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8 Challenges The Recruitment Industry Faces And How To Overcome Them

On 12 June, I was invited to hold a seminar on „The Future Of Recruitment“ in Budapest, organized by our local Partner office Ikelosz/ Kennedy Executive Search Hungary.

And just like with the Rubik’s cube – a famous Hungarian invention – it is not always easy to define what the right move is.

What does the future hold for us? What will change, what will stay the same? So far, all we know is that “it will be different” (Peter Drucker).

True. However, there are some trends on the horizon that should impact the recruitment industry. And challenges we currently faces. Let us look at these first in this posting, number 1 of a series of 2.

Here come the 8 hottest challenges the recruitment industry faces, with gracious input from my colleagues, peers and network in the Czech Republic, Denmark, Germany, France, Hungary, Italy, Monaco, The Netherlands, the UK and USA:

  1. New pricing models: In some of the markets we serve, the retainer model is challenged. Clients want to run “lower risk” and work on a contingency basis. They do not integrate the fact that the “fill ratio” (i.e. the percentage of assignments that conclude with the actual “placement” of a candidate) for a contingent job is 20% and for a retained one 60-80% industry average (and, ahem, 95% here at Kennedy). Read on “Why You Should Pay A Retainer” for more information and the stats behind. Those were the good ol’ days when we could say “pay me one third now, the next in 30 days, the last in 60 days even if you have seen no candidates. Plus 20% admin costs, of course”. Today, clients challenge this – and they should. Work at flat fee? Link the second retainer to the invitation of at least two candidates? Or adding services such as onboarding? If you currently negotiate with an executive search firm, the above are pointers for you.
  2. Digitalization: You have heard before that LinkedIn will be the end of external recruiters? They said the same when monster.com was founded. Or the fax machine was invented. All industries I know are impacted by digitalization. Information is accessible to everyone. 24/7. What you do with the information is the question. LinkedIn, Artificial Intelligence or big data are just tools. Yes, they do replace some of the tasks that are done by humans today. But they will allow the remaining ones to work more efficiently. As long as you deal with people (recruitment…), people must be in the selection process. They will continue to be.
  3. Inhouse Recruiters: Internal recruiters will always better understand the company culture than a recruitment firm. The executive search firm, on the other hand, can bring in another vision and maybe be less biased (though we only work well when emotion comes in. This is why I love to say that I loved every of the 350 candidates I have brought into a new job and every single client!). There are clearly jobs that can be filled by internal recruiters. The times where we got a fee for transactional recruitments is over or will soon be. When it gets hairy or when an undercover approach is needed, however, we come in. When internal and external recruiters work together in a complementary way and not in competition, both will serve their clients better: our hiring managers and our candidates.
  4. Changed candidate behavior: Clients and candidates meet on eye level today. The old power balance “I am the boss, you are my subordinate” is broken. Employer branding (heard this one before, you say?) is vital today. Candidates will look your company up on glassdoor. They will check you, yes, you, personally as their potential boss on LinkedIn and Facebook. If you want to attract “the best talent”, make sure you are “the best employer”. Treat your employees like clients or they will go to your competition. Like clients.
  5. Changed client behavior (psst: they want clones): Clients tell us that they want someone who is doing the same job at their direct competitor. Is this how we will create the enterprise of tomorrow? A more innovative brain pool? How we will remain competitive and sharp? Maybe not. However, we observe this all over Europe and the US. Fighting this means in our case inviting that outsider candidate. And often s/he will be the one!
  6. Stagnant revenues in the core business: Executive search is a 13 bn USD business worldwide (as per the AESC). This number is growing – but not in the traditional core business. Some of the big players generate up to 50% of their revenues with leadership consulting, a once non-core business. Diversification is the new black. And we all want to wear it. Assessment, board advisory or coaching? If we want to walk away from the purely transactional recruitment business that can be done by machines and become true advisors, we have to embrace these.
  7. Persistence in an industry with many „black sheep“: Barriers of entry are incredibly low in this industry. To become a headhunter, all you need is a business card and a phone. In most countries, no license is required. Not even your criminal record will be checked (welcome, if you are an ex-con!). To be a GOOD headhunter, though, is a completely different story. Ethics, processes, questioning techniques, good judgment and much, much experience are criteria that will make the difference. Every client and candidate I know have made at least one negative experience with an external recruiter. We face the challenge of making a difference in an industry with not always a good reputation, of showing the long-term thinking and maturity to do this job the right way. In the end, it is the most beautiful profession in the world: we help candidates grow and companies reach their targets. Wonderful!
  8. Internationalization: Today, talent flows freely from country to country. It is normal today to hop on an airplane on Monday morning and fly to your office in another country. Or work from your home-office abroad. Our industry must respond to this trend by offering both: a deep understanding of the local market we serve whilst bearing in mind the global marketplace. If we want to shape the world of labor tomorrow, we must understand its state of mind today. The world is becoming smaller. Our mindset must become larger. Local is important. Global too. If we understand what moves talent globally, we have the answer on how to overcome ALL the above challenges. And this – pssst – is the teaser to the next posting and part 2 of this series!

 

Where do we take it from here? How do we adapt to a fierce and competitive market place? How can we make a difference?

Be back on 17 July and learn how to work more effectively with executive search firms if you are a client or a candidate and make your search firm fit for the future if you work in recruitment.

 

Jorg Stegemann
Jorg Stegemann - Headhunter, Certified Coach and Business Writer - is head of Kennedy Executive Search. Apart from running Kennedy's company blog, he writes for Forbes, BBC and other media.
  1. Jasmine Reply

    Excellent write-up! Thanks!

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