Will the recruitment industry, as we know it, exist in the same way in 5 years from now? There is a growing school of thought that suggests not. We have recently noted agreement among HR and Talent Acquisition heads, as well as recruitment industry leaders that substantial change is afoot in the industry. We suggest that this evolution may be taking place quicker than most realize.
It is clear that generalist executive recruiters are having a particularly hard time these days and many seasoned consultants are now struggling to make a good living. Industry leaders are coming under increasing pressure and scrutiny as a result of mediocre financial results. Many experienced consultants and managers, disenchanted with the same old ‘usual suspects’ in terms of large agency recruitment brands, are joining start-ups, establishing their own firms or moving in-house to corporate Talent Acquisition teams.
Recruitment Company Pain Points
Recruitment firms today are feeling the impact of more widespread use of Applicant Tracking Systems (ATS) by their clients; the emergence of LinkedIn and the growth and increasing sophistication of clients’ internal recruitment teams. These factors are further amplified by the complexities of an economic environment where established geographies are stagnant and emerging/growth markets are the new focus of clients’ investment in talent.
No single factor has played a greater role in driving change in the global recruitment industry than LinkedIn. It has reduced the value of a candidate database since this is now accessible online and available to all. Indeed, in the past, the value of a recruitment agency has been based in part on the size and quality of its candidate database. LinkedIn has also removed the need for clients to use recruitment companies for their research capabilities, since it enables clients to instantly see for themselves what talent exists in other organizations.
At the same time, clients are getting much smarter about deploying another technology — the Applicant Tracking Systems (ATS). With this, the days of hiring authorities keeping resumes in drawers and relying on external recruiters to keep them current on the movement of external talent are gone. With the use of sophisticated systems, companies are now able to track talent effectively — often from country to country within regions or around the world.
Client-Centric but Not Talent Centric
Recruitment firms, on the other hand, remain very poor at moving talent across regions or around the world. This is due to a large extent to out-dated compensation schemes which reward individuals based on results within their own geographies. These compensation structures often discourage the proactive internal sharing and external marketing of the profiles regionally and globally qualified talent. The large recruitment players also suffer from a lack of sophisticated processes for sharing top talent between countries and regions. In contrast, the top tier executive search firms have robust, specialized global practice groups and they are compensated for global activities in a much more clear and meaningful way than the major mid-market players. However, their ‘don’t call us, we’ll call you’ approach to senior talent poses inherent limitations and hinders their ability to quickly and effectively penetrate new geographies or market sectors.
Due to rapid growth within emerging markets, we are now seeing a situation whereby top talent and the best opportunities often do not exist in the same place. The inability of many recruitment firms to effectively and consistently manage a global talent base and rapidly invest in and penetrate new geographies means that client organizations have been forced to become more self sufficient with regard to taking advantage of the growth potential of rapidly emerging markets.
Agencies Focused on Survival, Not Innovation
Meanwhile, the more the large and global recruitment companies struggle financially, the more they are inclined to change their own leadership, thus setting up a vicious cycle. In recent years, recruitment company boards have frequently gone outside to hire ‘professional’ leadership from other industries, often at vast expense. Time and time again this has failed because recruitment is a fast moving, very tactical and operations-driven business where industry experience and expertise (and people skills) will always trump MBA’s and non-industry specific strategic skills.
Recruitment company leadership lacking in hands-on experience soon discover that they are unable to add value to the recruitment process. These industry rookies, although very experienced in general management, are not in a position to innovate and inspire the teams under them and lack the skills to demonstrate their value to the organization’s clients. The added layer of cost, and the fact that innovation tends to be driven by ‘visionaries’ at the top, means that many recruitment firms with new (or the wrong) leadership are too busy struggling to survive, let alone innovate.
The Way Forward
The way forward for recruitment companies will depend to a large extent on their current circumstances, in addition to their vision for the future. At The Chapman Consulting Group, we have been able to prosper and grow, due in part to the following factors.
- Specialization. We only do one thing which is global HR search. This has allowed us to minimize complexity and cost; and rapidly expand globally because we deal with a small community of customers. As with all specialists, we are able to bring value to our global community through a robust understanding of their profession. This is particularly critical in HR search, since the recruitment of HR professionals does have unique dynamics and processes versus non-HR recruitment.
- Seamless Global Capability. This is underpinned by a consultant compensation scheme which does not inflict geographic restrictions which conflict with customer needs.​
- No ‘IT Guy’. Technology and innovation is driven by the people in the business. Not by ‘out of touch’ leadership or an ‘IT guy’ who has no search experience. This allows us to innovate quickly, with purpose and vision.
- Talent Focused. We do not differentiate between ‘clients’ and ‘candidates’. Each individual can commission a search or be the talent for a search, depending on their lifecycle within their own organizations.
What Generalist Firms Must Do to Stay Relevant
It is already clear that HR and Talent Acquisition leaders no longer need external recruiters to deliver names and resumes for widely available skillsets in markets where little growth is taking place and profits are flat or down. For the most part, this talent can be capably and cost efficiently hired by internal recruiting teams. On the other hand, we believe that two recruitment firm capabilities which will be very much in demand in years to come will be the ability to provide highly specialized executive talent (and advice) locally, regionally and globally; and the ability to add value through more scientific, professional assessments and referencing processes as part of the recruitment process.
Due to today’s changing economic and demographic environment, corporations have an increasing need to be able to access hard-to-find talent and expertise in difficult-to-navigate geographies. Even more than before, they will require the expertise of specialist recruitment partners who can be trusted to provide strategies and advice on attracting and securing highly skilled and specialized talent as well as the wherewithal to deliver the talent itself. Corporations will also lean heavily on these firms to help use their persuasive influence to sell their employment proposition to the best specialized e xecutive talent in the market.
In order to deliver the above, generalist recruitment firms will need to adapt to achieve a higher degree of specialization on a divisional basis. They will need to become more globally-minded in addition to simply having a global presence, and their compensation plans will need to follow-suit. As discussed above, generalists will also need to see beyond ‘the database’ since this is now effectively digitized and commoditized. Large scale structural changes will therefore be required in terms of their back offices and the kinds of support they provide to their ‘front end’ recruiters. Generalists will also need to be faster and smarter when it comes to technology and innovation.
Finally, the ability to consistently, reliably assess the suitability of talent for the organization is something that very few companies or their recruitment partners would claim to excel at. The ability to ‘add science to the art of recruitment’ is the new frontier of the recruitment industry. It’s very early days but most major search and recruitment firms are developing and/or hiring the talent and tools to achieve this capability. Today they are struggling with the challenge of how to integrate professional assessments into the recruitment process and how to charge for this service. Being able to develop tools and processes that work across different cultures and languages increases the degree of difficulty. The recruitment companies which innovate and lead in the scientific talent assessment space will most certainly prosper in future.
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