Over the last 15 Years the recruitment industry in Australia has seen a number of challenges to its business model that have promised disruption, with most failing within 12 months of launch. The interesting thing about these challengers is that they are seldom, if at all, created by an established recruitment company looking to challenge its own market.
The innovator's dilemma
You only need to talk to a few of the large recruitment firms to see that they, like any large corporation, struggle with the concept of innovation. Clayton Christensen probably says it best in his book The Innovator's Dilemma, when he refers to the challenge of ‘resource dependancy’. This is where organisations feel that their customers will not use their new products or services, therefore they do not develop them further and let these great ideas go to waste. In the same vein 'resource dependancy' also occurs when employees and senior executives do not focus on new ideas because their development does not assist them to achieve their business plan objectives, whether that be a sales target, revenue target or shareholder return.
The recruitment industry is no different in that sense. Sales targets, revenue goals and shareholder return all dominate what are essentially sales led organisations focussed on achieving targets. These organisations only survive because of their strong sales culture and as a result, they have very short term views and objectives. None of which include innovation or market disruption, as these generally require a long-term investment. Supporting this is the fact that innovation has generally been delivered from their suppliers further up or down the value chain, like job boards, resume services and business networking sites.
Things are changing fast. Technology and the candidate market are becoming more accessible and as a result the number of challengers to the market are increasing, dramatically. So it's hard not to think that the recruitment industry is on the verge of a disruption with new models and players entering the market at an increasing rate. It seems the only ones not participating are recruiters themselves.
The industry is under pressure
As an indication of the rate of change you need only look at the state of the industry. Companies like IBISWorld estimate there are currently around 7,000 recruitment firms in Australia, employing around 30,000 staff. While business models vary, the vast majority still operate the same way they did over 20 years ago.
It would not be surprising to many that the industry is overdue for change. However, what is interesting is that much like the realestate market, the recruitment market was one of the first to be disrupted away from traditional print to a digital advertising model. Yet, significant disruption still eludes the industry, even with the plethora of smaller startups and ‘me too’s’ being launched into the industry.
Google - the great disruptor
That could be about to change though and recruiters should not be caught flat footed. Recent rumours have been circulating about Google relaunching Google Base. For those that have no idea about Google Base, back in 2005 Google launched a product that was designed to ingest all online classifieds and make them more searchable through Google’s master search index. This would in essence make the major content portals less relevant. At the same time, it would have allowed business to easily access candidates directly without needing to post through job boards or utilise the services of recruitment business (more so the labour hire businesses).
It failed and became obsolete in 2010. There are a number of reasons why this occurred, however, you cannot ignore the fact that what Google needed was content. And it didn’t have it. This content was controlled by the major classifieds portals like SEEK, MyCareer and Realestate.com.au. Despite negotiating with the major portals to share their content, most knocked them back or did only partial content sharing deals.
Content is still king
Without the content the chances of success in an industry where ‘Content is King’ left Google looking like a ‘Queen’ without a throne. Over time the initiative lost momentum and no amount of resuscitation could have brought this Queen back from the dead. Fast forward to 2016, Google Base is about to do a ‘John Snow’ in Australia, or so it seems if the rumours are anything to go by.
Since the emergence of the major job board players there have been literally hundreds of attempts to ‘disrupt’ the traditional recruitment and job board models. We have seen everything from video resumes, intelligent resume reading and job matching services through to direct copies.
Excluding industry specialised job boards, almost all attempts to disrupt have failed to gain traction. There is one exception to this rule - LinkedIn. LinkedIn’s original model was aimed at business networking and while not an immediate threat it has evolved into a competitor to recruitment businesses and job board players over the last 5 years. This prompted some of the major boards to look at new concepts and ideas. Companies like SEEK launched SEEK Learning and in doing so built a great buffer against disruption of their own job posting service from LinkedIn.
Fragmented market & low barriers to entry
The industry is fragmented, at both ends. Senior appointments and the labour hire businesses. This has acted to put pressure on recruiters margins, particularly for the larger players who need to support higher costs. The persistent problem with recruitment has always been the low barriers to entry. This has meant that after a short period a recruiter can leave and open an office the next day with nothing more than a phone and a bit of passion. These low barriers have not really lifted, in fact if anything they have been lowered even further through the job boards providing greater and greater access to candidates.
Something needs to change
To date no recruitment business has attempted to challenge the existing job board market or disrupt the market significantly. It is almost as if the industry is sitting back waiting for change so they can follow, rather than drive the change before it is forced upon them. And it makes sense for recruitment businesses themselves to disrupt the market because they have something that the average startup requires - content.
If content is King why do recruiters give it away?
Job boards have played a big part in driving innovation in the industry, but they have also driven the industry towards a low value economy. They have in many ways behaved in exactly the same way aggregators and comparison sites, like iSelect, have in the health insurance industry. They have taken control of the customer relationship and in doing so trained the customer to think job board before recruiter. As a result consumers have questioned the value recruiters deliver.
Most importantly, recruiters have unknowingly given their content freely to the job boards and then paid for the privilege to access the candidate market their content attracts. It’s not that job boards have been actively working against recruiters, it’s more that they understand the candidate and market better and have been willing to act and innovate around it.
In some ways the recruitment industry has been so spellbound by job boards they have relied entirely on them for innovation. So much so they seek the job boards out to educate them on how to innovate their way. However, it is hard not to think they are focussing more on protecting their job board market, rather than disrupting it.
New players are entering the recruiters market
The most concerning trend is the entry of successful tech companies like eHarmony who are now reinventing themselves into generic relationship companies that focus on using their personal matching algorithms to match candidate with the most relevant business.
These tech companies understand the power of the customer relationship and are expending their core service offering into matching people and business based on personality traits and culture fit, rather than just experience and skill alone. They represent the greatest threat to the traditional recruiter.
Expr3ss (an eHarmony company) uses the relationship algorithms they honed on matching couples to match candidates and businesses. In some ways this is a step towards replacing the recruiter by taking them out of the conversation.
More so than ever the recruitment industry is under fire and now the challenges are coming from well funded successful startups that have the skill, resources and money to see it through. What's more, they know more about the candidate than any job board or digitised resume service does. Couple that with a history of aggressive research and innovation and it is not hard to see the industry is about to change. And it may come quicker than you think.
Where does this leave the recruiter?
Your head would have to be firmly planted in the sand if you couldn’t see that the recruitment industry is once again feeling the pressure of change, only this time could be it. Either recruitment companies change or they could find themselves going the way of Kodak or Nokia. Replaced by companies that are using technology to simplify and engage with the digital natives.
Increasingly candidates are being given the tools to bypass the recruiter and go straight to the company. They are not only contacting them directly they are now contacting the relevant person that matters to them and their career with the right information that sells themselves better than any recruiter can.
As technology pushes us to accept electronic relationships as the norm, even general technology is working against those recruiters not wanting to embrace change. People and the companies they now talk too can communicate or initiate discussions faster and in a more informed fashion than ever before.
More so than ever though the market is on the verge of some sought of change and it’s clear from the rate at which job boards are buying tech companies that have a new twist on recruiting they can see something happening. And in some ways they are desperately covering their bases.
Need even more proof?
If you need more proof about pending change, just think how disgruntled people have become with LinkedIn. At one stage it was considered the Golden Child of business networking (& employment), now it is considered the slightly unattractive teenager with pimples. If, like me, you have a profile there is chance you have been thinking about closing it down.
LinkedIn seems to have developed into a genetic mixup of business blog, narcissistic social Facebooky platform used by individuals to crow about their achievements or their companies achievements. Add in the endless connections requests from people you have never heard of who seemingly have the responsibility and achievement of the worlds greatest CEO without the title or proof. It is nauseating.
As people turn from LinkedIn, this will leave a gap in the market and undoubtedly when gaps like this occur in fragmented markets, disruptors emerge.
So where does this leave those recruiters who have quietly been going about their business using technology tools that promise to find and manage candidates better? Confused and bewildered, maybe? Or maybe not sure of where too next? Or Maybe thinking how can they defend their turf?
In no uncertain terms it is time recruitment companies drove their own innovation agenda. They need to find the new model that will propel them through an uncertain market and re-establish them as market leaders. One of the first steps they can do is take back what’s theirs, their content and use this as the start of their next business iteration.
It still stands true today, Content is King.
And without it, the competitors and startups can try, but they will be at a disadvantage in whatever they attempt to do. With such a natural advantage it is a wonder more recruitment companies have not taken control of their own destiny and branched out with their own technology play or disruption.
More so than ever, now is the time to think revolution. I just wonder how may recruiters can see the change coming and will look to innovate before it's too late? They are in the box seat to drive change, in the exact same way that Kodak was.
The questions is, what are they doing about future proofing their business?
Viva La Kodak!
Akqire is a strategic design company located in Melbourne and Sydney. We collaborate with companies that are on a mission - to create innovative products and services that change their competitive landscape.