James Mayes

Blog: The death of middle-ground recruiters?

In Recruitment on May 5, 2011 at 7:40 am

I’ve seen a number of new pieces recently about the effect of the recession on the middle ground – and subsequent polarisation to luxury or bargain.  In the fashion sector, I’ve heard reference to the Primark/Prada position, where people buy wardrobe staple items from the lower priced high street stores, but occasionally treat themselves to a luxury item when wanting to really make a difference to an outfit.

Likewise, in the restaurant sector I’ve noticed many mid-cost establishments close over the last eighteen months – but McDonald’s has just had it’s busiest weekend ever, and Heston Blumental’s Dinner has no tables available in the next three months.

Clearly, this is all about consumer spending – but how does it transfer to the commercial world? If this really is a changing behaviour we’re witnessing, surely it will effect business decisions.  Over the last five years, we’ve seen a real rise in RPO business. We’ve also seen a strengthening of in-house recruitment teams, evidence enough provided by the rapid growth of The FIRM. If recruitment buying decisions match the patterns elsewhere, I suggest the following will thrive:

  • In-house recruitment teams focussed on delivering service, not profit
  • RPO/volume agencies competing aggressively on price
  • Niche/boutique/head-head firms who deliver on the toughest roles and justify higher pricing

All of which leaves the middle of the road agency in a somewhat uncomfortable position.

How to they change? Specialise? Go for volume, then compete on price? Obviously, changing job-seeker habits have a part to play too, especially with the rise of mobile applications, social media and community building – but provided the jobs are there, candidates will find them.

How do those agencies (and I reckon there are a LOT!) stay in business?

  1. Nice analogy James and I agree with every word you say. Having spent a number of months looking into the RPO sector recently, it really struck home how much further this area has to grow – if they do it right. Like so many other areas of recruitment, I was really struck at how hit and miss it was in terms of the quality organisations out there. But I do think if they can get it right, there will be an opportunity for them to imbed themselves with clients and become more integrated into organisations – thereby threatening the in-house model to a greater degree.

    Finally, no mention is made of the good recruiters out there who have gone solo and possibly don’t fit into any of the boxes above, but they have chosen to specialise in certain areas, utlising strong relationships built over time and they seem to be making a good fist of it. Where do you see these “types” going, as they typically don’t have the same spend or exposure of some of the bigger boutique or niche recruiters?

  2. James,

    Great post and love the analogy of peoples shopping habits with the recruitment industry.

    Couldn’t agree more that a number of middle-ground recruitment agencies could find themselves in trouble fairly soon if they don’t adjust. I think a key point they need to focus on is their “level of service”.

    For years a number of these types of firms have got away with being able to provide horrendous customer service, perhaps because in this country we have just been used to it and accepted it. But with a change in peoples buying behaviours, the introduction of social media etc…I believe people are are now looking to deal with brands/businesses/people that make them feel valued.

    Therefore your right that when it comes to the low cost/high volume appointments, people won’t expect to receive the same level of service you get from a niche headhunting firm. But when paying good money for a mid-level appointment, I think a good level of service is a must. So agencies that persist with the same bad habits and crap level of service that they have got away with for years will ultimately suffer, as the buyer will start looking elsewhere (in-house solutions, social media).

    So my message to “middle-ground” recruiters is simple, start giving your customers the level of service they deserve or you will soon be a thing of the past.

  3. I think the ‘middle-ground recruiters’ as you call them can stay in business by developing and selling recruitment strategy (that will naturally incorporate placement activity) to the SME sector rather than just playing the CV numbers game.

    They will need to hire better quality consultants/managers to both devise and sell it though.

  4. James, you make some very interesting suggestions. Let me add a few more points in relation to the future of the recruitment industry. Firstly whether they utilise in house teams or RPOs, employer organisations are faced with challenges arising out of their need to contain fixed costs:

    Firstly, in house recruitment teams whilst focussed on service rather than profit, incur high fixed costs. Balancing variable volume versus high fixed costs is a challenge that inevitably leads organisations to cap the growth of any in house services, including recruitment teams.

    Secondly aggressively priced recruitment outsourcing (RPO) produces low margin returns for the service provider. Whilst the outsourcer might reduce fixed costs for the client, low returns inevitably mean low quality delivery, limited scope of service and very little flexibility to increase capacity when needed.

    Thus there are inevitable limitations to the capabilities and capacity that can be delivered by the direct services of in-house teams and RPOs.
    Recruitment consultancies whether large, mid range, niche or boutique have existed and thrived as an industry for several decades despite cyclical challenges. Why? Because they provide specialist capabilities when they are required by clients, in a responsive, flexible and effective way that for the most part does not require the client to fund fixed costs.

    And so there will always be an important role for recruitment companies of all sizes because employers will both need and want their services. I suggest that we will see the recruitment industry continue to flourish at all levels throughout the world.

    • Thanks for the comment Jim – always appreciated when someone takes the time! You make some valid points for sure and I’d agree it’s possible for the recruitment industry to continue to flourish. The market is going through massive change though, and a “business as usual” approach will not suffice. One of the key points I took from a conference earlier this year focussing around online recruitment is that current agencies really don’t grasp the potential impact of digital dis-intermediation they currently face. Those that embrace change and evolve stand a good chance, as they always have. I fear for some though, the change will prove too big an ask.

  5. Thanks for your response James. In my mind some of the key things that the recruitment industry has to offer are intellectual capital, flexibility, confidential intermediary capabilities and the ability to manage and retain realtionships. I agree that recruiters have to adjust to and adopt social media tools in order to continue to succeed. I expect many are doing so. Having started a new recruitment business recently I can confirm that the use of social media is one of my primary business tools. However the core competency of a recruitment business is still in my view, more important than the tools it uses.

  6. […] opinions, but one I read a while ago which particularly makes some excellent points is “Death of the Middle Ground Recruiters”. In the article, James talks about how middle of the road recruiters can find a way of surviving […]

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