The recruitment industry is next up for disruption

Recruitment industry

The last two significant inventions in the recruitment industry were made in 1994 when NetStart Inc. were established. Software sold to companies for listing job openings – moving job ads from paper to online and again in 2002 when LinkedIn was created making networking and search(headhunting) much easier.

The big players are starting to make their move

We have just seen Microsoft’s acquiring LinkedInfollowed by Facebook and Google who announced that they will now develop their solutions within recruitment – It is amazing how a $26.2 billion purchase (LinkedIn) can wake-up the sleeping giants.

The future of work and the gig economy

People are changing jobs more rapidly and we see new organisational structures taking over.

One of the reasons why LinkedIn can reach an evaluation of §26.2 billion is not just the state that they are in today but also its future potential. I recently read an article where it was indicated that 35% of U.S. economy now are freelancers.

More of us are working in organizations employing a mix of freelancers, contractors, consultants, and full-timers

– explains Jonathan Younger, co-author with Norm Smallwood of “Agile Talent: How to Source and Manage Outside Experts.”.

We see a tendency of candidates changing jobs more often, making career planning across companies, and terms as “gig economy” and “career mercenaries” are rising and businesses are contracting with more specialist and freelancer to have the right flexible workforce for their specific current needs, all in all putting more pressure on transparent and efficient recruitment. Therefore, looking at the future of work it is evident that recruitment will play a bigger role in organizational performance and company will ask for more intelligent, transparent and efficient ways of recruiting.

8 out of 10 people find new jobs through their network. Furthermore, in candidate scarcity markets (IT, engineering, etc.)  people are difficult to reach as they often have jobs, are not actively looking and are often contacted from headhunters. At the same time, we see that:

• Job advertisement is slow and ineffective, you “spray and pray” in the active seeking candidate market with no knowledge of whose attention you reach and no guarantee of success.
• Headhunters are expensive (15-35% of the hired candidate yearly salary), slow and old school in their work style. They work from assignment to assignment and transparency in the process is limited.
• Personal network seems the best way to recruit successful people, but nobody is offering a structured way to work targeted and strategically and active with networks

Over the next five years, the number of traditional recruiting companies will fall dramatically as companies choose transparency and lower fees over pushy recruiters

– (Joel Cheeseman, Recruiting tools)

Working with MPS

As part of my Henley Executive MBA study, I am at the finishing stage of analysis in Managing Processes and Systems (MPS) a gap’s and disconnects analysisof the recruitment market, and I will in the next share my key findings from the report.

The MPS course is designed to align and design system and process to the strategic requirementsof the organisation or market. Further, we are working with how to implement a process through project management techniques and how to evaluate and improve the outcome.

To get a grasp of MPS, it is important to understand that processes and systems are defined in a very broad manner. There are systems and processes everywhere, and there are always potential for improvement, it is only a matter of focusing on the once where the effect is significant enough.

As it is part of the Henley learning style, that we always work with our real life, present cases and as I am developing a recruitment consultancy and still evaluating where to find my “niche” I choose to do a gap’s and disconnect analysis of the recruitment market.

I run my recruitment company and have earlier worked in several internal and external recruitment functions, + 10 years of experience and have thereby worked with quite a bit of the consultancy out there and process-wise the solutions are very much the same (the differentiation is primarily within the execution).

Illustrated in the following SIPOC model.

There are of course deviations process wise from consultancy to consultancy, but what I have found is that the variations process wise are limited, and the deviations are often more a matter of how the processes are executed.

The recruitment process does primarily vary in the depth of the job analysis, search and/or selection, when the company meets the candidates (before or after test and references), the tools used for testing, etc. and the length of the guarantee.

This is not to say that the quality is the same, because there are big deviations in the ways that the process is executed. With this the quality of the consultant’s ability to understand the company and the specific needs of the role, back office, and search methods. How candidate and client communicationare handled, planning and structure of process, interview & reference skills, follow up and onboarding, etc.

Of course, all recruitment consultancies are not the same, and I am therefore only able to give overall indications of where there is room for improvement in the recruitment industry from an MPS perspective.

The recruitment market is characterised by a few big players combined with an extensive list of small primarily new actors (myself included), and there seems to be a tendency of opening, merging and closing quite rapidly in direct correlation with market conditions. One of the reasons for this can be that it is a market that it is quite easy to start up in, and by looking at the Transforming Resources(SIPOC) you don’t need that much; a CVR number, a phone, a laptop and a meeting room – and you are ready to go.

In the following are my key findings, where I see a huge room for improvement:

1. We tend to measure recruitment success on input, not output, meaning the number of hired candidates that sticks with the company for six months (typical guarantee period) instead of measuring the success of the recruited candidates, do they live up to expectations and deliver on the critical job factors/KPIs
2. Elaborating on the thought of measuring success by output, there is a high potential in putting more attention to the process after the hire. Using the findings from the recruitment process (job analysis and candidate evaluation) to design an individual performance training to get the hired candidate fast up the performance curve and eliminating risk for an unsuccessful hire.
3. We tend to put all attention (more or less) on the company (as they pay the bill) and forget to prioritise the candidates who are an essential asset for a successful delivery, especially the candidates that does not fit the particular role. There is great potential in taking a more long-term perspective to candidate handlings, offering things like cross-company career development, to bring value to the candidates and to create ambassadors in the market and as a result of this enhancing candidate and client referrals.
4. We tend to evaluate candidates on past performance (chasing the right CV’s) instead of evaluating of potential and organisational fit.
5. One size fits all thinking and not knowing what to look for. There tend to be a tendency of not narrowing the profile down in the job analysis due to insecurity on what the market has to offer; if you get to specific in the profiling, you limit room to bring in something new.
6. Recruiting to fill holes instead of being a strategic partner supporting clients realise their strategy and succession planning, by taking a strategic analytical approach to the job analysis.

A diamond is a chunk of coal that is made good under pressure

– (Henry Kissinger)