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One of the questions I am commonly asked during training sessions or in conversations with individual recruiters and owners is about the future of agency recruiters, especially given relentless advances in technology, of which ChatGPT is just the latest.

I always answer that I am very positive about the future of agency recruiters; in fact, I see the role of agency recruiters becoming more important, not less, in the coming years.

The first reason for my sunny optimism is simply demand and supply.

All the many, many owners of HR tech start-ups who asserted the recruitment industry was broken, exploitative, inefficient or a waste of time and money have been proven comprehensively wrong.

The financial results across the recruitment sector in the past two years demonstrate that recruitment agencies are providing a valuable service that end-users are prepared to pay for.

New recruitment agencies are opening for business every week.

Employers, across many surveys, continue to rate ‘hiring and retaining top talent’ as a key business challenge.

More than two-thirds of the leaders surveyed last August by Harvard Business School and BCG researchers reported that filling positions for lower and higher-wage workers is critical for their organisation’s ability to compete, both in the next 12 to 18 months and in the next three to five years.

When organisations cannot source these workers directly they are most commonly investing in external recruiters to fill the gap.

No matter how you measure it, demand for the services of recruitment agencies outstrips supply.

The second reason I’m extremely positive about the outlook for recruitment agencies is how many companies fail to execute the most basic and obvious tactics for hiring and retaining the employees they need.

The same HBS/BCG research referred to above revealed that most employers adopt a very rudimentary approach to what is regularly asserted in surveys to be their most valuable asset – talent.

When it comes to higher-wage workers, employers rely primarily on two basic strategies: increasing remuneration and implementing remote/hybrid work models (which already appear to be waning). They’re doing even less for lower-wage workers: In the HBS/BCG survey, fewer than half of respondents reported using even basic levers, such as health care benefits (not applicable in Australia) and pay rises to attract and retain lower-wage workers.

It seems in-your-face obvious to offer higher pay if you are consistently unable to find the quantity and quality of employees you need.

Employee surveys consistently report that candidates are primarily swayed, to join or stay, by money.

Comprehensive payroll data confirms that switching employers makes a significant impact to inflation-adjusted remuneration in a way that staying loyal does not.

However, just because I am optimistic about the future of the recruitment sector it does not mean that it’s going to be a rising tide that lifts all boats.

Inflation, for decades largely a non-factor when it comes to candidates’ salary expectations, is about to become, if it isn’t already, a major factor in switching employers.

The latest inflation data for Australia reported a new 32-year high of 7.8% in the final quarter of 2022, rising at its steepest pace since March 1990.

There is no guarantee that the current quarter’s inflation rate will decline.

This rate of inflation is unprecedented in the career of almost every recruiter younger than me (56) and, consequently, creates a situation where almost every candidate will be looking for a pay bump of ten per cent, at an absolute minimum, to switch jobs.

Late last month the National Australia Bank’s monthly business survey reported worsened business conditions for December with a reading of 12 points, a decline from November’s print of 20 points. A level above zero indicates favourable conditions, while numbers below zero represent negative conditions.

A recent LinkedIn survey of more than 1000 Australian workers over 18, found that 59 per cent of respondents are considering a switch from their current job in 2023, with the top reasons for switching nominated as more money (40%) and better work-life balance (31%).

Declining business confidence and heightened candidate expectations with respect to pay (to stay or switch) are a recipe for a perfect storm of, on one hand, candidates wanting a significant jump in remuneration to move and, on the other hand, many cautious employers wanting to contain their costs, especially salaries, ahead of an uncertain year (or two) ahead.

This confluence of factors will put the spotlight on the negotiating skills of recruiters, the like of which has not been seen in the past three decades.

Generating jobs in 2023 won’t be too difficult however, I predict it will be the recruiters who demonstrate the best negotiating skills who will gap their peers, at an unprecedented level, when it comes to fill rates.

Don’t be complacent about the number of jobs in your pipeline; instead be brutally, yet respectfully, realistic (with yourself and your client) about the remuneration package it will take the get the deal done to maximise the likelihood you get paid for the hours you have invested.

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