The Current Trend Toward 'Transactionalizing' Third Party Recruiting . . .

When it comes to the Recruiting World, something big happened in 2008. Something really big. However, most didn't take notice, and frankly, it's easy to understand why. As the economy began entering a tailspin, the Talent Acquisition Community looked to find solace in what they were told was the next big idea. Yep, while Social Media headlines and conversation gained momentum, Recruiters sprinted into a frenzied state of 'Friending Oblivion'. In a 1938-like "War of the Worlds" event, mass hysteria ensued as Recruiters started sending connection requests to each other (instead of the talent pool) at an unprecedented rate.

While Recruiters were hurriedly following the zombie mob to an unknown destination of Social Media Utopia, the real threat was developing right under our noses -- Recruiting was being transactionalized. As the Talent Acquisition Community was friending, online VMS (Vendor Management System) providers such as BountyJobs, Dayak, TalentHire, RecruitAlliance, etc., collaboratively hit the market hard with significant marketing investments. The VMS value proposition is straightforward - the Hiring Organization simply has to post a job description online while offering to pay the same fee to any firm who fills the position. Behind closed doors, the relationship between Internal Recruiter and External Recruiter is pitched as "overrated." Any form of communication outside of email? Pitched as "overrated." A partnership mentality? Pitched as "overrated."

If you think about it, it is these very philosophies that most External Recruiting Firms work diligently to overcome each and every day - as with any relationship, communication is paramount. So is a partnership mentality. Appreciating one another, earing each other's trust, and wanting to see each party achieve is what success is all about. Without this, you're "just another vendor." Yep, at that point, not only has Recruiting become transactionalized, but your efforts have become marginalized . . . and ultimately, you have been commoditized.

At the risk of speaking out of both sides of my mouth, I admit that for some organizations, marginalizing and commoditizing their former Recruiting Partners is a viable strategy. If Cost-of-Hire is the only metric important to the organization, and the overriding employment strategy is to hire mediocre and then hope to develop talent, an online VMS is the way to go. However, for those organizations that rely heavily on tacit interaction, complex insight, and judgment in a rapidly evolving business atmosphere (who Peter Drucker termed "Knowledge Workers"), I would ask Talent Acquisition Leaders to reconsider Cost-of-Hire as their paramount metric. While the lure of an online VMS is sweet, and the concept of never having to speak with an External Recruiter looks good in a marketing brochure, marginalizing and commoditizing those individuals who are actually walking among the talent pool you wish to more deeply penetrate will likely come at a great cost, both direct and indirect; tangible and intangible.

At the end of the day, it would be easy to blame the movement toward transactionalizing recruiting on technology vendors seeking to benefit by such short-minded psychology. Yes, their goal is to sell recurring seat licenses or siphon a percentage of each placement fee paid. However, the Transactionalization of Recruiting itself is the end, not the 'means' -- as we well know, there will always be new means to financially capitalize on the 'end'. The truth is that the buck stops with Talent Acquisition, the true creators of competitive advantage within an organization. Identifying, attracting, engaging, and closing another human being to join your team and come work for you is more a delicate dance than purely a transaction. Keep this in mind and you'll always be near the front of the pack.

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Permalink Reply by John W. Riley on January 23, 2009 at 12:54pm

Those web-site are taking a hit I hardly notice any postings anymore on them...plus they are black holes and most of my clients have tried those site with unhappy results. But i hear what you are saying. Maybe i will start one.

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Permalink Reply by Jim Durbin on January 23, 2009 at 1:22pm

I used to salivate when I dreamed of working for a firm that didn't have contracts with large firms. Such a target rich environment to be the only large firm in a town that didn't work contract staffing with the largest employers.

Of course, my bosses thought I was crazy, but let's remember that until recently, Robert Half had a sky high stock price in comparison to the other public staffing firms. Rumor had it that RHI focused on small to mid-sized businesses for high profit and no VMS or vendor lists.

Something scarier than Bounty Jobs and others? Sourcing and resume matching sent off-shore. If the quality is the same, but the cost is 10% less - what exactly is the point of employing recruiters in the large staffing firms and paying them big salaries? If your business is transactionalized, then you will become marginalized.

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Permalink Reply by Joshua Letourneau on January 23, 2009 at 4:35pm

Jim, might you be describing Microsoft, Deloitte, and Google? :) Each just burnt down their entire Sourcing Unit "like a cane field in a high wind." (courtesy of 'Secret Window').

Jim Durbin said:

Something scarier than Bounty Jobs and others? Sourcing and resume matching sent off-shore. If the quality is the same, but the cost is 10% less - what exactly is the point of employing recruiters in the large staffing firms and paying them big salaries? If your business is transactionalized, then you will become marginalized.

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Permalink Reply by Kimberly Easley on June 29, 2009 at 1:18pm

I work at a creative staffing firm and one of our largest accounts is trying to get us to sign a contract with a VMS. The problem is, with most of our VMS relationships, the middle man usually gets anywhere from 2-5% of the billing. In this instance, said VMS is capping the mark up at 55% to the company (fairly standard) but instead of receiving the standard 2-5% of the billing, they are getting 23%. We are to provide the talent, pay the freelancers, pay necessary insurance, unemployment, payroll taxes, pay for background/drug checks (in addition to the background checks we already run) and on top of that, we provide our freelancers with insurance, paid time off, 401K, etc.

Does this seem normal to you? It just doesn't add up. They've had a lot of vendors pull out of the contract because they can't justify the cost. It's likely we'll have to do the same. Would love to know what others are seeing.