Many prevailing ideas in the recruitment industry have survived beyond their utility. These archaic ideas and their continued influence testify to the widespread acceptance of a deeply flawed commodity model for talent.
Commodities are interchangeable units sharing precisely similar contents and quality. This could not be further from a useful description of a human being, even in the limited view of that person as a worker. People are not a commodity.
Viewing talent as a commodity leads to a long list of bad strategy, policy and hiring decisions. For instance, many hiring decisions are focused on an individual’s testimony of their past performance rather than the hiring manager’s confidence in their future.
Talent is unique to individuals and should be measured by potential.
What has changed?
Economic, technological and societal shifts have transformed the marketplace of the recruitment industry beyond recognition. Many companies are left with outdated ideas about how to succeed. While many recruitment companies and in-house talent acquisitions teams don’t have the time and resources to change for the better, Lyle Alexander exists to deliver that change.
What are some of the macro drivers of change in recruitment?
1) Anybody can find anyone: the six degrees of separation has been reduced to one degree.
2) Cost is King: organizations are more focused than ever on cutting and controlling costs.
3) Centralization: to gain visibility and control, processes have been standardized and supply chains have been streamlined. The 'buying process' for talent has been narrowed.
4) The rise of in-house talent acquisition: 40% of companies now take on the burden of recruiting talent for themselves.
5) Outsourcing: organizations are increasingly shifting accountability for anything but their core functions.
6) The war for attention: employees in every industry are in a constant battle against distraction by media companies desperate for their attention. Productivity is suffering through the fragmented focus of employees.
7) The dying art of communication: both talented individuals and hiring organizations have been increasingly losing the benefits of diplomacy; the greatest driver of relationships, mutual understanding and resolution. We are in the age of disconnection and miscommunication.
These are some of the macro trends that are creating new winners and losers in the war for talent. Employers and agencies are operating in a new, dynamic marketplace that is unforgiving to those who fail to respond with innovative approaches to recruitment.
How have those changes happened?
ANYBODY CAN FIND ANYONE: 1 DEGREE OF SEPARATION
The average number of steps between two strangers along a line of acquaintances was once six. Thanks to our technology platforms, this number is now usually one. The world has been rapidly getting smaller; recruiting is not what it used to be.
Professionals around the globe are more easily reached than recruiters could ever have dreamed of but with this gift has come altered expectations and demand. Hiring companies are taking matters into their own hands more often and increasingly seeking innovative alternatives to traditional suppliers.
The perception of value in a recruiting firm is too often tied up in the word 'search'. This over-simplification of what a recruitment consultant does becomes a self-fulfilling prophecy and leads to diluted services offered and limited imaginations about what can be achieved working with a really good recruiter.
COST IS KING
The recovery from the 21st Century's great recession has been achieved in varied ways in different companies and economies. One of the major trends has seen firms cut their way to prosperity. In the effort to become lean, organizations have been ruthless in their efforts to reduce expenses. Every dollar counts.
Among the biggest consumers of recruitment services, procurement has risen from being a clerical function to key strategic partner to the core business. Occasional price negotiation has evolved to wholesale reviews of the direct and indirect supply chains and intelligent appraisal of the true value of supplier partners. Those unable to communicate their unique value proposition have been gradually commoditized; surviving only by cutting prices and eventually their own costs and, with them, quality of service.
When cost is king, money spent on hiring talent is rarely seen for what it truly is: an investment.
CENTRALIZATION
When cost is king, centralization writes and administers the rule of law. In order to gain visibility and control of costs, many organizations have centralized their structure. In doing so they have uncovered lengthy, often complex supply chains and inconsistent policies and processes.
Through centralization they have been able to yield efficiencies, economies of scale and control. With control, it is possible to standardize policies, contracts, supplier relationships and culture among other things. The modern CEO can and does micro-analyze spend, productivity and activity, sometimes at the click of a button.
The recruiting supply chain has not escaped centralization and smaller firms, even those who add value, have often lost their small but vital market-share to bigger companies who can service more verticals and/or locations despite often offering lower quality of service.
Arguably, one of the major downsides of centralization is the marginalization of critical voices and ideas. The appetite for finely-tuned localized solutions still exists but less well thought of. Indeed, there were significant advantages to decentralization that have continued to be yielded by firms who have limited centralization. Decentralization’s great strength is that it encourages the independence of thought and nuance needed to solve difficult problems.
THE RISE OF IN-HOUSE TALENT ACQUISITION
Market conditions have provided a near-perfect environment for the rise of effective in-house talent acquisition teams. Firstly, recruiting has been re-cast as a transactional process, organizations are hungry for cost savings and talent is easier to reach than ever. The Human Resources department has never been so important to the hiring process.
Just as the financial crisis led to a boom in the number of procurement professionals in the C suite (CPOs), the same can be said for HR with (CHROs). The professionals within HR are no longer simply focused on employee issues, benefits and compliance. Dynamic HR teams are now playing an instrumental role in the growth and prosperity of their companies and the working cultures within them.
Recruiting firms, strategic and transactional alike, need to embrace this world and develop services and account delivery models to supplement in-house acquisition teams where they exist. The winners in this marketplace have strategic partnerships with HR.
OUTSOURCING
In the long run, high quality recruitment companies will always out-compete the alternative options. Behind this truism lies the principle motivation for outsourcing in general: stick to what you are good at. When there are ongoing tasks to be done that fall outside core expertise, it is often a sensible strategy to outsource them to a specialist company. They can often do those tasks more effectively and efficiently while taking on the accountability for completion.
Managed Service Programs (contingent labor) and Recruitment Process Outsourcing (direct hire) companies are outsourced recruiting functions with fundamental differences. Recruiting firms need to know the difference between them and the how to distinguish the various models delivered as they continue to capture market-share. In most cases, recruitment firms need to adapt their client delivery model to include the outsourcing solution as an extension of the end-client's business; and build a customer-relationship with them.
MSP and RPO models typically give excellent visibility to the end client and usually save or control costs effectively. Sometimes there is a downside resulting from the strictly defined processes: voices of the users of the system can be marginalized. This can impact the quality of service from the supplier partners and the satisfaction of the hiring managers. It is critical that all parties recognize the balance of cost, quality, efficiency and risk that is baked in to the solution. If unintended consequences impact an organization's ability to engage the best talent, all stakeholders have a responsibility to be transparent, open and communicative as they share their experiences in good faith.
New Winners and Losers
These fundamental shifts in market conditions are creating new winners and losers. The financial crisis in 2007/2008 created an extinction level event for hundreds of recruiting firms and we are beginning to see the same as a result of COVID-19. In Darwinian terms, only two types of recruitment company survived:
A) Trusted Advisors: firms who add exceptional value to their clients; or
B) Transactional Partners: firms who managed to find creative ways of heavily reducing costs in order to lower fees.
This change has polarized the industry. On one end of the spectrum you have high quality boutique organizations who partner with their clients to solve problems and deliver valued consultancy along with the best talent. On the other end there are somewhat unwieldy organizations who have operationalized recruiting into a step-by-step repeatable process that can be insensitive to the nuanced needs of their customers. As a natural result of this development, we have seen the rise of low-cost off-shore recruitment firms and large-scale recruitment delivery centers which operate like customer service call centers in many ways. It follows naturally for a company that has accepted their role as transactional partners to adopt these cheaper delivery models.
Neither of these winners are better than the other. They merely offer different solutions to the changes that have happened to affect the work of recruiting talent. The Lyle Alexander Consulting way of comparing these strategies is to think about the service offered to the client judged on cost, quality, efficiency and risk. These strategies offer varying levels of each measure and adjust to a certain extent according to the client’s situation. That said (exceptional individual contributors aside), it is very rare to find a single company capable of both being a trusted advisor and a transactional partner. These things are both strategic and cultural - they can be planned or they can emerge.
What is to be done?
It is likely that your company and/or talent acquisition team is affected by these external forces which have reduced the effectiveness of the way you work. Change is possible and starts with a good conversation. Let’s talk about how you can evolve to meet the new challenges and win. Together we can envisage a successful future and make the change needed to get there.
Ready for a changing World