Growth in the sector has been astonishing over the past decade.
At the start of 2019, there was a reported increase of 46% in new recruitment businesses registered at Companies House in the UK. The growth in the sector has been astonishing over the past decade, with over 80% of current recruitment businesses being less than 10 years old. Yet following the COVID-19 crisis, could the past 3 months signal big changes in the market?
The value proposition in the industry is still very polarised; with “cheap” job boards on one end of the spectrum and “expensive” head hunting agencies on the other. Job boards can start form as little as £99 – but the sheer volume of CVs that in-house recruiters have to go through keeps many up at night. While the 15-30% agency fees on big ticket roles has caused many a sharp intake of breath for a CEO or Finance Director.
With the COVID-19 crisis causing many industries to think differently and adapt, is it now time to reassess the value that many recruitment businesses offer? And if yes, what shape will that take in the coming months and years, what is that middle ground?
We were in a similar situation in 2009 following the banking collapse of 2008. A market flooded with talented tech staff that had lost their jobs and a finite number of new roles they could apply for. So what from that period if anything can we potentially learn?
At the time, ATS (Applicant Tracking Systems) were becoming more prevalent and allowed in-house recruitment teams to do much of the initial filtering using technology. Whilst some of the filtering methods were arbitrary, they were better than nothing and 50-60% of the work could be done with them. The reality is that not much has changed since 2009. Reliance on CV-based recruitment platforms that create long lists of ‘maybes’ rather than true shortlists of quality remain the go-to method for many businesses and hiring teams. Technology certainly lies at the heart of the solution, but how will it reshape recruitment costs?
Time must be a consideration.
Time will be a valuable commodity in a number of ways. In-house recruitment teams may have shrunk in size and are striving to become leaner. What they do with their time will be even more under scrutiny and wading through CVs surely doesn’t sit at the top of the curve. Interviewing and filtering at the final stages of the selection process or onboarding new candidates is a more valuable use of resource.
Not only that, filling vacancies with the right candidate as quickly as possible is also paramount. Whilst agencies narrow down your selection to only candidates they deem suitable, this can be something that takes 5-6 days.
The right candidate will continue to be priceless, but the margin for error is greater.
Ultimately, many business owners don’t care about fees IF they get the right candidate (within reason of course!). Yet now that we are having to contend with telephone and video conferencing for interviews, online skills testing and often hiring people without meeting them in the flesh or seeing how they interact with the team, the margin for error is greater than ever.
According to Oxford Economics and Unum, the average cost of taking on an employee (on a salary of £25,000 per year) is £30,165. This incorporates an average spend of £5,433 on recruitment and absorbing the loss of productivity while training the new employee to a level of proficiency, taking an average of 28 weeks. However, the cost of a bad £42,000 per year hire (to your business) averages to £132,000 when you include loss of productivity, training and agency fees. Working with the right recruitment partners to get the right candidate is as important as ever.
Agencies and partners will have to give more value.
From passing on potential cost savings through the reduction of overheads, to being true subject matter experts, hiring service providers will and should be asked to give more value than before.
Many companies have now proven that they don’t necessarily need those swanky offices anymore. Service providers are being told to ditch those central London glamorous offices, move teams remote and charge less. Providing value for money will prove as important as ever.
Specialist agencies should grow in importance, as they will have in-house subject matter experts in technology or specific skills sets that in-house HR teams might not have. Becoming more involved in the vetting and testing process as well as speaking the candidate’s language is a great way to add value.
Starting salaries shouldn’t dictate fees.
Something that has always struck the team at Elbo as unfair is that the main driver of fees is a role’s starting salary. Does an agent work twice as hard to fill your £60,000 role versus your £30,000 role? Is it twice as hard to fill? And if not, is it done in half the time to justify the huge discrepancy in costs?
Job boards don’t work in this way granted, however you then face the challenge of a higher volume of applications to screen. Statistically it’s been shown that many hires in the £60k + sector come from being head hunted or word of mouth and talent of that calibre tend to apply less through job boards.
If now is the time that we are finding a “new normal” and reevaluating costs, recruitment is a good place to start. We believe the Time v Cost v Quality equation sits at the heart of a good value proposition and have engineered Elbo to work in this way. We take into account 100’s of data points and ask all candidates to take a personality test to ensure you get the right person, letting algorithms take care of the searching, so you wait much less time for the three best candidates, and we do it for a fair, fixed fee..
We’d love to know your thoughts on the recruitment industry value proposition and where the industry is going from here.