How economic uncertainty shapes the recruitment market
Article by Peter Linas, EVP of Corporate Development and International
The recruitment industry has a complex relationship with the economy. As revealed by Bullhorn’s most recent Global Recruitment Insights and Data (GRID) survey, which gathered insights from over 2,000 recruitment professionals, the industry is nonetheless optimistic, with the majority (56%) predicting that their company’s revenue will increase to some extent this year.
However, due to a range of macro trends and business issues, this is not assured. A similar number (58%) of recruiters cite mitigating economic uncertainty as one their most pressing challenges.
So, how exactly does the economy shape the recruitment market?
Here are a few of the key issues.
A low rate of unemployment, just like the UK is experiencing at the moment, is generally perceived as a good thing – but it can bring challenges for recruiters. With fewer people looking for jobs and fewer companies hiring, recruiters aren’t needed as much, leading to less revenue.
But this is not the whole story. Even in an environment of low unemployment, major skills shortages can still exist – and it is arguably in addressing these talent gaps that recruitment companies can offer the most value. Firms that specialise in sourcing scarce talent in areas like IT and engineering, whether permanent, or on a contract or freelance basis, will undoubtedly manage better in this sort of environment than others. Yet in any case, all types of recruitment company must stay ahead when it comes to adopting the most advanced sourcing techniques and technologies.
There is also the prospect of employment rates changing abruptly due to a sudden recession or a slump in the economy, perhaps triggered by a macro event that businesses have little influence over, such as Brexit. A jump in unemployment would lead to an expanding of the pool of candidates available and, in turn, a greater need for recruiters. However, at the same time, a difficult economic climate could mean fewer companies are hiring because they don’t have the budget available to take on more staff.
Employment levels are hugely important to the recruitment industry, and as you can see, it’s a complex relationship. No one can say with complete certainty that either high or low unemployment is good for the industry because both scenarios provide challenges. When demand for recruitment services is low, it’s important for firms to add new value to clients and to ensure the longevity of relationships.
Changing ways of working
When we talk about employment, we have to talk about the different ways in which people choose to work. Not everyone works a 9-to-5 permanent job any more. In fact, several million workers now work in the gig economy in the UK, a figure that is constantly growing. Per the GRID, 65% of recruiters believe that demand for workers in new labour models will increase.
Self-employment in particular has gone up rapidly in the last two decades. So how will this affect the recruitment industry? Will recruiters be needed?
One thing to remember is that the gig economy is not as new as some would have you believe. People have been working as contractors and in self-employment for decades, and recruitment has not been drastically affected. Indeed, many recruitment firms specialise in contract recruitment.
It’s also important to consider how the economy impacts how people work. For example, if the economy takes a downturn, people are less likely to risk freelancing, preferring the safety net of full-time jobs.
Let’s not forget that the process of connecting employers with any potential candidate is inherently challenging, even if digital talent platforms are making it easier. Specialist recruiters are still required to help carry out background checks, interviews, and a variety of assessments to ensure that a quality hire is made.
Of course, for traditional recruitment agencies, further changes may be needed as the gig economy grows over the coming years – and this may include increasing the size of their contract business and their use of digital talent platforms.
Talent is becoming increasingly mobile, and as businesses grow, they often seek to operate in new countries. But is globalisation good or bad for the recruitment industry?
Globalisation presents an opportunity for recruitment firms that want to grow. Major markets like the UK host some of the best talent available anywhere in the world, but potential restrictions on the movement of labour post-Brexit may encourage talent from Europe to look to other countries for work. Having an active presence in the countries that skilled workers are attracted to the most is a major commercial advantage for any global recruitment firm.
But expanding abroad does have its challenges. Different countries have different jobs markets, different levels of economic stability, and cultural nuances that vary widely. Consequently, any recruitment firm that wants to expand should prepare for the opportunity with significant research, planning, and a willingness to adapt to change.
Business growth and spending
Of course, economic uncertainty affects hiring – but how does it affect the growth trajectories of recruitment firms themselves?
When economic uncertainty looms, firms must cut costs in the right areas and spend wisely. Margin compression is a huge issue in the industry – when the costs of delivering a service are higher than the price of the service. This was cited as a top challenge by 54%, according to the GRID.
There is also a growing need to focus on digital transformation and to continue to embrace automation. Doing so will create efficiencies and cut costs. And money must be put into the right tech investments to realise the full ROI from digital transformation. The GRID findings show that embracing digital transformation to improve operations is a top priority for just over a third (36%) of respondents.
Aspiring recruitment businesses may need to diversify their service offerings to ensure growth in trying economic conditions. As demand for traditional jobs wavers, they may need to focus more on strategic hiring and workforce consultancy, which can be an important upsell. But to start diversifying, firms need to show that they are equipped for the job. In other words, as they take on more complex client demands, they need technology that can help them meet and exceed them. The world’s leading firms are already harnessing the full benefits of automation, and starting to explore the exciting applications of artificial intelligence.
A complex relationship
In order to thrive, recruitment professionals must be flexible and learn to evolve along with the changing economic situation. In doing so, they will position themselves in a better position to deal with the ups and downs of the economy and, at its core, the ever-changing face of work