Ultimate Careers Blog

Times have been hard.  First the banking crisis, then the economic crisis, followed by swine flu crisis, the expenses crisis and now a crisis within government.  And the chain of events of the last year or so has affected everyone differently.  You hear a lot from friends, read even more in the papers and as for the internet, well everything from the end of the world to saying this is the best thing that could have happened.  So the only known that I can depend on is what I have personally heard and seen.

Many friends and former colleagues have suffered.  I have lost count of the number made redundant, particularly within my sector, recruitment, and at all levels.  I know bankers who have worked 60 hr weeks and have come away with the same bonus as their ‘9-5′ colleagues (nothing), but also bankers who are not doing at all bad thank you.  The only consistent thing is the fact that it is an unfair world out there, winners and losers, but there have been many more losers than winners this last year.

Anyway, I have digressed somewhat there.  Going back to consistent trends though, something that I have increasingly experienced over the last 12 months is the following responses from prospective clients; ‘it is our new policy not to use  agencies and source candidates directly’ or ‘we have recently cut the number of suppliers to a handful of core providers and invested in an in-house recruitment team’.

So what has been driving this?  Relying only on anecdotal evidence it seems to be very much driven by cost.  But surely this goes against all literature on the advantages of outsourcing?  Surely ‘Insourcing’ is brought about to gain more control of the function, not to make it cheaper?  Surely a business whose sole purpose it is to attract job-seekers is going to do it more efficiently and effectively than a company who specialise in making computers or making money (or creating wealth as the banks often put it)?

Perhaps in most cases yes, but within recruitment the online job boards have revolutionised the way that agencies look for candidates.  And since the agency with the best candidate is in a pretty prime position, it goes without saying how important this has been!  When compared to offline advertising (papers and TV) it is very cheap and you have a ready-made target audience who visit the site.

Whilst I do not profess to speak for every agency out there, I know of one very large multi-national agency and many smaller ones who rely almost entirely on the online  job sites for their candidates.  So what is the problem with that some might say? 

Well, they have almost ‘outsourced’ the very function that they sell to their clients i.e. their ability to attract the best candidates.  Surely that is a dangerous thing, and surely enough clients have cottoned on to this and thought to themselves ‘why am I being charged so much for what is basically the ‘middle man’’. 

So, in the name of cost cutting many businesses have taken on ex-agency staff and are doing themselves what they feel many agencies offer.  So is this the future of recruitment, have the online job boards spelt the end of many recruitment organisations?

In a word, No!

I believe the saying ‘it’s not what you know, it’s who you know’ spells it out.  The best recruiters out there are the best networkers.  Simple.  And companies should ignore them at their peril, for whilst costs and efficiency are perhaps the biggest driver at present, allowing your company’s HR strategy (and I could bring out many a saying about ‘people being a company’s most important asset’) to be dictated by the most cost-effective method will never ensure the best people are always hired.  Or even that the best people are hired the majority of the time.

 10, 15, 20 years of networking cannot ever be replaced by an online job board, or even several of them.  For all of those businesses who are increasing their reliance on online job boards, ask them if they know how many people find their job online.  When you are next out with your friends do a quick straw poll and ask how many of them found their last job on a website – if you think it is a high amount you will probably be very surprised by the result.  And at the same time ask them their preferred method of finding a job, I am betting ‘through someone I know’ might well be top and ‘through the internet’ might well be at the bottom.  If you were looking for a job would you want to be looking at a computer screen all day, or ‘twittered’ by someone you know (no matter how loosely) asking if you would like to meet up and discuss a potential role.

Do a Google search on literature on the subject and unfortunately it is fairly limited but most seem to suggest 10-20% get a job through direct advertising such as newspapers and online job boards.  However, most literature seems to suggest up to 70% is through networking i.e. through someone they know.  Now that may have been facilitated by the web (e.g. Facebook, Myspace, LinkedIn), but it is not easily accessible for a price on the web i.e. it cannot be bought. 

And so this is, I feel what the recruitment industry must not forget.  And I know that there are hundreds of agencies out there who have not forgotten this.  But equally there are hundreds who maybe have and rely too heavily on a candidate source (and without a candidate you can never make a placement) that is neither under their control, is easily accessible to clients for a relatively cheap price and moreover represent perhaps less than 1 in 5  of all job seekers. 

So in a nutshell I see the future of my recruitment world being not in larger offices which feel and look like call centres, but I want my consultants out in the field, meeting clients, meeting candidates and networking to ensure that they are one of the ‘friends’ that up to 70% of jobseekers get their next role through.  Otherwise the recruitment industry might suddenly wake up and have its own identity crisis!

I was lucky enough to be at a breakfast meeting with the Chief Economist of HSBC this morning (Dennis Turner).  Very interesting and knowledgeable chap as you would have thought, and for someone who was predicting a return to ‘boom & bust’ back in 2005, someone perhaps to listen to.

I will not bore you by repeating everything he said, so to quickly summarise (and do not hold him to any of this, as this is just from my memory):

·         The current recession would have happened with or without the ‘credit crunch’ and should have been left to happen in 2005 (would have been soft landing), but for the fact that Labour had a general election to win and so kept the consumer ‘debt bubble’ continue to expand.

·         He predicts 5 quarters of negative growth, what he termed an ‘average’ recession, and then gradual growth next year (he thought we were probably now at the bottom of the cycle).  He agreed with the general consensus that 3.5% growth is what the chancellor needs it to be to balance the books, not what it actually will be. Interestingly he did point out that France, Germany, Italy and the U.S (amongst many more) currently have a far greater debt:GDP ratio (all above 60% now).

·         Our economy is over-reliant on consumer spending (80% of GDP if I recall), which is the principal reason we have gone in to recession – debt levels had got to nearly 1.5xGDP and so consumers had to stop spending as could not afford debt. 

·         The economy needs to re-balance itself in order to sustain long-term growth, by this he means exports from the manufacturing sector need to contribute a lot more.  With a weak pound (good thing for exports), low interest rates (so the £180billion pumped in to the system is invested not saved) and low inflation, history tells us we are positioned well to come out of recession.

BUT, and this is a big BUT.  Unlike any other recession, we have a credit issue and an inherent lack of trust between lenders and borrowers.  Will this impede the ‘normal’ cycle of a recession and make it deeper and longer, or will the ‘quantitative easing’ and near-privatisation of half the banking sector mean that the tap will explode in 12 months time and inflation/interest rates sore considerably beyond 5% that we have been so used to.

That is the million dollar question on everyone’s mind, but I came out of it with a warmer glow about the economy than I did before I met him.  And that, as far as I am concerned. is a good thing before the weekend!

For the last 2 hours I have been watching with interest the budget.  Whilst I have always taken a keen interest, this year is different.  We are in the worst recession since WWII, or is it since records began, I am not sure what the latest headline is.  Suffice to say the economy is in a mess, not entirely of the governments own making we are led to believe as we are in a ‘global economy’.  That said, it is still the Americans fault (hang on I thought it was a global economy), nothing to do with us whatsoever. 

Exempt from all blame, the government needs to do something to get us all out of this mess.  During a week when it was announced a further 177,000 became unemployed in March, Gordon Brown proclaimed recently that it would be a budget for jobs, so was it?

Firstly, the long-term unemployed will get guaranteed training/jobs after 12 months – great, you tell the half a million people that have been made unemployed over the past 6 months that they have to wait 12 months!  And the majority of people want a job and income now, not necessarily training.  So what is in it for them? 

The largest employer of staff in this country are SMEs – have they made it any easier to keep employees by perhaps cutting NI depending on size/profit in the short term?

Investment in green energies is certainly a welcome boost and will certainly create jobs for the long term, but you cannot just plug a skills gap and turn a switch on in a few months – it will takes years, perhaps decades for this to happen.

And then there is the £2000 on offer for a ten year old car so long as you take a nice loan out and get more in debt to buy a new one that will lose considerably more then £2000 as soon as you drive it off the fore-court.  On the plus side, if it works multi-national car manufacturers will be boosted (perhaps someone could tell me how many are British owned?).  However, what about the second hand car dealer whose fore-court is full of 1-3 year old cars, and what about the mechanics who have been one of the few to gain from the downturn. 

Ok, so let’s look at the wider economic picture.  I am a great believer that the heart of the economy is simple – it is about confidence – so what confidence can we take?

I know that there is a fine balance between spending and paying off the national debt – the theory I presume being we need to speculate to accumulate, meaning we can afford to pay back the debt at a later date – but even with my limited macro-economic knowledge surely having a national debt equal to 79% of GDP by 2014 is not healthy.  And that is assuming that the economy contracts only by 3.5% this year (the independent IMF says 4.1%) and that our economy rebounds faster (3.5% prediction for 2011) than ever before.  Dare we even think about a position when the government defaults on its debt because it can’t borrow enough to pay it off.

Not sure how good that will be for investment in to the UK and for the ability of future governments to spend on anything!  At least we will have more wind farms blotting our landscape!

I am obviously not impartial when looking at the budget and what it means to everyone out there will be different from one individual to the next, but I wanted to see help specifically for newly unemployed and SMEs and for the government to look to minimise the national debt so that we are not paying for our mistakes for decades to come.  On the face of it, I didn’t get what I wanted, but that is not to say you didn’t, so would be interested to hear your thoughts.

I have been reading with interest this week the 1st quarter results that have come in from both Hays and Michael Page, 2 companies you would have thought would be fairly resilient compared to a good proportion of the market.  No shock that both are not doing as well compared to a year ago, generally net revenues (income minus staff costs) down 25-40% across most sectors on 2008.  If you take in to account that Easter was in March last year, they could have been even worse if the same had happened this year.

One of the headline quotes from Hays was that in their opinion 20% of recruitment companies in the UK will disappear.  I do not disagree with that, and perhaps it is conservative given the fact that unemployment is widely predicted to reach 3 million and the growth of online recruitment has led to many companies investing in their own in-house teams, or RPOs (Recruitment Process Outsourcing).

What I do question is the assertion that the bigger organisations will be ok and that the smaller you are, potentially the worst off you will be.  Perhaps the smaller organisations, so long as they have a relatively small cost base, will be best-equipped to react faster to the market and so navigate through the storm.  Whilst the ‘bigger ships’ have larger resources, they too can rich a critical tipping point whereby costs exceed revenues for a long period and they cannot downsize or move fast enough to miss the iceberg.  There is perhaps some bias by myself given the relative sizes of Hays and Ultimate, but I would not at all be surprised if more than one or 2 of the larger ‘recession proof’ agencies fall dramatically from grace over the next 9 months.

In my experience the 1st quarter always brings the lowest revenues (for both Temp and Perm desks) so that a 40% drop is not catastrophic.  However, what will be interesting and perhaps the litmus test for the industry is how they perform over the next 2 quarters.  Wherever I have been (and this could just be co-incidence), June has always been the highest billing month for Perms by far, so if these peak times of recruitment revenue are 40% down still, that will be bad news. 

So the results of Hays and Michael Page, no matter how alarming on paper, were not surprising and will not have told people within the industry anything they did not particularly know.  What will be alarming is if the pace of slowdown does not stop, or even if it stays at this level for the next 2 quarters. 

Lets all hope it does not and Easter brings a turning point in the industry.  Have a happy Easter break!

Welcome to the Ultimate Careers blog.  The aim of this blog is to open up discussion on all things recruitment-related, so please feel free to comment on anything I have to say.  I do not profess to be a literary genius or having any particular journalistic talent but I will try to keep some humour injected throughout and keep things interesting and topical.

So happy reading.

Tim Betts, Director