(This is a bit of me geeking out about recruiting – if you’re not in the biz/ interested/ have something better to do (nap, fold socks, tease a badger, etc), feel free to give it a pass…)
Before China opened up, the model for delivering products and services was a bit of the reverse of capitalism. We strive for an abundance of suppliers (encourages competition, keeping R&D up and cost down), trying to sell to a finite audience. The model for Communism was more along the lines of not enough producers selling to a large audience. I’m generalizing, of course – the claim was that the State would manage it, and there would be a perfect balance of supply and demand. The reality, of course, was very different. Instead of sales reps trying to push product, the “buyers” had to convinces suppliers to choose to provide to them. It’s a bit like that in high-end retail (ie, the top designers get to pick who to sell to), and in other specialty industries. I think the recruiting industry is in a similar model, where (when they’re needed – ie, hiring is healthy), recruiters are trying to convince a select group to provide their skills to their clients, at the expense of competing firms.
A major problem – from a recruiting industry stand-point – with this model is that when the market is strong, recruiting agencies spring up like mushrooms after a spring rain. Many of them cut corners, telemarket like they reps in the film Boiler Room, and give bad service. The volume of noise they generate is in direct proportion to how bad they are at what they do: it becomes a pure numbers game for them, regardless of the human carnage (candidate as well as hiring managers) they leave in their wake. When the market slows, they simply slink away and go back to other occupations. Like, Nigerian e-mail scamming.
Clients and candidates – justifiably, or not, but certainly understandably – begin to associate all recruiters with this group of, well, scumbags. The signal-to-noise ratio becomes ridiculous, and it’s all just static to them after a while.
Here’s where I think this is taking us: good, in-it-for-the-long-haul recruiters and agencies will begin to work with select groups of clients, on a retained basis. They’ll find a group of clients that they have an affinity/ relationship with, that don’t compete directly with each other (avoid conflict), and who they feel good about placing people at (ie, the candidate gets a good place to work at). Unlike a huge executive search firm, the retainer will be small, with an agreed upon a rate card (ie, scaled based on level of hire, unique skill-set) where they can charge set fees per hire that are lower than traditional contingency approaches where it’s around 20 – 25% of base salary. No more percentages – internal HR loves when it’s easier to predict cost of hire. The will also provide some level of “trusted advisory services” around the client’s recruiting strategy and operations, and agree to set amount of time (ie, renew every 6 months, whatever). The win for the agency is more predictable revenue, better insights into the client (so, more surety of placement, speed to hire, etc), and less competition from other agencies.
It’s an idea that’s a hybrid of recruitment process outsourcing with traditional recruiting agency – the client still controls onboarding, brand, etc, unlike with an RPO where they outsource too much control, but still has a partner they trust out there doing their staffing for them.
It’s a way to turn up the signal, and drown out the noise.