Recruitment Agencies – You have 30 seconds to say your goodbyes, I’m coming to get you.

The client only ever showed the right hand

The client only ever showed the right hand

There are two things currently vexing the mind of this blogger – Firstly, how does Davina McCall continue to get a job on the telly when she’s a bit rubbish and secondly, when is someone going to sit down with the agency recruitment world and tell them that big bad corporate world has been actively planning their demise for the last decade ?

Now, as Davina has just rescued the nation from peril by ‘pushing herself beyond breaking point’ (copyright lazy journalists up and down the country) I guess for now I’ve got to tackle that other conundrum, make myself unpopular in the process with the agency recruitment sector and tackle the 800lb gorilla in the room. Hey ho. That’s just how I roll.

You see, before the clicking of agency recruiters exiting takes place from inside that particular cabal, this is not a lazy, ‘they are all a bit rubbish and untrustworthy’ sort of thing you see nowadays. Nope, I know where that goes and it isn’t clever or grown up. Bloody big generalisations never win an argument and the whole debate has become unnecessarily polarised anyway. Nope, there are good and bad in everyone (as Stevie Wonder would say on his keyboard) and up and down the internet are some great folk like Mervyn Dineen and Greg Savage trying their utmost to reinvent, re-educate and reframe the agency model but having been inside the corporate tent for 22 years I’m still scratching my big Irish head as to the question – why bother ? When conditions are perfect* the big switcheroo will be complete and the proverbial ass will fall out of that market they say. When it goes the way of the typing pool or the Filofax will it be mourned or celebrated ?

Statisticians suggest that in the UK alone there are some 10,000 agencies hitting pre-recession levels of £27 billion in revenue. 100,000 people, most are in owner-led start-ups (the backbone of this country’s stuttering economic recovery). The technology agencies are typically owned by a bald guy called Mark established in a soulless commuter town, whilst the sales ones are owned typically by a guy called Dean, who dresses like Del Boy Trotter and drives a hairdresser’s car. They all have one thing in common – they’ve fallen into recruitment in the hope of making a buck as it’s a typical low-barrier to entry type of affair. One day their dream will come true as a larger dominant player will purchase them as the market consolidates and they make their fortune. In the meantime, the fact of the matter is that they are lined up against the following might of the corporate world with the sole intent of eradicating the agency world at every turn:

  • The Internal recruitment teams are initially built and justified because of the high margin paid to agency recruiters and the ability to drive down this cost by doing it internally.
  • When scale hits, then an RPO relationship is added to the mix. Their commercial contracts are historically simplistic and transactional-based and predicated on offsetting against the use of agency recruitment spend. The phraseology is moving ‘bad’ money (agency revenue) to ‘good’ money (investment or bottom line). This tends to be in the area of bulk or volume recruitment and the maths make the case compelling – as long as the agency model is diluted. The big altar of Direct Sourcing is built and like a distressed beacon only turns to the agency world when the tools of the trade fail to turn up the right candidate at the right time.
  • When the model matures the case for beginning to cannibalise the senior search market becomes compelling by buying the skillset (search and research), establishing a configurable CRM and committing to own as part of a wider talent strategy. Moving down the value chain into the agency dominated mid-market becomes only a timing issue.
  • Generationally the baby boomers grew up with the concept of the search and agency model as a staple part of the corporate diet, as much as the PA and the private toilet. They could keep abreast of the market, their opportunity within it as much as undertaking a hiring process for themselves. Today and tomorrow’s leaders will be more accustomed to bringing the social and virtual network to work with them, tapping into that and refraining from the traditional agency model. Once again that’s what the corporate world hopes.
  • Social media and Technology has disrupted the world of recruitment. Those seeing it as a further opportunity to erode agency spend view LinkedIn as a ready-made candidate database. View video interviewing as an easier route to volume first stage hiring and referrals companies provide bolt-on technology to assist attracting a highly successful segment of the passive market at a fraction of the agency cost. Recently social engagement capabilities have emerged to help organisations build brand and stickiness and of course analytics helps dilute the age old conversation about the market, the candidate that the agency used to value as a subsidiary service.
  • Procurement and its ugly stepsisters finance and legal have at their core a dastardly purpose statement built on the premise that the agency can’t be trusted a and focus on driving down the cost of supplier relationships and the risk of contamination to the business.
  • Finally organisational unconscious bias is strong within the enterprise and it’s usually negative and fearful. I did it earlier in the article for comedy effect (but I wonder how many of you recognised the stereotype). I have never once come across a welcoming overture out of an agency’s earshot inside a business. No feeling of rapprochement and no business case that didn’t use the model as a makeweight for advancement in a clear zero sum game.

*When conditions are perfect – when talent acquisition meets talent development in perfect harmony, embracing technology as an enabler for sourcing and enlightened organisations seize the importance of candidate experience, all underpinned by perfect strategic workforce planning, then the game is up for the popular agency model. A huge factor in the success of the model today is the ineffectiveness of HR organisations to get their act in order but when that’s the only barrier then …..kaboom. Surely ?

Perhaps there is a future for the old agency as talent agents, similar to sports stars, and their revenue model is moved to the candidate as a sort of signing on fee. I read recently that this practice is beginning to take root in the highly competitive environs of silicon valley amongst technologists but perhaps there’s a wrap around service embracing candidate brand building through to package negotiation. The niche argument persists but surely if the market is consolidating then that provides less specialisation and more conformity. And if the business model for the owner-led agencies is ultimately to be bought for a price then is there really a long term plan or a greater intrinsic purpose centred on the candidate market or just a get rich while corporate dysfunction allows you to milk at affordable margins.

As I pointed out earlier this wasn’t about agency bashing – I’ve met some very capable folk there happy with the conditions they operate within and who have no wish to transition elsewhere in the value chain. This is about the phoney war that exists between client and vendor and cutting to the importance of the debate required for the sake of the talent agenda we need to embrace to fuel our ongoing economic growth and prosperity. Believing there are long lasting relationships between both parties (for different reasons) is just peddling a myth.

Finally, I guess if the perfect conditions do kick in soon, the recruitment agency sector can always look to Davina McCall to save the day !

And on that note and until next time – Please do not swear.

 

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19 thoughts on “Recruitment Agencies – You have 30 seconds to say your goodbyes, I’m coming to get you.

  1. A corker Barry! Agree with you on Davina McCall, and your head isn’t that big.

    I also agree that Agencies & Vendors developing long term relationships is a bit of a myth – I find that usually clients don’t remember the company, but they remember the individual consultant that did a good job for them. By this I mean, it is the hiring manager and the consultant, a connection between two people that is more likely to last.

    The only point I will make is that these “good” consultants rarely end up in RPO environments for several reasons. They also will continue to exist because their networks, contacts, and skills are extremely valuable in certain situations, and so can charge a premium. However, that does not stop RPO being a very commercial solution.

    • Cheers Harry. Much appreciated. The long term nature and the cosy public persona is a myth and the relationships are very tenuous. I’d rather we rallied sensibly around a collaborative talent agenda (I’m a dreamer like that) but the protectionism on both sides and the commercial realities get in the way of that happening.

      As for RPOs, don’t get me started 🙂

  2. I agree with much of this Barry, although I suspect there are more commercially astute, niche recruiters out there than you might imagine – few of them like Dean and Mark.

    But, as I think you allude to, their problem is potentially that this niche specialism does make them prone to the vagaries of that particular market and that many of them don’t know enough about recruitment in its more generalist meaning.

    When I first started using the Internet to bang my particular drum (how the contingency model is deeply flawed) around 10 years ago, agency recruiters thought I was either one of those ‘agency haters’ or a bit mad. Now that same notion is starting to take root and get acted upon by a small handful of agency recruiters.

    The 3rd party recruiting landscape is going through a fascinating (and slow) period of change right now, but is still full of inconsistencies and paradoxes. The industry is still largely in the grip of trainers and so called ‘thought leaders’ who only understand the type of recruitment practiced 15+ years ago and whose “innovative new thinking” in agency best practice is to replace cold-calling with automated email marketing. And for all the occasional robust stuff people like Greg Savage say, they’re still capable of aligning themselves with the same practitioners who are responsible for continuing to dumb down the agency sector.

    The primary place where agencies should look to, to find the answers to how they need to evolve is the inhouse sector. But they’re not. Instead they’re getting lured into a type of thinking that still has its roots in treating the client as if they’re stupid.

    In my opinion, the agency recruitment sector is a sick patient that is currently being treated by a nurse with munchausen by proxy syndrome.

    • Thanks as always Mitch. I tried hard here not to utter the unconscious biases that dominate this one. Mark in the blog is actually my brother in law who has taken his business from scratch to a very decent place now and so who am I to pee on his well-earned parade. The debate is still highly inauthentic (short bursts of love from the corporate when distressed hiring is in vogue – usually 2 weeks after the RPO DR team have failed – but prone to bad tempered fallouts). The agency side too often is characterised by the enterpreneurial spirit to reach a level of revenue that makes an acquisition attractive and this hardly fosters a sustainable relationship. In the midst of it all technology is just overwhelming us with promises of paradise. The dysfunction breeds ongoing revenue for the agency and the corporate machines are slow to change thus we perpetuate the broken machine and everyone looks at me as if to say what’s the problem. Matching disengaged people with the opportunities to flourish in the right environments seems to be missing from all of this.
      Anyway, enjoy your inputs and we must grab a beer some time and solve the whole sorry mess.

  3. I would agree if HR departments had any idea how to recruit technical staff or if hiring managers had the time to go trough the hundreds of CVs posted for every ad. They don’t though. Not only that but recruitment agents allow potential employees negotiate their pay with the employer without dirtying the waters, otherwise employers have a tenancy to use emotional blackmail and drive offers down at the last minute. Without middle men, the power would swing back into the hands of employers completely and contractors know this, not only that but jobs would take years to fill. It is not uncommon for me to hear back from a direct application(far more often that not I never hear back and they don’t accept calls) 6 or even 9 months after interviewing.

    In an ever changing market this has to be a really bad idea.

    • Thanks Stan. There are many things broken with today’s recruitment model and I’d never fall for the lazy line that it’s all down to the recruitment agencies. As with your point I am pleased we are now havign debates about candidate experience (still not mainstream though), proper funnelling of the candidate pipeline to provide people with choice and the role of the agent / broker in an effective hiring process. Moving to the right solutions is taking too long but that’s the nature of change for you and the vagaries of people who still dominate the landscape, regardless of what technology can offer.

      • I am just not sure how the numbers would add up. How can a hiring manager seriously justify looking through 200-300 CVs properly/ Is LinkedIn skill check boxes really a useful way of judging a person? It needs human sensibilities and savvy, someone who understands the job and a lot of time. It must be said also, that agents stand up for their candidates, the little guys. In times of yore, employees had shop stewards to look after them, but there’s no such thing in IT. I have had employers refuse to pay or take forever to pay and the agent has stepped in and saved the day. Without them and their legal departments I would have been in real trouble. I agree that agents have a bad light and there is a lot of mistrust, but employers need to know the real value of good employees and the value of having someone skilled in finding and managing that talent. HR departments have no chance,.they tick boxes and have no affinity with employees at all. I can never see myself approaching employers directly again, not least because of the painfully crusty and incredibly long online application forms they still expect candidates to fill in, that really do no justice to anyone and never even let you know how you have done.

      • You raise a good point about representation and in the post I alluded to an ongoing need for that, however I did make clear (niavely perhaps) that when conditions are perfect (technology and people working internally in perfect synch to handle volume and respect) then the game changes. Candidate experience is gaining some more noise as a differentiator but needs to be proven in the mainstream by those who hold the purse strings. We probably face a few more years of this phony war but what comes after ?

  4. Hmm. Recruitment has not changed at all since I was a consultant in 1987 advising clients on how to best use our company’s fantastic ATS (it was the very first in the UK). From an internal recruitment perspective we had referral systems, we had media (the Sunday Times Appts page) and we had agencies.

    The only new thing is managed service/RPO, which is the classic of finding a gap in the market (usually an agency extending its offering) and operating as a middleman to squeeze margins out of suppliers and ultimately just taking a slice of the existing costs and severely diminishing what was not a great service in the first place.

    The question is really why is it still crap? And until you sort that out then all the technology and new providers and models in the world will not make any difference. I don’t care what the model is, I just want it to work – to be a great experience for the client and the candidates and to get the right results.

    And I have some ideas as to why it is crap… starting and ending with the clients.

    • why’s it crap ? – Follow the money on both sides would be my best guess. It’s what drives client and supplier behaviour after all and what incentivises them. Can we reach a mutually acceptable new way forward ? Have the niche companies stolen a march and the client, in turn, recognised it’s an area they won’t go native on ?

      Getting the debate into a mutually acceptable future direction is step one then solution mode – currently, as my morning has often shown elsewhere, the reaction from a deeply protective (and why not) agency side is to circle the wagons and feel offended the subject gets raised. We need more leadership on both sides – for the sake of the children at least 🙂

  5. as a agency start-up owner I agree. Davina should’ve left telly after her stint at MTV. But it gives me comfort that she continues to dazzle, entertain and provide televisual value to millions. She has fought off competition from younger, cheaper more technologically advanced presenters. Much as she is derided by the purists, she provides wholesome pleasure to many. I’m considering expanding this Davina/Agency theory. Good post, Barry.

  6. I would agree with this even though I have been in the agency world for the last 30 years. What is interesting is the sort of quality of recruiter companies are now hiring in their internal teams. Some are very good but most are awful. are companies getting the skills they need or are they just paying less for what they are getting anyway? I also believe that a lot of employers are unwittingly building internal monopolistic empires that fail to deliver. The unfortunate thing for these companies is that they only have the narrow prism of their own internals through which they can see their skills markets.
    .

    • Lots of internal recruitment firms are incredibly narrow in their approach but have sadly been driven that way by a constant push for driving out agency as a strategy. Misses the point on so many levels for me.

  7. Let us also remember that for the last 6 years it has been a buyers market for finding skilled people, and may I also remind you of the Plethora of agencies that were set up alongside the agency firms like Bechtel, Jacobs, Fluor, Aker. They could not deliver and were thus hived off or consigned as “just another supplier”
    It may be just a little early to gloat. I also do not know of any internal recruiters that have developed extensive personal networks in their fields of recruitment.
    It is the networkers who who prosper the most

  8. Agency recruiters operating in niche disciplines, especially professional services, are still seeing their year on year turnover rise, so they will probably not recognise what you say in your article. However, I agree with your analysis of the market and the change is coming, even for those operating in the more pucker markets like tax, legal and banking.

    I have thought for some time now that agency recruiters in professional services need to plan ahead and start to evolve into either a pure search firm, or offer a mix of contingency and retained work, operating within the £100-£500k salary bracket. I also think the successful ones will vertically integrate with a niche job board, which would allow them to continue to service their clients in the £30-£100k range via direct advertising. The acquisition (or development) of niche job boards by search firms is happening in the US and Asia and I predict it will occur in Europe too. I know of one search firm that launched a job board in the UK last month.

    Obviously not all specialist recruiters can buy or build a job board, nor is there enough work for everyone to move to top end search, so I agree there will be people exiting the market in the coming years.

    As an aside, I would also caution all external recruiters about investing and relying too much on LinkedIn over their historic candidate sourcing strategies. When Indeed started to upload cvs and offer cv search last year, it ceased being a job aggregator and became a job board. When LinkedIn’s shareholders demand better returns I suspect they will start to squeeze external recruiters off their free job posts and groups and make them pay like the corporate clients. I think everyone will then view the site as less of a social media/networking platform and actually as the mainstream job advertising site that is, ie a job board !

  9. Does anyone have any figures on a companies recruitment agency spend vs the total compensation for their own, in-house recruitment team? I would guess the figure for agency spend is usually higher and until large corporates value their in-house teams more, recognise the skill of recruitment, reward it creatively and then begin to look at metrics such as quality of hire, rather than just cost and time per hire, recruitment agencies (bad and good) will continue to survive.

    • Nail on the head sir. My experience tells me that where those conditions don’t exist then it sits somewhere between 60-80% of spend being agency (contingent & retained) related. That number will reduce but mindsets are either too set or too complacent to allow for a sensible debate and solution to a future model.

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