September 2006 – Changing the recruitment sector

The years immediately after 2000 were tough times for the recruitment market, heralding a period of consolidation and change, the consequences of which are only now beginning to emerge as companies attempt to understand the shifts and pressures that are moulding the employment landscape.

It’s not unusual to be talking about big change in recruitment. But there have been false dawns before. In the last downturn some of the hardest knocks were delivered to the newborn online recruitment sector that suffered, with other dotcom entrants, from a punishing investor reaction to over-exuberant growth.

But advances in internet and search-engine technology, combined with better understanding of the way these mechanisms can be absorbed in to the marketplace, have created a new wave of interest - this time, hopefully, tempered by more sober reflection of market potential.

Separate lunches last week with the heads of two recruitment businesses – one overseeing a large, diversified operation, the other, a survivor – just – of the first dotcom recruitment boom, confirmed my impression that the changes occurring in recruitment today, not to mention the broader labour market, are something more significant than those that arising in the traditional economic cycle.

“Recruitment is undergoing an industry transformation,” says Colin Tenwick, chief executive officer of StepStone, the Norwegian-registered online recruitment company that has changed its business offering in the past five years, since it very nearly went under.

At the time it was forced to close its UK-based online job board but retained online recruitment boards in 13 countries that still account for two thirds of its business. Today the other third, demonstrating strong growth potential, is delivering bespoke recruitment technology for corporate websites through its information technology arm, StepStone Solutions.

“The whole way in which job candidates are looking for positions and in which companies are trying to attract people is changing,” says Mr Tenwick.

“Up to now the recruitment industry has not changed fundamentally in the last hundred years. Recruiting companies take an assignment and do all the hard work of reaching potential candidates and providing a short list.

“But today when we’re talking with the head of HR or head of recruitment, they want to know where they are sourcing candidates and they want to influence the process and build relationships with potential employees through their company web sites. We’re beginning to see a much more subtle matching process developing between businesses and job candidates.”

These changes are beginning to influence recruitment attitudes. With a few exceptions among higher or specialised job levels recruitment is rarely perceived as a buyers’ market among candidates. The recruiting business is in control of the process and the job of the recruiter is to bring in the candidates.

But access to information through the internet, particularly within corporate web sites, means that candidates are now able to build up a much more detailed picture of a prospective employer than they could in the past. “Candidates are beginning to rank their recruitment experiences with employers,” says Mr Tenwick.

“At the same time they are beginning to view careers differently with a far less structured approach than existed in the past. You are seeing people work for two years with one employer, then leaving to take three years off,” he says. This means that companies must change the way they relate to new, existing and even former employees.

People in general, particularly those whose skills are in demand or who have built a reputation in a specific field, are no longer willing to be moved around like pawns at the whim of management. Individuals are beginning to understand their own worth and companies that fail to recognise the intrinsic value of people are going to suffer.

This realisation has underpinned the growth and branding strategy of another business in the employment market that has risen quietly through a series of acquisitions in the past few years to the point that it is now number three, by market capitalisation, in the international staffing market behind Adecco and Manpower.

Vedior is hardly is hardly a household brand. Instead it has chosen by accident at first, then by deliberate intent to pursue what Zach Miles, chairman of the board of management and chief executive, calls a “multi-branding approach” to the recruitment services business.

Today Vedior positions itself among investors as the sum of its separate parts, celebrating its individual brands for their diversity rather than trying to impose a centralised brand identity. The company grew out of Select Appointments, another business that experienced significant growing pains after its formation in the 1980s.

A refinancing arrangement in the early 1990s led to a rethink of it strategy. “We wanted to create a business that could offer more protection and stability for shareholders so we decided to diversify in different geographical markets and different sectors,” says Mr Mills.

Responding to the need to maintain experienced and motivated managers within acquisition targets, it left sizeable chunks of equity and high degrees of autonomy to those who were running the existing businesses, often the same entrepreneurs that had founded and built them from scratch. “We wanted them to continue to behave as entrepreneurs under a broader corporate umbrella,” says Mr Mills.

Some of the markets are relatively small and specialised, what he calls “niches within niches” but many of Vedior’s companies dominate their niche with brands that are recognised instantly among their clients. Select itself was absorbed by Vedior, a Dutch staffing in business in 1999 but instead of departing after the acquisition, the core of the Select Appointments team under Tony Martin were invited by investors to take control in 2000.

Mr Mills, who took over from Mr Martin in 2004, says: “Vedior had been a ‘command and control’ management operation whereas at Select we had operated a much flatter structure, encouraging strong local management where those who know their business are left to get on with it. It was easier to adapt to a decentralised arrangement. Had we tried to do the opposite it would have led to an exodus of talent.”

The result is a company with a growing international reach that is watching carefully the renewed debate over immigration and its potential impact on cross-border labour supply. Mr Mills says he is against any two-tier arrangement that could restrict labour movement into the rest of European among workers from Bulgaria and Romania, due to join the EU in 2007. “If you invite someone in to the European club, the rules should be the same for everyone,” he says.

He too has been noticing underlying changes in the employment market, including the growing popularity of “try before you buy” arrangements where temporary staff are sometimes converted to permanent employees after a trial period. Here too, however, the distinction between temporary and permanent staff is breaking down as the prospect of a permanent job loses its lustre for some.

In some sectors temporary and contract work commands a premium for flexibility. That is no bad thing. The days of treating the supply of labour like that of any other utility are coming to an end. Good people at all levels are defining the businesses in which they work. They do so by choice and the opportunity to exercise that choice is growing. Vedior and StepStone have learned to change with the times.