Why Recruiters Fail to Innovate

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?

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.

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.