As I sat listening to news, for the third time this week, of another senior recruitment industry operator resigning from their lucrative desk in order to set up for themselves, I wondered where things were heading with the agency side of our industry.  My first Whiteboard blog post of 2017 acknowledged the increase in recruiters shrugging off their corporate security blankets to go out alone, but even back then I didn’t foresee the trend picking up even greater momentum.

What bothers me most is the questionable long-term viability of this movement.  I’m fortunate to be in a position to be able to talk to many of those who make this move. Without fail, the short-term economics make perfect commercial sense. Once the restraint of trade period is navigated (sometimes more honourably than others), it’s often pretty easy and straightforward to re-initiate latent client relationships and get busy working on Permanent recruitment assignments. Particularly in a period of strong economic growth and just 4.9% unemployment, companies are crying out for the services of recruiters.

And let’s be honest, after years of teaching recruiters how they must boost their own personal brands to resonate with their chosen industry, those talent-hungry clients out there couldn’t care less what fancy recruitment logo resides beneath your grammatically suspect emails.

But it’s the longer-term prospects of this movement that give greater cause for concern.  The recruitment process, and how recruiters make profits, is very simple.  Particularly for those just deciding to stay working alone and doing just Permanent recruitment.  But what then happens a few years down the track when the economic cycle is more bear than bull and you realise you’ve made a job for yourself rather than a business with equity and value?

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It’s also the startling lack of innovation in recruitment that worries me.  An article in the NZ Herald yesterday suggests that only a third of New Zealand companies are embracing innovation and positioning themselves for the changes being wrought by the digital and sociological upheavals ahead.  My guess would be that even less than a third of recruitment companies are doing the same.  From all of my conversations, particularly with the new start-up recruitment firms, it’s very rare I hear anything new or exciting in terms of how they plan to deliver their service and commercialise their offering.

In the article mentioned, PWC’s Andy Symons says of the innovators out there:

“These are companies that solve customer problems; they see opportunities, use emerging technologies, look at customer data to understand how they behave and then create elegant solutions to specific customer problems which ultimately result in a commercial benefit.”

The thing is that recruitment, as it currently exists, pretty much works.  OK recruiters are reviled by jobseekers, repelled by many businesses, and begrudgingly accommodated by companies who haven’t worked out a better solution for themselves yet. But the undeniable truth is that the recruitment industry’s greatest innovation happened back in the 1980’s when some bright spark decided to offer their services on a “non win, no fee” contingent recruitment basis.

Contingent recruitment is our industry’s greatest innovation. And given how ludicrous it is that we run around working for free until, at the point when all the stars align and a placement is achieved, a fee is billed to a client that makes up for all of the failed efforts with other clients beforehand, it’s actually a bit sad really.

There are some recruiters out there trying to innovate.  Changes to how staff are incentivised, flexible working, offshoring sourcing, social recruitment campaigns are all examples.  But none have the same undeniable commercial impact of a contingent recruitment deal.  So really it’s little wonder that the allure of doing it yourself, when it’s still so easy to sell solutions this way, is proving irresistible to so many in our industry right now.

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My only worry is if companies start to see contingent recruitment as a problem.  If they start to recognise that having multiple recruiters all paying lip service to their staffing needs and flicking vaguely relevant CV’s in the hope of striking lucky isn’t actually solving their problems.  If those recruiters have nothing else in their locker, no understanding of emerging technologies or customer data, no appetite for developing “elegant solutions” outside of offering to work on a contingent basis, then they are closer to the precipice than they know right now.

If that happens, the ones who have started to innovate now, will remain relevant and important to businesses.  Those who haven’t will probably start innovating too late.  And that, as it stands, accounts for most of the recruiters out there.

Jonathan Rice

Jonathan Rice

MD at New Zealand rec-to-rec firm Rice Consulting and co-founder of on-demand recruiter offering Joyn. Recruitment agitator and frustrated idealist, father of two, husband of one, and lover of all things Arsenal and crafty beer.

2 Comments

  • Avatar Christine Seagar says:

    This is an interesting article, Jon. But I am unsure at some ends. First – NZ is so small. Here if you set up yourself you need to know people and your industry well. In NZ you have this small industry problem. A sales person no matter how well “technologically” vetted will ultimately not get employment if my client “makes some calls” in the industry and then says “buddies say no”. So the personal factor is more pronounced in NZ. This is more important than fancy software like HoneyPot in NZ. However – in tech recruitment that is more international HoneyPot would work for NZ as well and could make IT agencies redundant. I mean being in Germany I see the agency craziness that you will know from the UK and that is so different in NZ. Here fees in IT start with 30% and mainly UK agencies are in the German market (I’d love to hear what you think why this is) and they can pretty much get by with “CV flicking” and never having skyped or having met their candidate in person. Technical testing on agency side – unheard of! So these are just my unstructured thoughts on this very interesting article (and yeah I still love reading the whiteboard articles every Friday morning in Germany) and on the good, the bad, the ugly on either side of the equator. In some ways if it’s not IT or maybe construction engineering I think NZ remains a personal relationship economy coupled with neoliberalism – meet me, know my needs before I know them, find me the best candidate and I will pay on a contingent basis or in temp a hilarious PSA rate. I think the agency I worked for in NZ was very much into innovations. I am shocked coming to Europe and seeing what’s called recruitment and service here and how much money is made in that way. Is it sustainable? Who knows… On the other side looking at developments with Customise Group for example – you basically run your own show but you are a Partner in a business that is actually innovating – isn’t that possibly the future of recruitment in NZ? Billing really well and having the cool new tools available? Well anyhow – can’t wait for next weeks insights from your side

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