No Candidates - A bleak outlook!

Warning signaled to Recruiters as acute candidate shortages threaten. Re-structuring or out-sourcing suggested as solutions.

The needs of the market are evolving to the point where some agencies risk being out of step with their clientís business needs. If recruitment agencies are not prepared to improve the breadth of service delivery to their clients, many of these business relationships may cease.

When a client enters a discussion with an agency to consider specific vacancies, the expectation is that the agency will be keen to lend assistance. Since employers are already experiencing problems filling vacancies, they are hoping to place more reliance upon existing agency partnerships to provide a much broader range of support. In contrast, many recruitment agencies are becoming less inclined to accept the ìrough with the smoothî. The preference is to select relatively easy placements to deliver low-effort and low-overhead revenue.

To meet this objective, most agency staff routinely filter vacancy opportunities arising to measure whether they are worth pursuing. For example:

ï ìAre we likely to have a CV to match this job?î
ï ìIs it the kind of job that we normally work on?î
ï ìIf we advertise for the job, are we likely to get any relevant response?î
ï ìAre we likely to get an unsolicited CV/walk-in for this job?î
ï ìIs it worth wasting our time on this job if it does not fit one of our usual job categories?î
ï ìI have targets to meet; will this job bring me any closer to my targets?î

If agencies continue to cherry-pick the reasonably uncomplicated, quick-fix jobs, they may soon see the demise of some those valuable business relationships. Before rushing to refer to the increased volume of vacancies in the market as obvious evidence that this proposition is nonsense, consider for a moment the parallel affecting Travel Agents.

Does this sound familiar?
ìGood morning! Once you have browsed all the brochures and selected the holiday you want, do come along and we will be delighted to book it for you!î

Here the Agency expected the consumer to do all the work to select a holiday and then pay a price to include their margin. It is therefore not surprising that holidaymakers now use a variety of alternative ways to select and book their holidays. The obvious consequence is plummeting profitability for travel agents just as consumer spending on travel is up. The main reason the top travel business experts failed to see this coming was a blind belief that calls for change were nonsense. Their head-in-the-sand approach failed to see any need to extend the service delivery to include new creative options because business was already showing a significant upturn. With precisely the same mind-set, those recruitment businesses that may be unwilling to amend their strategy in line with the needs of the market maybe running, lemming-like towards a similar, but deeper precipice.

ATTACK ON MARGINS
When vacancies are moderately easy to fill, margins decline as clients use lower-cost supply options. Certainly, the proliferation of internet Job-Boards already fulfils thousands of the ìquick-fixî vacancies. (Reed reported a record 180,900 vacancies on their website ñ May/June 2004) Therefore, is the writing on the wall now sufficiently clear to show that many of the ìeasierî recruitment areas are undergoing (excuse that awful word) - ìcommoditisationî?

Reluctance to recognise and respond to market changes is not the only dynamic threatening the UK Recruitment Industry. To appreciate the broader risks, we need to consider unemployment. In the UK, the number of unemployed workers has reached record lows with more of the labour-force now in work. Private sector employment was up for the 10th consecutive month by May 2004. The steep rise in demand included: Services, Construction and Manufacturing which are all boosting employment levels. (NTC Research/Reuters Employment Index) This trend is a firm indicator that current shortages of candidates for a wide range of candidate profiles, are certain to increase.

CANDIDATE FAMINE
The candidate famine has already reached a number of sectors with candidate availability declining every month since November 2003. The range of Permanent skills reported to be in particularly short supply includes Secretaries, Customer Services Personnel, Software Programmers and Nurses, with shortages of Care Workers, PAís and Chefs within Temporary skills categories.

The UK economy is one of the most successful on the planet. On face value, the creation of thousands of new jobs means more placement revenue. However, when the constant flow of additional vacancies arising across the UK is combined with the growing volume of existing un-filled vacancies, the dynamics take on a worrying perspective.

UK sectors that are experiencing particularly rapid growth include Media, Marketing and Advertising. Demand in Construction follows closely with a staggering 75% increase in the number of positions available in 2004 compared to last year.

A further variable in this already sombre equation is the influence of labour demographics across the EU. To help put this into perspective, at the June 2004 ëRecruiting in Cyberspace Conferenceí in London, organised by the Centre for Economic Performance / London School of Economics, Keith Robinson Director of Totaljobs, referred to the wisdom of the UK opening itís borders to workers from the new EU member states.

Robinson said, ìThe working population of Europe would plunge on a scale not seen since the Black Death giving a shortfall of 38 million workers in the EU.î The full impact of this alarming prospect is probably a decade or two away. However, we have already reached the point where many employers and agencies find it necessary to apply unusually creative strategies to bring high-demand candidates to interview.

REDUCED PLACEMENT VOLUME
With easily filled jobs and IT skills continuing to be attractive targets for commodity-based operators, a range of agencies should expect a shortfall in both placement volume and margins. High street agencies will find it ever more difficult to respond to increased demand for Temps as Permanent positions become harder to fill. Furthermore, with demand already driving up salaries, the volume of available Temporary resources is unlikely to be sufficient to fill the vacuum. Pressure to fill Temporary vacancies has already affected pay and in May 2004, average Temp rates rose again for the 12th month running.

The primary short-term issue for UK Recruitment is the acceleration of resource scarcity that is starting to have serious impact upon middle/senior level candidates with established experience and/or qualified expertise. This already affects a multiplicity of technical, sales, marketing and management areas with further steep increases expected against current high-demand levels. This will probably have a major impact on most job categories with salaries of over 25k. Especially where a record of accomplishment or experience is an essential interview pre-requisite. As verification, in May 2004, average salaries for new Permanent jobs rose for the 10th consecutive month.

The recruitment business is cyclic and yes, we have been here before. However, this time a modest adjustment in tactics will probably fail to protect players who resolutely apply a traditional recruitment business model. With a dearth of available human resource, a major shift in strategy is a more reliable defense against what could be another phase in the evolution of UK Recruitment.

INDUSTRY SHAKEOUT
There is ample evidence that highly resourceful recruitment measures are already vital in some sectors, as employers and specialist agencies bring candidates with diverse experience and qualifications to the UK for interview, even from beyond the EU. Given the imminent need for an adjustment in strategy to source applicants, it is probable that the more inflexible operators may not weather the shakeout that could re-shape parts of the recruitment industry.

Historically recruitment consultants have relied upon their agency to provide the infrastructure, budgets and strategy to facilitate the flow of candidates to fill vacancies. However, the problem of skills shortages has already distorted this guiding principle, especially for harder-to-find candidate categories.

Many recruitment agencies are placing some degree of reliance; even total expectation, upon the creative ability of their recruiters to do whatever is necessary to produce candidates for interview. This places recruitment consultants under considerable pressure. Indeed, the continuity of the livelihood of some recruiters not only depends upon their ability to win, pitch and manage new clients and to interview/select candidates. In an already tough market, many recruiters are either wholly or partly responsible for also finding candidates for interview.

If recruiters are to enjoy any degree of career stability and have confidence in the working environment provided by their employers, agencies need to do more to generate candidates. They need to re-appraise the level of responsibility and budget applied to providing this essential component of the recruitment process. The longer agencies distance themselves from being active and responsible for candidate resources, the more vulnerable they and profitability will become. Continuity of candidate supply is the fundamental factor to facilitate revenue generation. Therefore, to protect their position, to strengthen their ability to secure continuity of candidate resources and revenue flow, agencies should be considering making a significant investment in this area.

SUMMARY & SOLUTION OPTIONS
As has been stated, much of the recruitment industry exhibits a conspicuous preference for quick, easily fixed vacancies. This is in spite of the fact that margins are low and constantly in decline. In addition, the scale of candidate shortages that is already starting to bite parts of the market is showing every sign of sharply increasing.

This combination of facts produces a paradox:
The more senior the job category, the higher the salary. The more complicated and scarce the required skill sets and experience profile, the less recruiters are disposed to respond. This is in spite of the fact that the potential revenue return will be significant. So why are agencies happy to compete for easier-to-fill and ìcommodityî jobs, for an ever reducing margin of low salaries, when there are high fees to be earned from the ever-growing numbers of the really tough-to-fill technical and management vacancies?î

The obvious reason is that most agencies have neither the means nor the expertise to address higher-fee vacancies. Furthermore, many are disinclined to make the scale of investment in staff capability and infrastructure, necessary to adjust to meet the needs of the market.

An alternative practical solution is to out-source the management and delivery of candidates to clients with higher-fee, hard-to-fill vacancies. Head-Hunt is an organisation offering selected recruiters and agencies either a totally managed, out-sourced solution or a programme of consultancy to provide an in-house, turn-key solution.

John Townend, Managing Director of Head-Hunt says, ìOur agency partners have the certainty of not having to charge their clients a placement fee until our candidate starts employment. We believe this uniquely demonstrates that our search method is a reliable way to deliver candidates of the highest calibre to interview. There certainly are no quick fix, short cuts. By implementing a properly briefed and closely managed assignment, supported by a large-scale programme of strictly monitored candidate research, we can virtually guarantee a positive outcome for both our agency partners and their clients.î

Agencies and recruiters wanting more information, who are already aware of higher salary vacancies but powerless because of a deficiency of viable candidates, are invited to email: John@head-hunt.co.uk with a contact number and a preferred time to receive a call.

John Townend 2004
Managing Director
Head-Hunt Ltd
01763-208841