Tuesday, 7 June 2011

21st Century Dinosaurs

It’s a well known fact that recessions breed disruption and change. Complacent businesses are suddenly undermined and new aggressive competitors enter the market. Hard economic times are the forge of new ideas. Businesses started in the deep freeze of economic stagnation can flourish when the sun shines.

The recruitment industry is facing a double hit. The cyclical challenges of the last few years have made many businesses re-think their processes and expectations, but there’s also undoubtedly a long- term structural change whose effects are becoming obvious. The established businesses in recruitment should be looking over their shoulders. Senior management should be asking how their business is reacting to these changes.

There’s an assumption that people wish to be secretive about their job hunt and that the recruitment industry earns its money by winkling good candidates out of dark unseen corners. This attitude was changing even before the recession. When GAAPweb launched its CV database in 2008 over 40% of the candidates were happy to have public profiles and this willingness to be seen was not age sensitive. In fact, across the age demographic, there was no significant difference in the percentage of public profiles: Finance directors were just as happy to be seen as junior part-qualifieds.

The rise of social media has undoubtedly changed candidates attitudes towards privacy. The ubiquity of LinkedIn and a permanently visible CV means that we’re all on view all the time. The recession has enhanced the effect – especially as the UK moves towards growth again. Candidates are now more confident about moving, but are still chasing relatively fewer roles. They are becoming more naturally promiscuous and overt in their job hunt.

Employers are asking the obvious question: “ if candidates are so visible, why am I being charged a premium  for a 3rd party to make contact with them?” In a world where up to 85% of candidates offered by recruitment consultancies are originally sourced through online channels, those consultancies are going to have to work harder and harder to justify what value they add.

Over the last ten years there have been numerous claims about the ‘next wonder tech’ that will transform the recruitment industry. Many of these claims have been hyperbole, proven to be wildly optimistic when confronted with the detailed needs of a selection process. This may still be true, but the work being done around semantic matching engines (and not just in relation to recruitment) is hugely impressive.

There’s a host of semantic tools and platforms that do an excellent job in automatically understanding content and generating automated taxonomies and meaning from that content. Understanding CVs and profiles is not being ignored in these developments. Perhaps more importantly, these engines are picking up content from other sources. The best of them can now go to LinkedIn, twitter and even facebook to build a deeper profile of a potential candidate.  When this is overlaid upon a structured view of job responsibilities and requirements (which can be generated by human hand or automatically) the accuracy of the match is very good. It’s easy to ignore the technology factor,  but expensive humans will not be the best tool to undertake,  even quite deep, resourcing tasks for ever.

The advantage these tools have is that they will always be watching. They will pick up profile changes and job moves faster and more consistently than the best human researchers will ever manage. And they will work. If not now then soon, but the best of them are very accurate now –especially in well defined disciplines.

The key consideration is that by automatically converting unstructured data (e.g. CVs) to structured data (databases) it’s possible to run matching algorithms and to use machines to understand content. Those that doubt this should look at the dating industry and its growing sophistication. Agencies will have to ask whether they’re prepared to bet against tools that provide 95% of the accuracy for 2% of the cost.

Social Media
Social media and social recruiting has become something of a hot topic recently. Its rise has been met by - quite frankly - baffling denial. It seems that large chunks of the recruiting industry are unconvinced that social recruiting can be effective.

The fact is that social recruiting was the only way of finding a job for the vast majority of job-seekers before the rise of the jobsboards and online job advertising. Print advertising could only ever carry a fraction of the roles in the marketplace and for everybody else it was a question of working through who you knew, who they knew and mass broadcast of begging letters and speculative CVs. Social media reproduces these workflows exactly. It will work because it represents a natural way of societal operation.  It will be made to work because employers are catching on that fact.

In truth employers don’t have to struggle to make social recruiting work. In the same way that it matches candidate workflows it allows employers to formalise what’s always happened and ask  “Does anybody know someone who could....?”

New propositions
As we move out of the recession some of its legacy is starting to become obvious. Several large businesses are more enthusiastic than ever about reducing their recruitment costs and questioning the value added by their traditional suppliers. Diageo have cut their recruitment agency spend by 70% in the last 14 months and intend to go further. A major leisure company has just undertaken a huge growth programme (including upwards of 50 new hires) without going near an agency. Many corporates are reviewing how they hire and how much it should cost.

Start-ups are responding. All around the country businesses are being set-up that exploit some or all of the factors described above. Typically their charges fro placements made run at 2-4% of salary. There’s lots of different models with lots of different skills. Some of them won’t survive. Many will.

The dinosaurs died out because they failed to adapt.

At the very minimum, recruitment businesses must start to ask whether their value propositions are holding out and will continue to hold against the recessionary and structural furnace that surrounds the industry. Head-in-the-sand ignoring the situation is not an option. Whether you are a junior starter or senior management you must ask the questions of your business that will prove that it is adapting.

Good operators will survive. Those that add value, can justify that value and work to change their practices to produce something new will always survive.

But I’m not optimistic about the rest. In recent months I have heard the following statements from otherwise sensible (and successful) recruitment consultants:

 “Online will never work for roles over £50k” – The average salary on GAAPweb was £48.5k...in 2008!
“Senior people will never put their CV publically online” – theladders.co.uk now has 70,000 people in their databases, all filtered and earning more than £50k
“I will always be worth my 20% fee – even if I can’t actually explain my value add” – Mr Rex, T, I assume.

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