The recruitment problem - an insiders view
Recruitment has always been and will always be a "feast and famine" business. To sustain growth beyond a certain level is extremely difficult without very tight controls. It is possible to put in the controls necessary to create a business that is sustainable but only at the expense of firing poor performers on a regular basis. In many cases this is counter-productive as it sometimes takes six months for a good consultant to break into a market and it is only then that you see an ROI.
Recruitment is a very profitable business with appalling cash-flow issues. Because of the charging structure (one third on starting, the next in a month or so and the final on placement), consultants have to keep up a level of business development constantly, or the pot dries up very quickly. And frankly, most are not very good at selling.
There is no annuity business. Worse, a consultant is only as good as their last hire. Recruitment is the epitome of a transactional business. There is little chance of developing strong relationships with organisations (you are always seen as an outsider). Where relationships are strong, it is between an individual executive and his or her "pet headhunter." If that executive moves, is fired or retires, consultants have to start from scratch - this is why most consultants have a small number of key contacts that they grow with throughout their careers and cannot do their jobs when those contacts have gone. As a result there are no older headhunters who have proper business and commercial credibility.
From a business and investment point of view the best route is to acquire a largish firm, get more funding to acquire more specialist boutiques (boutiques only like joining more prestigious firms that are "global brands"), grow the business as quickly as possible, hiring and firing consultants without compunction and possibly damaging relationships with clients, then IPO'ing or trade selling to a Korn Ferry, or Heidrick & Struggles within three years. In this way you get the growth curve without the inevitable plateau and decline.
The market is increasingly seeing the smartest and most entrepreneurial consultants splitting-off from their large families and setting up boutiques. These firms specialise in only in one or a small number of areas, but their watchword is quality. Corporate clients are becoming wise to the growth plans outlined in the above paragraph and are turning to boutiques as they provide a better and more "guaranteed" quality for the same or slightly cheaper price. These boutiques do not have a "brand" but they do have people that understand the business that their clients are in.
The business processes for recruitment firms are mostly still languishing in the 1970's. There are still "little black books" of consultants' contacts that are guarded as if their lives depended upon them - because they do. The whole remuneration structure of recruitment is geared to selfishness and competition, especially within one's own firm. More effort and management time is spent sorting out this internal bickering than on providing a quality service for the firm's clients. This iniquitous state cannot continue, but until someone figures out a more sensible way to pay consultants, we are stuck with it.
Technology has a large part to play in the development of an effective and efficient recruitment business - (There is at least one supplier that can meet those needs in terms of ease of use, matrixed databases, openness and transparency, accountability and scalability), but it is the relationships between individuals that drives the business.
There needs to be a shift in the way that recruitment is seen by clients. We are still seen as little better than "body shoppers" or worse, "meat-packers", unethical, uneducated in the ways of business, lacking understanding of what our clients do, and how they do it. Surely the time has come for us to stop the internal fighting that so blights our industry, and focus more on what our clients' clients are doing. We can then understand not what is needed today (or yesterday in most cases), but what is going to be needed tomorrow.
Guy Kirkwood
France