Recruitment Software is always an afterthought.
But there is an alternative:
SIA have just cancelled the Executive Forum in Miami due to Corona Virus fears. The Forum is the most crucial gathering of recruitment executives in the world. All of those industry leaders have just been handed the most literal warning sign possible, from a string of recent economic indicators. But will it change anything when it comes to their attitude towards recruitment Software?
For those recruitment executives too busy, lazy or offended to read the full piece, here are the bullet points.
I do, however, suggest using 30 minutes of our newly freed Miami schedules to consider if you are part of the solution or the problem. Hopefully, my input helps.
- It doesn’t matter if you believe Corona will continue to be a global catastrophe or not; the economic wheels are already spinning.
- Historically, recruitment gets hit early and hard, but nothing new there.
- Just like The Great Recession, (and to a lesser extent Y2K, The Dot Com and 9/11), recruitment will survive, but as an industry, we continue to miss the point.
- EBIT margins are all we can control. We should prioritise their rate of change as much as revenue, and we should use recruitment software to do it.
But what’s the take-home?
RECRUITMENT SOFTWARE IS OUR SAVIOUR, yet we continue to systematically drive it away.
How many times have we proved the technophiles wrong?
The world told us LinkedIn, Monster and Indeed would bring the demise of the traditional recruitment agency. And yet, here we still are.
After The Great Recession, we were one of the first to bounce back, and we were the first to boast about it too. Along came Hired.Com and “AI”, but agency leaders know how to spot hype, right?
And yet, here we still are.
It’s not rocket science. Agencies continue to deliver critical value to their customers. They are needed, and always will be. But herein lies the problem.
Major disruptors have forced tourism, transport, entertainment, retail and advertising to change their attitudes. However, our proven ability to endure, despite that change, only reinforces our subtle dismissal of technologists.
Even with the looming threat of the most unusual and unpredictable global recession of all time, our industry leaders subconsciously create barriers to innovation at every turn.
As an industry, our foolishly blind pursuit of revenue over EBITDA margins is our most significant barrier. It’s killing genuine innovation and cannibalising our value proposition and addressable market size, but let me first set the scene:
A storm is coming, but we will all be okay, right?
Fear-mongering about health aside, it doesn’t matter if you believe Corona is a big issue or not. The markets are reacting. Hays, Adecco, Randstad and Manpower have all seen a 30% YTD drop in share price, as investors get spooked in the knowledge that historically, recruitment is one of the first to feel the pain of an economic slowdown.
While we all know that employment and GDP are correlated, you may be interested in the dramatic reduction of actual hours worked post-2008, despite employment levels and the recruitment sector normalising.
Our over-reliance on the “Talent Shortage” narrative, compounded by the over-selling of contracting and temp solutions, may have been an innocent and legitimate reaction to the reduction in actual hours worked.
An alternative theory would be to suggest that as an industry, our decision to use those business models to chase revenue blindly has indirectly contributed to that metric.
But more importantly, we continue to miss the point, and we are falling behind as a result: We talk about transformation, but we focus on revenue from the top-down, and it’s blocking technological advances at every turn.
When Turkeys Vote for Christmas
In Q1 of 2018, Adecco announced the following results:
- Revenues were down 1%
- NFI and NFI margin was down 4%
- EBITA was down 28%
- The EBITDA margin was down 20%
Group CEO Alain Dehaze confidently presented the narrative that an unusual calendar year, coupled with increased spend on technology acquisitions, namely Vettery and General Assembly, were to blame. (He chose not to mention that Q1 2017 was a very high bar to beat.) With that single press release, he pinned his flag to the mast. Adecco was prioritising EBIT margins, and they were using technology to do it.
The Markets reacted poorly at first, with a 6.3% drop over the coming days and a 20% drop on their previous monthly high.
But he delivered on his promise. Despite a YOY revenue drop of 4% in Q4 2019:
- Gross Margin was up 20bps
- EBIT Margin was up 10bps
- SG&A decreased organically by 3% YOY.
The markets acknowledged the long term strategic decision to embrace technical leadership and responded positively, despite the significant revenue drop.
It is these attitudinal shifts by the likes of Adecco, Randstad and others that will see their continued ability to weather an economic storm. It will most likely see them be the first to return to growth post an economic downturn.
Yet despite the evidence, the majority of the industry continues with the same old boring narrative:
- Technologists will never understand the nuance and complexity of human-led recruitment services.
- Recruitment tech is all hype, especially AI, and it will never do what it has in other industries.
- We don’t have the time or resources to consider a dramatic technical shift.
- Just go get us more candidates, we will worry about the big boy stuff.
If you find yourself agreeing with any of the above, I would bet that you have also lost some talented technologists in your organisation lately.
It is precisely these attitudes that drive technical talent and innovation away from our industry.
A massive opportunity for change
Recruitment technology is now one of the most populous startup sectors. Driven by what initially seems to be low hanging fruit, and an industry ripe for technological disruption. I’m sure your LinkedIn inbox is a testament to that.
It also has astronomical failure rates. Internal technical teams and new startups are slowly facing the reality that they are not being prioritised, or even wanted, by recruitment leadership. Technology is not yet solving the talent drought at scale, and it’s unlikely it ever will unless leadership attitudes change, and we begin to empower our brightest technical talent.
What worries me most, is that some of the most innovative technologies are being lost in the meantime, as short-sighted leadership decisions prioritise the quest for revenue over the opportunity to build something that genuinely delivers a more efficient, sustainable and valuable business.
Even as a smaller company, I’ve made this mistake myself, numerous times. I’ve prioritised chasing revenue instead of genuinely listening to my brightest technologists about innovation. I’ve lost some exceptional talent because of frustration with the industry status quo, and I’ve witnessed larger recruitment companies haemorrhaging entire technical teams and amazing leaders, to other industries, for the same reason.
SO WHAT DO WE DO ABOUT IT?
STEP 1. Stop telling technologists they don’t understand.
It’s time to acknowledge execs are not always the smartest people in the room. We need to empower technologists, specifically product leaders, with the knowledge we have, if we are ever to create true innovation in our sector.
STEP 2. Stop prioritizing everything else over technology.
It’s the main reason we lose exceptional minds to other industries. Ask any former recruitment industry product leader why they left, and they will tell you the space is a graveyard for technical ambition.
STEP 3. It’s time to acknowledge that Adecco and others were right. And while you might not invest in or acquire Hired.com, 100offer, or talent.io just yet, I wouldn’t discount the innovation the marketplace concepts are delivering.
If you haven’t seen hunted.com yet, I guarantee your eyes will light up at the idea of somebody easing your own hiring pains.
I worry, however, that if an impending recession doesn’t scare us into action, nothing will.
My suggestion is that these steps are the biggest things traditional agency leaders can take towards respecting the value technologists can bring to your executive team, and as an added bonus, they’re free, and very easy to implement.
They are the most valuable steps we can take to empower real innovation in recruitment, and not just luke-warm iterations of the same, highly volatile services.
From there, we genuinely empower our technical leaders to implement the changes they envision. By default, this shift removes the endless red tape that has seen countless past tech failures in our organisations. It gives our brightest talent light at the end of what has been a very frustrating tunnel. It shows them we do want change, and we know they are the best people to deliver it.