I'm Toby Marshall, Director of Abacus and a new contributor to CCH. My goal? To each month explore and offer thought-provoking opinion on topics of interest that as human capital professionals we can't ignore ... Why we routinely pay tens of thousands of dollars to commission-based recruiters who simply introduce a name and resume? Why the recruitment industry has a staff turnover rate of over 50 per cent, the same industry that promises you employees who will stay with you long-term?
Today's need to continue to attract and retain quality talent is arguably more evident, but increasingly more difficult, than ever before. However understanding the dynamics of the current Australian recruitment industry is a great place to start and it is this topic that we kick off with this month ....
Our recruitment industry, currently worth in excess of $10.2 billion and employing over 32,000 staff. A thriving and particularly buoyant industry one may conclude. However, after some years in this industry I keep coming back to the same thing. That the industry's buoyancy and growth continues to be at the expense of Australian business. Let me explain my thinking.
Scan the employment classifieds in any newspaper and it appears that recruitment companies have a pretty tight stranglehold on the talent on the market. Right? Not so. Australian organisations have long been persuaded by recruiters that engaging a recruitment firm is the only effective way to find the talent they need in a market that is suffering from a (perceived) skill shortage and shrinking labour pool. And in fact realising the way in which you outsource your recruitment and how this in itself may be damaging your business is the all important first step.
One thing recruiters often fail to identify is two huge pools of talent that continue to go largely unnoticed; mothers with young children and older, semi-retired workers. As a recruitment specialist with over 16 years of experience and analysis of the employment market, I continually find myself coming to the same conclusion; that the structure and dynamics of the recruitment industry are so fundamentally flawed that business is wasting millions in fees and failing to connect effectively with their ideal candidates. This issue of under-utilised talent is major and in my opinion, only one of the by-products of this very ineffective recruitment system.
It is however this very talk of dwindling talent and skills shortages that continues to detract the criticism away from the 'supposed experts' who manage the search and selection process on behalf of many leading Australian organisations. The way in which recruitment firms currently operate, in my opinion, hinders rather than assists the recruitment process. Until the industry adopts a more ethical and accountable framework, the economy will continue to bear the brunt. In an era where employee retention is a bone of contention for so many organisations, a quick-fix mentality driven by short-term results and measured purely by commissions earned and classified advertising space sold offers, in my opinion, no framework for optimal long-term results.
Consider this; Recruitment firms only have access to a small percentage of the available jobs out there; in fact many are not advertised or are 'hidden'. It is estimated that up to 80% of jobs are hidden as only 10% of positions ever make their way into the hands of recruitment companies. And given the proliferation of agencies vying for a share of the lucrative commissions ...at best even the largest, most well-resourced recruitment firm has only 2% of the job market in a job seekers sector. But herein lays the bigger problem.... As the job seeker is not the one paying the recruiters they are not the recruiter's number one priority. Recruiters, rather than looking to get maximum employee/ employer match are focused solely on grabbing the closest fit in the shortest possible time and scooping up the commissions. Ultimately they are being rewarded for short-term success - not long-term employee retention.
What is it then that needs to be done to ensure the industry is more accountable, co-operative and effective for all stakeholders?
Companies need to take more control of their own recruitment needs - one way is to think about recruitment as on-going process; continually identifying and communicating with prospective employees, whilst successfully marketing their employment brand to them. Furthermore, recruitment firms do have a powerful role to play in partnering with HR and Australian businesses - but whilst recruiters refuse to share risks with their clients and continue to take a band-aid view of human resources these problems will persist.
Recruiters have to be prepared to develop long-term relationships with clients; however clients too need to commit to their recruitment firm and work long-term for the best results. Recruiters must be prepared to accept that fees should not be entirely up front - rather apportioned over an established period so the incentive is not only finding the right staff member but being rewarded for that person staying in that job.
Indeed, good recruiters can help employers avoid making costly mistakes. They know their clients and their corporate culture intimately, which means they can help identify the right person/ people. Quality recruiters have access to in-depth market understanding which means they can help a client develop retention programs to keep their valuable human assets.
Furthermore, once companies begin measuring the costs of employee churn, it is only then that they will realize the income lost to the inefficient recruitment system. Whilst companies are not able to hire employees, Australia is experiencing nearly 15 per cent under-employment . As a result, companies are failing to harness the great talent out there. The damage to the economy is huge. In fact it is estimated that the figure involved in un-utilized talent coupled with poor performance as a result of job dissatisfaction could be as high as $15 billion.
Furthermore ... there's good news that change is on the horizon. A recent survey by The Economist Magazine found that CEOs believe the 3rd highest risk factor facing companies is attraction and retention of quality employees. It seems that CEO's and Boards are finally realizing the need to get behind the issue of recruitment AND retention.
The cost of finding and employing staff is having a huge impact on the bottom-line of businesses, especially when an employee was not 'matched' in the first place and then exits quickly. The revolving door starts again and employers are left footing the bill, whilst recruiters continue to prosper by the system. According to our research it is estimated that the cost of employee churn to a small business of 20 staff is regularly in excess of $200,000 per annum.
We strongly believe that within the next five years we will see more of Australia's Top 500 companies demand a shift to a Fee For Service recruitment framework - with the main change being that a large part of the fee is based on the employee staying. This is surely the point. Essentially Fee For Service Recruitment works because recruitment agencies share the risks with their clients; the way it should have always been.
About Toby Marshall
Toby Marshall is the Director of Abacus Recruitment Solutions (www.abacusrecruit.com.au), one of Australia's only recruitment agencies utilising a Fee for Service Recruitment Model. Toby is recognised as Australia's leading recruitment specialist spearheading a new era in candidate search and placement.
Marshall's analyses of the employment market led him to a powerful conclusion: that the job market is fundamentally flawed and inefficient. This inspired him to develop a set of solutions that would solve skill shortages for employers and enable candidates to find a better job.
Established in 1994, Abacus Recruitment Solutions is the largest Australian introducer of business to the global network of recruitment firms, the NPA.
Marshall is an accomplished and entertaining public speaker who understands the real dynamics of the recruitment industry. He is also the author of the books 'Get Great People' and 'Get A Better Job', in which he challenges the current orthodoxy surrounding the Australian recruitment process.
Keep reading below to find the conclusion of Toby's 18 years in recruitment has brought him to create the Ultimate Recruitment Kit.
Toby is an active speaker on the international conference circuit. He speaks on Recruitment and Selection; The Changing World of Employment - How to Recruit; and The Great Staff Scarcity Myth.
In early 2007 he created The Ultimate Recruitment Kit for companies - the ultimate creative recruitment guide. His mission: To give all companies, no matter how few employees they have, the information and expert help they need to do their own recruitment and selection and find great new staff. If you like what you have read so far, you can get more information and resources at www.YourRecruitmentCoach.com
If you are in Australia and are interested in Recruitment Services and help with particular recruitment and selection problems, you can go to Abacus Recruitment Solutions at www.abacusrecruit.com.au