In the past two weeks I have shared data about the recruitment industry globally, that Barry Asin, the President of Staffing Industry Analysts discussed at last month’s RCSA International Conference, under the two categories of The Industry Today (Global staffing industry sales top $400 billion) and Success in the Near-term (Globalisation, technology and outsourcing drive recruitment trends).
In the final part of this series, I will examine the four possible futures that Barry speculated on as possible long-term scenarios.
He labeled each of these possible scenarios as follows:
- 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:
- Compliance/employer of record
- Niche expert
- Insurance/risk manager
- 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.
- 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.
- 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.
- 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.
- Embracing the science of recruitment (while not forgetting the art)
- Being a talent expert, both generally and in your niche
- Having a strategic recruitment offering, not just a transactional one
- Learning from, or replicating, relevant internet business models
I couldn’t summarise the whole issue of the future in our industry any better than with the quote Barry used to conclude his presentation:
‘It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.’
Note: Although this quote is attributed to Charles Darwin there is no evidence that he ever wrote or said these two sentences attributed to him – it is a paraphrase of Darwin’s work, attributed to Leon C. Megginson, Professor of Management and Marketing at Louisiana State University).
The RCSA conference confirmed that the recruitment industry is changing and these changes are coming from every angle. In many ways the recruitment industry is now just like any other industry – it is consolidating, it is not growing quickly, it is subject to disruptive technology and practices, margins are shrinking, costs are rising, and buyers are increasingly mature in their purchasing decisions.