that are currently tying up markets but could provide a lot of benefit in stabilizing the marketplace.

Prediction # 4

The baby boomer retirement wave that many recruiting firms (and future retirees) have been waiting for will be delayed at least 1-2 years. The Social Security Administration stated that the first set of baby boomers became eligible for retirement benefits in 2008. But with the financial market vaporizing stock and mutual fund retirement portfolios many baby boomers will have to delay retirement a few years to catch up risk locking in those losses when they rebalance their accounts in preparation for retirement. Many baby boomers that were not prepared for the financial meltdown may need to obtain part time work during their retirement, at least for a time, to offset major losses in the market. This could actually help US corporations that are willing to implement flexible schedules for their aging workforces.

So there are my predictions for 2009. Please remember 2008 is in the past, all things in life are temporary and it’s up to us to create that new life in 2009 that is full of “Hope and Change”! On behalf of HTC Research Corp I’d personally like to wish you a happy and prosperous 2009!

What do you think will be in 2009

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Replies to This Discussion

Permalink Reply by Brandon on January 7, 2009 at 2:46pm

I tend to agree with the above prediction that the baby boomers will delay their retirement for a few years. The economic meltdown of 2008 has dampened the confidence of Americans, particularly baby boomers looking to restore their financial portfolios to pre-2008 levels.

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Permalink Reply by Matt Decker on January 7, 2009 at 3:55pm

I think the best thing we can do is turn off the news, turn off the negative media garbage coming in and get back to basics. Just hit it hard like we did in the beginning. That has always worked for me in down times.

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Permalink Reply by Marcia Bateman on January 7, 2009 at 4:00pm

Sorry I would tend to disagree. Recession- when we look at the recruiting industries history recession has always helped the strong survive and weed out some of the competition. What you do now will determine whether your firm will be a survivor or a statistic!

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Permalink Reply by Jason Hazel on January 7, 2009 at 4:21pm

I also wouldn't be surprised to see less competition by the end of the year. I certainly don't see fees or salaries going up this year but in the end it will be a leaner and meaner playing field. Any boomer that had their retirement tied to stocks this late in the game wasn't doing a very good job of planning.

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Permalink Reply by Jim Durbin on January 7, 2009 at 4:30pm

Jeff, I'd say 1, 2, and 4 are right on, but 3 (the reduction of recruiting fees) is not a remote possibility.

It's simple. 20% is the standard rate for big companies. 25-30 for niche and retained. And if you really are niche, you're saving time for the company and aren't about to drop your fees just because an HR person can get another company to do so. There aren't that many good recruiters.

And the problem with 20% is that anything below that simply isn't feasible to keep people employed, especially if perm salaries are also coming down. TPR's split the fees between recruiter and account manager. So you''re looking at 5-7.5% gross of a salary if you cut your fee, and you only get 10-30% of that. So a 60,000 placement gives you a 9000 fee (at 15%), which you split, and then get 10% of.

It takes time and money to recruit, and making a placement for $450 is madness. Cutting out 25-50% of the fee would kill your ability to make money in any TPR. Companies tried to do this during boom times, and couldn't make it happen. How can you possibly expect it to work with low volume?

Any recruiter accepting a cut in fees is begging to leave the business. I've seen those firms. They aren't nice places to work.

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Permalink Reply by Dorothy Beach on January 7, 2009 at 4:32pm

'Just came back from the DFW TExas Recruiters Network January luncheon and the scuttlebut is that yes it is slow but not dead stopped. I spoke to oone recrutier at an agancy that had a hard time keeping the balls in the air but most are seeing the slowdown. OK - so on my way home I get a phone call from an old contact, fully employed on a Director level for a well known IT company that wants to "explore options" but doesn't know how to do it. That may be more of what we might see since of course he isn't the only one, employed, contacting me. So there is hope but one has to be realistic in seeing that this mess might not start to perk up until Q3-Q4 this year.
Will Boomers prolong their work careers? I can tell you from the perspective of being one that very definately "yes" as long as their health holds up. In times like this though stress wears you out and then not having health insurance doesn't help so will Boomers be able to stay fit enough to work?
Fees are definately declining - I see recruiters taking 15% more often than not and 20% is the new "reasonable". I know retained search firms are having to take less and depending on how the business was run (short versus long term vision) are slashing fees up to 50%.
BUT, this is a great time to stock up on relationships and set yourself up on the so many options you have to draw people in. Especially good time for the niched recruiter whose focus helps a person decide to approach them. Your network is your currency - so make sure you take advantage of this time and even if you can't place as many, act as the career coach and coach-coach-coach. That means giving away information for free and taking time with these people. You'd be surprised at how many people are out on the market now that never had to look for a job and don't know how to do it.
A good sourcer/researcher on your team should be doing this also to bring a stream of candidates in. Oh, and NOW is the time for researchers/recruiters to experiment with Twitter and Facebook and Myspace for recruiting, among other venues and creating your blog and attending those webinars.

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Permalink Reply by Ken Olney on January 7, 2009 at 4:34pm

Because I specialize in the Healthcare industry ( specifically Home Health Care ) I agree with prediction #1 & #2 . As far as the reasons for " fees going lower " ( & I've already seen this since mid-2008 ) I would add that the Human Resources function / department is getting more actively involved in the recruitment process . Some of my clients hace actually started in-house recruiting departments . In the Healthcare field(s) , the background credentials of a candidate are extremely important . I'm seeing more & more quality individuals on the market , thus the healthcare companies / organizations are oftentimes able to find their own candidates without using an outside recruiter . When they're desperate & need help , they're in more of a bargaining position ( i.e. - negotiating fees ) than they were in the past . This trend , I believe , will cross all industry lines ... with HR having more of a say in how recruitment , by outside firms , is conducted & compensated .

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Permalink Reply by Jeff Weidner on January 7, 2009 at 4:49pm

Jim,
I think if you re-read Prediction # 3 it will make more sense to you.
I did not say recruiting firms would lower their fees. 20% has been a standard in the industry since way before my time.

What I did say is that because there is a larger pool of candidates and fewer positions salaries will go lower and since mathematically 20% of $80,000 is less than 20% of $100,000 recruiting fees will be lower as well. From this example $4000.

Now you can dispute my reasoning of salaries being lower but I think there is enough historical data and statistical analysis from past recessions and market fluctuations to back up my prediction.

Thanks for adding to the discussion.

Jeff Weidner

Jim Durbin said:

Jeff, I'd say 1, 2, and 4 are right on, but 3 (the reduction of recruiting fees) is not a remote possibility.

It's simple. 20% is the standard rate for big companies. 25-30 for niche and retained. And if you really are niche, you're saving time for the company and aren't about to drop your fees just because an HR person can get another company to do so.

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Permalink Reply by Kimberly Lucas on January 7, 2009 at 4:56pm

Thanks for the predictions - they get the juices going for all of us. Although I agree with some of your comments, I do have to sound off on the recession. A downturn - this is my career 4th - has a tremendous 'cleansing' affect. Recruiters with a weak stomach (network, value proposition, skills) will go away thereby reducing the competition. In addition, and in any economy, good people are generally employed so good recruiters will have work to do. My prediction is that a recruiter's biggest challenge in 2009 is to convince top talent to change positions - there is a bit of fear out there right now.

In any case, each year brings it's own unique and interesting challenges - that's what makes this such a fun business!

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Permalink Reply by Jim Durbin on January 7, 2009 at 6:16pm

My apologies Jeff, i was thinking of it in terms of dropping the percentage, not the actual drop in salary. Sadly, salaries will drop substantially - companies in 2001-2002 really got aggressive after the massive run up of the dot com boom, but those same companies also outsourced a lot of their best talent.

And then got bought up.

Is there anywhere to cut? Benefits have eaten up most of the rise in compensation (healthcare especially), and I see total carnage if salaries get cut for incoming offers. A position either has value or it doesn't. At some point, the desire to cut across the board has to be met with the reality that some jobs aren't worth doing for less.

As for the companies agreeing to cut their fees to 15% - expect horrible service from them, and massive turnover. Recruiting well is too hard to do cheap. And even 20% stretches the boundaries. Why do you think so many people go out and start their own firms? They don't make enough in a firm for the work they do. Cut that rate, and you're forcing staffing suppliers out of business.

Also expect VMS systems to get overloaded and not work well. More on that later.

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Permalink Reply by Robin Gillman on January 7, 2009 at 7:00pm

If I were to add a 5th prediction, Ken's would be it. My reasoning for this is not only efficiency, but the need to go from stop gap recruiting to more long term workforce planning.

After all is said and done and the playing field is cleared (all the layoffs) and everything settles, companies will be asking questions like: "Where do we go from here?" "What did we do wrong or are we doing wrong?" "How do we recruit for huge projects?" (Obama's stimulus package) "When we do hire employees again, how do we keep our turnover rates low?" "How do we gain people's trust again?" "How do we train or retrain our employees?" "How do we deal with change?"

Personally, I think a better recuiter makes for a better HR person and visa versa. Prediction number 5 would be further integration of Recruiting & HR with a look at the larger business picture. Overall lower fees and technology will drive this prediction.

Ken Olney said:

Because I specialize in the Healthcare industry ( specifically Home Health Care ) I agree with prediction #1 & #2 . As far as the reasons for " fees going lower " ( & I've already seen this since mid-2008 ) I would add that the Human Resources function / department is getting more actively involved in the recruitment process . Some of my clients hace actually started in-house recruiting departments . In the Healthcare field(s) , the background credentials of a candidate are extremely important . I'm seeing more & more quality individuals on the market , thus the healthcare companies / organizations are oftentimes able to find their own candidates without using an outside recruiter . When they're desperate & need help , they're in more of a bargaining position ( i.e. - negotiating fees ) than they were in the past . This trend , I believe , will cross all industry lines ... with HR having more of a say in how recruitment , by outside firms , is conducted & compensated .

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Permalink Reply by Donato Diorio on January 8, 2009 at 10:35am

I've got some of my own. Thanks for putting out the effort.

1. Social network apathy. Too many to focus on. Smart recruiters will pick the winners. Enough is enough, email filters will simply start to delete stuff from all the new networks. The next wave of winners will be the ones that tie the different social networks together. Standards for transport of profiles from network to network will compete. Winners will not be apparent until next year. Google will be one of them, but not the only one. Companies that gain ground will be lucrative aquisition targets.

2. PaaS (platform as a service) offerings will start to appear in all technology sectors including recruiting. In some cases pricing will be disruptive, causing an exodous of price conscious users away from traditional vendors. The lack of completeness in the service offering for these services will cause larger and more established firms to stay put with their existing solutions.

3. ATS vendors will continue to add more and more into their core offerings by continued development and integrations with 3rd party solution providers.

4. US invasion. Seeking new markets, US companies will look overseas to sell technology wares beyond US shores. Look for foreign offices to be set up both in the CRM and recruiting technology space.

5. Continued use of hiring metrics that track throughout the hiring process into the ATS/CRM. Currently most assesment tools are "islands of technology" that do not integrate well into true workflow in the recruitment process. Look for assessment prices to drop, look for consolodation in several vendors, look for significantly improved workflow processes to build bridges to those islands.

6. Beyond resume parsing. What is next? Video resumes, combined with assessment, combined with audio interview transcription. Combine all that and create a "real 360 assessment" of a candidate. Basically, candidates will start to get poked and proded beyond what they have ever experience before. Since their will be many, unrelated vendors doing this at the same time, candidates that have to go through multiple different processes will start to push back. Look for this problem to increase until there are a few vendors left OR there is some standard based technologically on XML, that will allow a candidate to bring any assesment with them to the next job. There is a potential here for government intervention to give rights to the job seeker, privacy issues, etc, etc.

7. Broadlook will release Profiler 4.0 and Diver 2.0. Both are head-turners! Profiler 4.0 does 5 companies at a time, current tests show 10X speed in tearing though lists of companies. Example: Entire INC 500 list and contacts at those companies extracted in real time in 45 minutes. Done on standard cable line. WOW! nuff said.