Skip to main content
EmploymentHuman ResourcesRecruitment

The Uncertain Future for Recruitment Agencies

By November 8, 20126 Comments

I’ve had a number of reasons to ponder the future of recruitment this week, particularly on the agency side, and it’s been a week of incredible conflicts.  This time of year is always a time for introspection, as things wind down a bit towards Christmas, and the general sense I get is that agencies are getting quieter, with less roles to go at.  On top of that there seems to be a general sense of weariness from a tough year’s trading, the gains made during 2010 – 2011 dwindling and dissipating again as global economic woes continue to pound and buffet our own small and effectively powerless economy.

I suppose this introspection has been mostly provoked by an article I wrote this week for the HRINZ magazine.  Their December edition is focused on recruitment and they asked me to pen my thoughts on the small topic of The Future of Recruitment!  I’m always gaining influence and ideas from those around me and a lot of what I heard at the recent RHUB NZ conference contributed to my thinking.  As did last week’s graduate recruitment seminar held by Talegent.  As do various blogs and articles I read, clients I consult to, candidates I talk to.  Even the conversations I have with my wife who has recently returned to internal recruitment…

So here is what has got me thinking…er…less than positively about the prospects for agency recruitment:

  • Most of the talk at RHUB seemed to be coming from internal recruitment leaders who claim they now only use agencies for between 1% – 3% of their roles.  They genuinely wonder why on earth anyone would want to work agency side.
  • This was followed up by similar comments at the HRINZ Recruitment Special Interest Group on Tuesday.  The attendees were 90% internal recruiters with the only agency representation I could see coming from Frog, Randstad and H2R.
  • I am yet to hear a single positive comment from any of the successful agencies on the new All of Government recruitment services panel.  Apparently after all of the kerfuffle and goings on, many Government agencies and departments are still yet to sign up and join in, including MBIE who ran the whole tender process to begin with.
  • LinkedIn continues to gain momentum and with their increasingly sophisticated Talent Solutions products have planted their flag much more firmly in the internal recruitment camp than the agency side, who were the ones to initially help them expand and grow.
  • At the Talegent seminar last week I shared a room with a large number of smart, professional and innovative young recruiters all focused on the competitive Grad recruitment space for large corporates.  I couldn’t help thinking that 5 years ago at least three quarters of the room would have cut their teeth in agencies, whereas now these guys have gone straight into internal.
  • This week I have learned of three more senior figures in the New Zealand recruitment sector leaving their roles in agency.  Some to go internal, and some to leave the industry entirely.
  • The SME market that agencies are rightly targeting as better prospective client bases are clearly not in good shape either, with the surprise leap in unemployment to 7.3% suggesting hiring and growth amongst these businesses is tightening even further.

But wait…

Before you join me to wallow in self-pity and start slashing your wrists with your rusted old Mont Blanc pens, is it really all so bad?  I for one still love agency recruitment.  I love what I do, I work with some brilliant clients doing great things for New Zealand businesses.  November is shaping up to be one of our best revenue-wise all year and the pipeline for 2013 is starting to grow.

As Julia Stones reminded us all after the HRINZ evening, we in recruitment can get a bad name, but many of us out there persist with operating with integrity and quality delivery and we can still hold our heads high that what we do really does change lives.

And how about this?  Last night we held our second Recruitment KickStart seminar for people interested in entering the agency world of recruitment.  Run by our very own Estelle Bosson, it was well attended with ten aspiring new recruiters who, given the truth about recruitment “warts ‘n all” came out energised and pumped about the career they could face.  As did the recruitment agency owner who came to talk at the event, in doing so reminding himself of everything that he felt passionate about recruitment.

OK, let’s face it, agency recruitment is under attack from all sides.  Many want to see it fail.  But it won’t.  Sure, it will need to adapt, become more agile, cope with less roles, more specialised assignments, possibly even unbundled services.  The way you recruit might need a shift in mindset.  The overheads will need a tweak and the pricing may need to be more creative.  But there are too many good people doing awesome things in recruitment agencies for it to suffer more than a temporary setback.

Let me hear your thoughts, whether agency or internal side, about where you see the future pathways for recruitment agencies.  I feel much better for getting that off my chest, thanks for listening.  The sun is shining across New Zealand today, get positive and have a great weekend.


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.


  • GaryBt says:

    Very valid comments on the general market. I only hope that the “Flick n Stick” agencies have to leave the market as things tighten up. There will always be a place for quality and recruiting with integrity. With over 20 years in the same segment the demand for high skilled candidates and lack of tolerance within companies for mediocrity of performance are the trends were are seeing. BUT unfortunately these same clients are putting pressure on us to conform to their terms of business with a drive to lower their recruiting costs and wanting us to wear it. Change is certainly afoot.. . We can ‘not play’ their game for a while but if we do play how do we maintain our quality while trying to absorb costs?

  • Fiona Harland says:

    Having worked Internal , Global and now owner of a Boutique External agency i can happily say that i still love the recruitment game. For me now having the flexibility to recruit in my style ….Create my own personal KPI based on my own work ethic keeps me coming to work. I just enjoy the business of recruitment regardless. I believe for those who still have the passion it won’t matter where you work ..internal or external. Both are complimentary and relevant in the market. Its a network of like minded individuals where we should still work to support and drive healthy competition ..BUT you need to like/love what you do and for the right reasons.
    I write this while sitting in the sun in Wellington as i take a break from recruiting for a Global Brand we support as an external agency NZ wide.

  • Mark says:

    I hear your thoughts Jon – yes before everyone runs and jumps off the Harbour Bridge without AJ Hackett attaching the cord – we must remember internal recruitment has been around just as long as agency recruitment and lets face it, agency recruitment can have more challenges but typically known for bigger pay packets, depending on performance of course. When the going gets tough the tough get going… there is a number companies right now that need that special someone and they’re willing to pay for it – it just depends if you can get to them first…pick up the dog and bone and make something happen!

  • Kevin says:

    First of all Jonathan may I suggest that tonight you open a lovely bottle of Central Otago Pinot Noir because it will probably make you feel so much better.

    You know, those of us who have been around for 30 plus years in this sector (I hate the term industry…) are simply experiencing deja vu.  I recall similar sentiment after the crash of 1987, the further fallout in the late 1980s, the cuts in the early 1990s, the Asian Crisis, 9-11, and the onset of the GFC.  Same cloth, different cut, but same outcome.

    You might say it’s different now – and it is – because we have technology to contend with.  But in the end, as I’ve said so many times, and in this blog, the basic economics of how we as a sector have operated has created internal recruitment.  But there is good news!  Now that a big chunk of the market has “negotiated” lower fees, we suddenly become more commercially viable.  Some internal recruitment functions will stay, but others, as a fixed overhead, will go.  But it will take time.  The next step dare I say it is that the private sector will wake up and say “hell, the public sector’s getting single digit rates, why aren’t we?” and then watch what happens!

    The other thing that doesn’t help us is that we’re an “isolationist” sector.  We all operate fiercely independently.  I tried many years ago to bring a group of independent recruiters together and it failed because some couldn’t see past the end of their nose.  And when something innovative or revolutionary “hits” our sector, we push back and try to preserve the status quo (as in the lifestyle we have been used to).  I was at a function the other night attended by the top echelon of business leaders and one talked about how our new economy now has to operate as a “collaborative” one.  I couldn’t agree more.  AoG is a collaborative approach and instead of lamenting about what it’s supposedly NOT doing, we should be delighted by the lifeline we as a sector have been given and embrace it.  It will take time to get in place as there’s 300 plus Eligible Agencies for them to potentially bring on board, so give it time, and stop being negative about it. 

    And you’re wrong.  MBIE is in, as are some others big Agencies, and from contacts we have made, there are many others close to signing or currently in negotiations.  I for one, am very positive about AoG, and so are all of our team.  So there, Jonathan, you can no longer say you haven’t had one positive comment!

    Again I repeat, like any other sector we have to adapt, and for too long we have not.  It will take time for the traditionalists in our sector to change, and some won’t, and the transition will be painful for many.  We did it years ago and look forward to others finally joining us (if you dare…)

  • Tony says:

    Jon I am shocked and very surprised to read your comments. Certainly I am the first to be honest if the market is not looking good, however I must say all year we have seen an increase in performance especially over the last six months and the outlook on the whole is looking good for our business. Perhaps the economy is a scapegoat for poor internal training, poor methodology and management. Just putting it out there!

  • John says:

    I think you need to widen your network Jonathan as it seems to be very skewed toward internal recuiters and accordingly life would look rather pessimistic being from an agency. However it is all a matter of perspective. I finally agree with Kevin on this one (albeit I make no comment re the AoG). Agencies will have to change methodologies, pricing etc but isnt that synonomous with remaining valid and in business. While there currently may be some comfort in being internal, given the economy and increase in unemployed, layoffs, downsizing, closures etc, if I was an internal recruiter I would be looking over my shoulder and watching the turnover stats very closely. Its a conundrum for internal recruiters. Be really good at your job and retention improves and recruitment requirements drop. Who now loses their job if job growth doesn’t match or exceed numbers leaving. It appears to me that it is only the large enterprises that have and can afford an internal recruitment team. These also tend to be the organisations who’s profile can attract candidates. Not every organisation has the pulling power of an Air New Zealand, NZ Post, or ASB. Given the very large proportion of businesses in New Zealand classified as SME’s who recruits for these organisations? Personally I think this is currently the real market for Agencies and therein lies the challenge for large recruitment companies. How do they adapt and match their market as it is their lunch that is being eaten by the internal recruiters, most of whom they trained. Who is going to train the internal recruiters if agencies become extinct ? (I know its not going to happen but it is worth the thought). I have been in HR and in the Recruitment sector now for over 30 years just like Kevin,and I have seen these sorts of trends come and go i.e. bring recruitment indoors and then divest when the cost gets out of line. In this current market with such a talent shortage, candidate attraction and retention is not easy as we know and accordingly if your organisation is not easily recognised then internal recruitment can be very difficult indeed. My personal view as an HR Manager was that there are certain functions which are NOT HR. These are payroll and recruitment, both of which should be outsourced to maintain objectivity. They also have no relevance to your core business. The HR function is to develop, train, ensure succession planning is in  place, and to maintain industrial relations policies and procedures.

    To some extent we all recruit on the basis of our own values, experience, training, and dare I say it predjudices. The question must be asked of an internal recruitment team do these factors result in a long term lack of diversity on many levels and in many forms. How objective can you be when you are constantly looking inwards and at the same jobs. Sure you know your organisation, its values and culture, but is this entrenched or consatntly being questioned and updated to remain current? or does it result in a blandness of culture constantly reenforced by the recruitment of people in the same image and lacking in differences?  

    I could continue to find many reasons for why an agency should not fear extinction from internal recruiters but I also understand their relevance. Great for large organisations with healthy turnover (thats not too high nor too low) able to sustain a group of people focussed on the dark art of recruitment.

    So Jonathan and others, fear not the future as there is no reason to fear change or trends. Recruiters whether they are internal or external are great people working with a passion just with a different and personal perspective driven by their inherently competitive natures.