If you have recent firsthand experience with recruitment (either as a candidate looking for a new role, or as a company looking to fill a vacancy) it is likely that the very mention of the word ‘recruitment’ will make you shudder.
Candidates looking for roles in big cities like Berlin, London and New York, will probably feel even greater pain. Why? Because a myriad of problems can occur ranging from; being the unwitting victim of a ‘CV shuffle’ where candidates are put forward for entirely unsuitable roles, through to the frustrations associated with the lack of a feedback loop when unsuccessful. Search costs are also significant, not least in the context of the narrow odds of success in an increasingly competitive marketplace.
Front end from their back end
For highly skilled IT candidates these pains can be exacerbated, as these candidates tend to move more frequently, and are often dealing with recruiters who don’t know their front end from their back end! And as these candidates generally have skill sets that are in high demand they are thus extremely attractive to recruiters. Hence they can often get inundated with unsolicited requests, even when they are not actively looking for roles. Given recruiters rarely have a technology background, the odds of a skills mismatch are even greater, and as a result many developers eschew agencies completely.
For companies looking to hire candidates, challenges will vary. Large brand based companies will often have teams of in-house recruiters, and their biggest challenge is invariably managing the sheer volume of applicants applying for roles. For smaller companies, with more modest resourcing requirements they will also often chose to recruit in-house, and one of the key challenges they will face is ensuring a sufficient volume of suitably qualified candidates. When it comes to more technical hires, they may also struggle to read technical CV’s so may end up missing excellent candidates, while pushing through ones who are ill-equipped for the vacancy in question. And finally, some companies will use recruitment agencies who look to bring liquidity to the market, while also curating candidates such that hiring managers get to chose from a short list of the best.
Regardless of the approach used it is clear to all, that recruitment in its current guise is broken. When one considers the recent evolution of the industry it is not hard to see why.
The Market Context
In recent years attractive agency commission rates (over 20% in some cases); the lack of barriers to entry, the absence of recognized recruitment qualifications, and the low capital intensive nature of the sector has resulted in a huge growth in the numbers of recruitment agencies.
These benign conditions have not surprisingly resulted in a number of bad agents entering the market, some of whom behave unethically. With a commission based incentive structure that only kicks in once a candidate is hired, the scope for opportunistic behaviour is also significant. And with staff incentives in many firms focused on transactions (getting candidates hired) rather than longer term relationships, the service nature of the engagement can also suffer.
In addition to the variability in quality, the sheer numbers of agencies seeking new clients from a limited pool, has also resulted in industry wide ‘agency fatigue’, where many hiring managers simply won’t engage with agencies period. The noise is simply deafening. No agencies please!
In their defense, agencies will argue they provide much needed liquidity, and point out that the significant revenue in evidence is testament to the fact they are clearly adding value to clients, and are thus very much in demand. Tarring them all with the same brush is out of line!
That said, what is clear is that there are fundamental structural issues in the broader recruitment market arising from the market context outlined above, and married to incentive misalignment it is evident that the space is ripe for disruption. And this in part explains the emergence of a number of technology led solutions in recent months.
Disruption in Recruitment
As professionals move a lot more frequently than in the past (with ‘jobs for life’ largely consigned to history), more and more people are experiencing the pain of recruitment outlined at the outset. Hence, whatever way one cuts it, the standard recruitment process is pretty inefficient; be it in the time taken up, the lack of transparency, and the fact that the majority of people in the process have a negative experience (i.e. all but one candidate is typically successful).
All this pain has attracted a number of startups and entrepreneurs looking to build a better solution for the modern age.
Recruitment is similar to other marketplace based industries where intermediaries match demand and supply. Much like Air BnB, Uber, Match, and Zoopla are using technology to disrupt inefficient markets, new talent marketplace entrants like Zartis.com and Hired.com (who just announced a Series B round of $15m) are also using technology led solutions to make recruitment ‘more efficient’. And they are doing it with impressive results.These new breed of companies are technology led, using software as a means to bring candidates and hiring managers together in a talent marketplace. While this approach won’t solve all issues, it will help bring much needed transparency to the process, while also cutting out a lot of the inefficiency related to simple things like diary coordination for interviews. These tech based market entrants typically retain the service component, essentially marrying the best of traditional recruitment with the best of what technology has to offer.
While LinkedIn brings greater access to candidates, it falls short when it comes to identifying active candidates looking for a move. As a result, searches in LinkedIn are typically ‘needle in a haystack’ type engagements. Talent marketplaces are different. Candidates sign up specifically because they are in job search mode. Their profiles get published on the platform and hiring companies can log in, engage directly with pre qualified candidates reducing the transparency and time issues associated with traditional agencies. Like any two sided market it is important that there is sufficient liquidity on both sides. However, given the names of the brands already using these platforms it is clear that the approach is already delivering value. Talent is critical for success and given the intensive competition for talent in many sectors it is no surprise that many of the early users of these talent marketplaces are tech companies (who tend to be early adopters of new approaches).
So far the new breed of players is concentrating on fixing small elements of the broader recruitment piece. The good news though is that a key benefit of technology based solutions is that the feature set gets enhanced on a regular basis, so these platforms get better and better over time. While the pain points are significant, the sheer market value of the wider recruitment space is likely to attract more and more entrants in the years ahead. Who knows? Perhaps one of these emergent tech led recruitment players will help to finally fix recruitment one day. Uber for recruitment anyone?
This post originally appeared on LinkedIn – Alan Gleeson