Monday, 15 August 2022

Recruitment Freakonomics - Recruitment Agents Do Not Exist...

By Jonas Kalevra, features, The Recruitment Times, 2016

This is a freakonomics piece, so at the very outset, we suggest something seemingly outrageous, but then try to support the claim: Recruitment Consultancy is dead! ...long live Job Broking.

The central theme of this article is that recruitment consultancies are in most cases nothing of the sort. So-called recruitment consultants are administrative professionals who earn a salary that is boosted by the commissions earned from 'sales' they make - placing people in a job. Business development in a recruitment agency comprises winning new clients (an employer who is seeking to hire based on a business need) and the agreement from these new and existing clients that if the recruitment consultant or agent can successfully provide an acceptable worker to fulfil the recruitment need, that the employer will pay for this service.

Refining this provocative suggestion to primarily the Finance and Technology & Digital recruitment sectors, let us look at why this view is NOT heresy.

"Who had I become? Just another shark in a suit??"
Tom Cruise as Jerry Maguire (in Jerry Maguire, 1996)

I use the above quote (and more to come) from the Jerry Maguire movie as it is very relevant. One of the strong themes of the film is how valuable and how close to the client an agent is, could or should be. By the end of the movie, the former 'shark in a suit' agent, Maguire is a reformed character totally committed to his mission statement of 'fewer clients. Less money. More attention. Caring for them...'. When Maguire originally has his moment of epiphany, he is unceremoniously fired from his lucrative sports management agency for such heresy. Agents are all about the money! Particularly theirs.

My background is in software development and digital marketing. I started in these industries at the height of the dot com boom. I started looking for my first job when the wheels had begun to fall off the gravy train in Silicon Valley and in Europe. Jobs were everywhere and I got my first and never-to-be-forgotten taste of the dead-eyed, insincere, and insistent tech recruiters (who are the reason why I haven't answered private number phone calls since 2002!).

They called up to 20 times a day with job opportunities I loved, opportunities that were in no way relevant to me, and ones that I could definitely have done well in - if accepted. I was at their mercy as a new entrant to the sector and no contacts or influential friends or family who could give me a leg up. I viewed the recruiters as a necessary evil and endured their wildly phoney chit chatter (how's your mum? how's the family?) and formulaic 'long time no speak' - even though nearly every time it was the first ever time of speaking with them.

These guys were determined and didn't seem to pick up on any cues from the manner of my responses. I lost count of the number of times I would be desperate to hear progress of my application (if they said they would put my CV forward) and never heard from the recruiter again, despite repeated calls, left messages and voicemails, and emails. Nothing. On the odd occasion I actually caught one of them on the phone, I would always get the sense that they really needed to jog their memory to have even the faintest recall as to who I was. A poorly convincing 'oh yeah, yeah I remember you' would be followed by some fobbing off as to the status of my application. Even needing them far, far more that they needed me, one can absorb only so much of such treatment before categorising all the recruiters I dealt with: Tossers, the lot of them, I thought.

When I did get jobs, I sensed that the recruiters were doing the utmost to maximise the financial upside for themselves - their commission. You daren't try to negotiate on salary or day rate as they would simply select the cheaper talent and maintain (or improve) their reward.

At a (hugely) conservative estimate, I have dealt with (email, phone, sms, face-face meeting) over 1500 recruiters as I have searched for and moved between jobs.

I have been placed in a job more than once by the same recruiter TWICE. That would be a 0.13% success rate for my agents through my job hunting and moving career. 1500 (and counting) is a nonsensical number of agents to have had, and this plays to the theme of the brevity and weakness of these job chaser - job agent relationships. I'd bet my house that not a single one of the 1500 recruitment agents who have flitted into and out of my life could tell you my favourite colour, my favourite football team, or even which subject I have a degree in.

To these agents, finding and placing job candidates is a race-against-time, and time-consuming numbers game that precludes developing close ties with the job seeker.

A consultant (big data cruncher)
'a person who gives professional advice or services to companies for a fee'

This Merriam Webster definition of a consultant, the term 'Recruitment Consultant' holds true in terms of the 'professional services' for a fee part. In terms of perception though, when you hear the word 'consultant' do you think recruitment or dense white papers, huge reports full of ivory tower thinking and barely practical corporate guidance (not to mention prohibitively expensive), churned out by the metronomic strategists and auditors that populate the likes of Deloitte and KPMG?

Do recruitment consultants offer sector expertise and true, bespoke-tailored guidance for the job seeker and the employer with recruitment needs?

In a survey of 1517 IT and New Media and Investment Banking professionals professionals NONE of them stated that the recruiters that had placed them in their last or current role - or recruiters that they usually dealt with - were either formerly professionals in the fields they were recruiting for, or subject matter experts in the roles and sectors they were hiring for. 95 of those surveyed said that the recruiter that had placed them in their last / current role was comfortable with the terminology of the role (familiarity not expertise?).

Print issue 1, 2016: Recruitment Disruption & Innovation: Buy Now >

Lack of industry and role expertise and knowledge reduces the level of consultancy that can be offered by a recruitment consultant. This lack of knowledge pares the service being offered to a matching or resource provision service: the recruiter simply provides the hiring party or person a selection of candidates who are deemed to have the requisite skills for the role. The provision of the skilled candidates is predicated with a need for speedy resolution. Quick turnaround automatically reduces the ability and time for the recruiter to strategise comprehensively and screen comprehensively a large pool of potential candidates from robust channels.

The sourcing of candidates becomes a keyword driven numbers game undertaken in the in-house candidate databases or via paid-for-access job board or external data sources. A numbers game that precludes such tactics as locating passive candidates who are not actively looking for a role, and wooing them (they can be found fast enough, but the wooing process needs to be more than the standard and inelegant 'are you looking to move/would you consider' quick-fire question with little lead up. There is also little time in the usual candidate sourcing to search off the well trod path and find hidden gem candidates who would not be immediately obvious for a certain role, but would thrive in it nonetheless.

Finding exceptional talent is now more important than ever: In our hyper-competitive global economy, businesses urgently need "game-changers," "impact players," men and women who are the Michael Jordan, Babe Ruth "five times better" than everyone else. The problem in finding these people is that most organisations rely on a fairly conservative selection process that focuses on narrow abilities and gives short shrift to broader or unusual potential, excluding some of the most promising candidates. Recruitment consultants in recruitment agencies are not helping their client businesses find these super talents. This takes time, and strategy and implementation of that strategy and monitoring of the process. How many recruitment consultants truly care for the health of their client companies (outside of making sure the commission will be paid?).

This article is not intended to simply denigrate the existing business model without offering areas for improvement and possible new revenue streams for true recruitment consultancy.

An outsourced service that builds on the principle of finding talent in different places: silent talent consultancy. Silent talent consultancy is a service that real recruitment consultants could offer to clients to find ability that is easily overlooked in the workforce. A service which analyses existing staff skills and personality and experience and makes recommendations for role swaps, role moves, greater roles and responsibility. To tap into this under-exploited long tail of talent, Facebook uses puzzles developed by an official "puzzle master" to attract and ensnare savvy programmers who might otherwise be missed. A "high-swagger" West Coast ad agency, meanwhile, deliberately searches for new talent from unexpected sources, seeking out stand-up comics ("marvelous storytellers") and college debaters ("really smart, passionate people").

Less clients, more time...Jerry Maguire was on to something. His mission statement would definitely work in true recruitment consultancy, but not in job broking where the reverse paradigm would rule the day.

Job Broking - The Rise and Omnipresence of the Flash Boys (and Girls)

There are parallels with the rise of high -frequency trading in the US equity markets and recruitment agency today. Speed and early action can seem to be everything; recruiters always want to know first (and exclusively) of a recruitment brief, and then fulfill the brief first with a selection of candidates. Learning later than other recruiters of a hiring need reduces the chance of being able to provide suitable (or just available) candidates for consideration. This is especially the case in boom sectors such as financial services, temp staffing, and digital and technology.

Managed Vendor Recruitment Services level the playing field somewhat in terms of job vacancies being submitted and displayed to competing recruitment services providers at the same time, and the the clock really starts ticking as each provider knows they are up against a number of others who are seeking to fill the same position with their candidates to then earn the margins of the candidates hourly rate or a commission from a permanent placement.

Even on an exclusive or semi-exclusive basis, speed is of importance so the recruiters can confirm a placement and then move on to fulfilling another recruitment need. It is simple math for a recruiter: the more placements, the more commission.

Michael Lewis's excellent 'Flash Boys' is an expose of the world of high-frequency trading, detailing how it came about and the unfair advantage gained by the traders and trading houses that were able to get trade data the quickest. The book takes a look at how electronic trading replaced the trading floor of screaming brokers, slamming telephones and hysteria-inducing ticker tape, and how that change impacted the market. The replacement of human activity (the trading floor as depicted in the films Trading Places and Wall Street) by electronic data transfer and the use of this data is exactly analogous to the transformation of the recruitment agency industry; far less reliant on black books of contacts and physical meetings, and more dependent on access to candidate databases and effective searching for the right candidates electronically.

Modern recruitment (particularly the fast-moving technology/digital and financial services) can be described in trade terms:

The recruiter (trader) receives a trade request from a buyer (the client), the recruiter then sources the most available commodities (the candidates) via a terminal (their candidate database tools), chooses the commodities that have best chances of paying off and then submits these commodities options to the buyer who is seeking to invest. The buyer may reject all options and go elsewhere (a lost trade), or select one of the commodities (thence earning a yield for the trader, who moves on to the next trade).

Equities traders are typically taught and advised not to be emotionally invested in any of their trades as emotion leads to prolonged losses due to attachment when a poor trade should simply be jettisoned, and when a high performing trade should be sold for the profit as part of a strict routine of gathering a volume of profits, rather than (greedily) hoping for even more profit to be realised by further growth in the future. To use the phrase made famous by Michael Douglas playing Gordon Gekko in 1987's Wall Street, for a trader, "greed is good". The forces of greed are in direct clash with the principles and ethos of the best recruitment consultancy service.

There is a purpose to re-imagining the modern recruitment consultant as a job broker instead. First, there is the focus on exactly what the supplier will offer and the naked commercial agreement can be more robust because of the transparency. There are many recruiters and recruitment agencies touting themselves as recruitment partners, when in fact they are not fit-for-purpose as a consultancy provider and operate as pure job brokers. For example, a basic search of IT recruitment agencies revealed the website of a "proactive agency with expertise and experience in IT recruitment that exceeds expectations." - Acceler IT. This is a specialist IT recruitment provider that has a website that is (1) not responsive, and (2) has a Flash intro as the homepage, and links to this Flash intro in the primary navigation of the website.

Acceler IT provides 'high quality technologists' to their clients, and states that they are a 'cut above the rest in IT recruitment.' A cut above yet they have a website that does not reflect the fast-changing landscape for which they operate in (responsive websites render the same content across desktop computers, tablet computers and smartphones; Flash is a display platform that is increasingly redundant and has serious security flaws - not to mention Flash cannot be viewed on Apple mobile devices). A re-brand to being an effective IT Recruitment job broker would serve Acceler IT well, or a complete roots and branch overhaul of their existing website and service messaging.

Secondly, a re-focus of the function of a recruitment agent would bring about a revision and distillation of the of tools required for the recruiter to supply candidates. The functionality and user experience of job seeker databases would need to improve to provide the ease of use and power of search and speed to better support job brokers.

Artificial Intelligence and machine learning have not risen as potential significant factors in the coming wave of recruitment technology. Harnessing them now and embracing the direct approach of a broker would bring about the tools (and the tools support) needed for the purpose. Trade desks at banks are mini hubs of technology iteration and innovation as the traders constantly request updates and new data visualisation of their trade technology support desks. I have NEVER known a recruitment agency to have in-house software development expertise (and the 43 agencies informally surveyed admitted to outsourcing any technology needs - and this was mostly IT support needs, not candidate search and relationship management technology innovation).

Thirdly, job broking as a job function would be held to different standards and codes of conduct. The UK's Recruitment & Employment Confederation (REC) would need to draft a new behaviours standards charter. Brokers are primarily focused on arranging transactions between a buyer and a seller for a commission when the deal is executed. It is thus easy now to distinguish a broker from an agent: one who acts on behalf of a principal. Referring to my earlier calculation of job placing loyalty by my 1000+ recruitment agents, and margin/commission protecting activities of those who have placed me and a great many others, I would not say that any of the recruiters I have dealt with have been my true agent - let alone a Jerry Maguire-like Minister of Kwan.

Job brokers are concerned with securing deals that earn commission. Currying favour with both the buyer (the client) and the (job) seeker helps close deals. This is a practical, objective way of looking at it.

The UK's REC marketing blurb states that it represents 83% of the UK recruitment market by turnover. The REC Handbook 2015 lists the many benefits of REC membership, included discounted fees for their specialist courses that help to make recruiters and their agencies better at winning clients, engaging and communicating with clients, and 'selling' (selling their services to clients, and selling vacancies to job seekers). Sector intelligence and specialist groups is also a listed benefit of membership. With a recognition of broking as the majority function of a recruiter in a busy sector, then perhaps courses could be tailored to develop the best job brokers and take into account other developments of wider business strategy (such as empathetic leadership and project management, communications skills, productivity, data analysis and more).

The suggestion of re-inventing the job title for the modern recruiter is borne of wholesale anecdotal and observed perception of the performance style of recruitment agents. There is a disparity in the behaviours and motivations of a great many recruitment consultants in comparison to the standards and ethics preached by the REC and the company line as presented to the public in agency literature such as their corporate websites.

Solving this best-fit service for the stated need, the issue rests on expectations: expectations of the employer as to what type of help they need (strategic consultancy for their resource/skills needs, or job broking - supplying of suitable candidates), and how they should engage with the consultancy or job brokerage. The candidate should have the choice of seeking out and getting assistance from a job broker (who can apply them for job that they would otherwise not find or be made aware of), or a career consultant (helping them craft, refine, and boost their professional identity and giving guidance on suitable roles and career trajectory and learning and development). Currently the lines are blurred, and expectations are not being met by action.

When there is transparency (a defined plan of action) of need and transparency of service provider, all parties stand to gain and cases of disenchantment should decrease. To illustrate, a simple example involving another sector that is in the early stages of huge disruption: retail banking (and the example is set circa 10 years ago).

Ten years ago, one would go to the closest bank branch near your workplace or your home, and you would go directly to the bank teller to pay money in or get a statement, or cancel or order a banking card; one would go to an advisor to discuss a loan or or for financial planning in a private office. Customers had exact expectations of the service they wanted, and the bank staff were placed and ready to offer the specific service their role dictated whenever called upon by a customer. No confusion.

How many employers turn to job brokers when they need initial guidance and strategy? How many employers waste time receiving guidance and strategy when they need distilled brokering? If the two sides of recruitment were clearly labelled, then there would be more happy customers.

Print issue 1, 2016: Recruitment Disruption & Innovation: Buy Now >


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