Despite Economic Uncertainty, Recruiters Optimistic About 2017

More than 75 percent of recruiting firms met or exceeded their revenue goals last year. Here's what recruiters are saying about what's to come.

February 22, 2017 – More than 75 percent of recruiting firms met or exceeded their revenue goals for 2016, according to a new Bullhorn recruiting trends report. Going into 2017, the report concluded that the vast majority of recruiting professionals remain bullish, despite swelling threats of global economic uncertainty and talent shortages.

Compared to last year, recruiting professionals said they expected an even more profitable and productive 2017, marked by growth from interim, or temporary, placements and driven by repeat clients facing talent shortages in key sectors. Eighty percent of respondents said they anticipated some revenue growth, and 17 percent expected revenue growth of more than 25 percent. These results fall in line with recent data collected and analyzed by Hunt Scanlon Media.

Increasing profitability and pushing revenue forward topped the list of recruiting priorities in 2017. Achieving financial stability took precedence over office expansion plans, as search firms also indicated acquisitions and offshore partnerships among lower priorities. That data point contrasted significantly with Hunt Scanlon’s findings, which showed search firms remain eager to establish partnerships, or to make acquisitions, with one another.

U.K. Firms See Growth Opportunities In the U.S.

A growing number of highly specialized and expanding U.K.-based recruiting boutiques are seeking refuge – and a business hedge – in the U.S. Call it a British invasion with a modern twist. As the fallout deepens in the post-Brexit world, the U.S. is looking more attractive to search firms headquartered in London who find they can just as easily expand their global search platforms to America ….. Here’s some further reading from Hunt Scanlon Media.

La Fosse Associates Opens First U.S. Office
U.K.-headquartered executive search firm La Fosse Associates just opened its first U.S. office based in Santa Monica, the hub of Los Angeles’ thriving tech and digital sector, where it is already engaged in a number of assignments for organizations ranging from early stage start-ups to global concerns.

Key findings of the report include:

  • Differing perspectives on global economic uncertainty. Respondents overwhelmingly said domestic issues outweighed global concerns. Overall, the lowest ranked areas of concern correlated to international affairs, including currency fluctuation, international trade, refugee displacement, and Brexit. Three quarters of respondents said they’re “indifferent” or “not concerned” about Brexit or refugee displacement – 75 percent and 72 percent, respectively – and more than half – 55 percent – expressed “low concern” about international trade – despite the fact that global market shifts could negatively impact domestic hiring plans.
  • Dividing thoughts on the new presidential administration. Following the contentious 2016 U.S. presidential election, recruiting leaders remained divided on the impact of the Trump administration. The percentage of respondents who said they’re “very concerned” or “somewhat concerned” almost equaled the number who felt “indifferent” or “not concerned” – 48 percent to 51 percent, respectively. On the other hand, 71 percent of recruiting firms said they’re “very concerned” or “somewhat concerned” about the potential disruption to their businesses sparked by healthcare policies and regulations, and 35 percent said they’re “very concerned” about it.
  • Increasing challenges of talent shortages. Sixty one percent of recruiting professionals said shortages of qualified talent represented one of their biggest expected challenges of the year. Information technology talent dominated the list of shortages most reported by recruiters.
  • Tapping into existing and new clients for revenue growth. Nearly 80 percent of recruiting firms said more than half their revenue would come from current accounts. The majority of North American recruiting firms – 57 percent of those surveyed – anticipated that revenue from new clients would account for less than a quarter of total revenues.
  • Focusing more on clients than candidates. Ninety two percent of respondents said they provided “good” or “excellent” service to clients and 86 percent to candidates, which showed that firms are marginally more focused on serving clients than candidates.
  • Neglecting internal databases for untapped candidates. Recruiting professionals ranked existing internal candidate databases as the best source for identifying quality candidates, but nearly 60 percent said those databases accounted for less than half of their placements.
  • Lacking key performance metrics to keep business. More than one third of recruiting firms said they didn’t measure client satisfaction, and less than half didn’t measure candidate satisfaction, which suggested that companies could be blindsided by negative feedback and lost business.

Key Takeaways and Six Key Trends

By all indications, 2017 looks to be a banner year for the recruiting industry. The vast majority eagerly anticipate more client demand and more placements, despite talent shortages and economic uncertainty ….. Here’s some further reading from Hunt Scanlon Media.

As Employee Turnover Grows, Talent Shortage Remains
The inadequate supply of qualified and skilled talent is the second-biggest threat to U.S. companies’ ability to meet revenue or business performance targets, second only to increased competitive pressures. Increasing turnover rates are exacerbating the challenge, with four-in-10 companies indicating turnover rate increases.

Bullhorn compiled six key trends that peers in the recruiting industry will be addressing in 2017 and beyond. Here they are:

1. Find Balance between Existing and New Clients – Money talks: profitability and revenues top the list of recruiting priorities for 2017. To make progress, most search firms are putting their energy into retaining and expanding existing client accounts; close to 80 percent of firms expect to generate a majority of revenue from current clients.

Leveraging existing relationships opens avenues into different functional areas of your clients without the expense of new business development. Consider how your success in one area can demonstrate competency in another. While the majority of firms recognize the importance of engaging existing clients, many do so at the expense of developing new client relationships. Case in point, new client revenue will account for less than a quarter of total revenues for 57 percent of North American recruiting firms. Don’t become complacent with business development. In a year when the projected performance outlook is so strong, this may be the time to invest in expanding your footprint.

2. Talent Shortages Loom Large – Without a doubt, talent shortages represent the biggest perceived challenge to recruiting firms; 38 percent list it as their single biggest challenge. That’s a double-edged sword; the same difficulty in sourcing quality talent is what’s driving clients to greater recruiting utilization. 

North American search leaders tend to focus more on domestic concerns and less on global issues such labor market restrictions and international trade negotiations. Even if those don’t impact your business on a daily basis, global market shifts can (and will) affect your clients’ hiring plans as well as the market supply of talent. Global commerce will continue and forward looking businesses who seek to expand their relationships with talent, whether directly or through suppliers, will benefit in the long term. 

3. Politics & Profitability – North American recruiting leaders are divided on the impact of the Trump administration. About half express increased confidence about the future of their business following the election, while nearly another half list his administration as a major area of business concern. Political conflicts exacerbate the volatility surrounding healthcare regulations, which have a direct impact on recruiting firms’ bottom line. The potential repeal and/or replacement of the ACA represents a clear source of anxiety for many search firms that ranked healthcare policies at the top of their list of economic concerns.

4. Internal Candidates Are Underutilized – Most firms spend countless hours and hundreds of thousands of dollars collecting candidate resumes into their database, only to have them sit there unused. Your internal database represents a huge opportunity, as well as a sunk cost, when it comes to filling orders. Once you’ve got them in your system, look to your candidate pipeline as your primary resource for filling orders. Social media comes in as the second source of best candidates, so make sure you’re keeping up your connections and engagement. 

If you’re focusing your online presence only on prospective clients, you’re missing an opportunity to attract passive candidates. Rankings of other candidate acquisition sources also call into question the value of job advertising (outside of job boards) and third party partners. 

5. Performance Measurement Matters – Increased competition, candidate shortages and pricing pressures play havoc on your results, but you need to know how your team is rising to the challenge. Over a third of search firms don’t measure client satisfaction at all, and less than half measure candidate satisfaction. Since onboarding time is usually measured in months, you need to make sure your hiring investments pay off—both literally and figuratively—with satisfied stakeholders. The use of an ATS is particularly valuable in measuring the performance of recruiters. By providing visibility into your pipeline of candidates; performance metrics (hit rate, fill rate, margin and revenue); candidate engagement, retention, and other key indicators; leadership receives more accurate information on the state of the recruiting team. 

6. Don’t Overlook the Candidate Experience – Recruiting firms do a much better job keeping their clients happy than their candidates. Maybe it’s the nature of the beast—there are simply not enough jobs for every candidate—but improvements here can boost your reputation and your apply rates. Since talent shortages ranks as the No. 1 industry challenge recruiting firms face, you owe it to yourself to explore how your firm stacks up on engaging candidates. Remember, communication goes a long way. Candidates want to know where they stand in the process, where their next job is coming from, and that you’re there for them. Don’t lose sight of the fact that they’ve come to you to find a job— they’ve placed their livelihoods in your hands.

A Recruiters Perspective

William D. Rowe, chairman and CEO of Rowe Global, which predominantly serves private equity firms across all sectors, says his Dallas, TX-based search firm in many ways reflects the results of the survey. Rowe Global, for example, exceeded its revenue goals for 2016, and the three previous years as well.

“The first half of 2016 was a very busy six months, but it seemed like it was busier in more mid-level management roles than key C-level positions,” said Mr. Rowe. “So fees were smaller and we were working twice as hard. But from July forward it was like everybody said, ‘I don’t know where this election is going to take us, but energy is what it is, the global markets are what they are, and we’re ready to get back to business.’ So the second half of the year was extremely strong, more senior level demanding.” 

Although it’s less than two months into the new year, Mr. Rowe said that business has been much the same so far in 2017. “It’s six or seven weeks in, but it’s been a very robust January, and I’m quite confident in the momentum continuing through this calendar year. I’ve been in the retained executive search business for 26 years and I’ve been through a couple different cycles. The reality is that the demand for our capability has been pretty constant for the last three or four years. I have confidence we’re going to have a very decent 2017.”

Contributed by Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media

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