Executive Search Firms Expect Revenue Uptick, Continued Growth in 2020

Economic uncertainty is the top macroeconomic challenge for search firms in the coming year, according 64 percent of those surveyed for Bullhorn’s latest “Global Recruitment Insights and Data” report. Still, 71 percent of the recruitment firms said they expect revenues to grow.

January 31, 2020 – A new year brings a new set of perspectives and priorities. In 2020, search consultants are excited about the possibilities provided by technology, anxious about the economy, and (still) struggling with the talent shortage.

Expectations for 2020 are largely positive but are more modest than in years past, according to Bullhorn’s “Global Recruitment Insights and Data” report. This is likely connected to economic uncertainty with 45 percent expecting a recession in 2020, compared to just 30 percent heading into last year, said the study. Overall, 64 percent of respondents named economic uncertainty as their top macroeconomic challenge for the coming year, up from 49 percent last year.

Despite this, 71 percent of search firms said they expect their revenues to increase in 2020, with 19 percent saying they expect revenues to grow more than 25 percent. Furthermore, 50 percent said they expect to see an increase in their operating budget. The metrics align with recent data collected by Hunt Scanlon Media spanning 15,000 recruiters across every continent. That market intelligence report is due in April.

“Growth and expansion are the two buzzwords we continue to hear across the executive recruiting sector,” said Scott A. Scanlon, CEO of the Greenwich, Conn-media concern. “Recruiters are focused on one thing: scaling for the future. And to get there, a number of them are bringing on chief growth officers to take their firms into the future.” Mr. Scanlon said that private equity firms flush with investment capital continue to circle the industry looking for consolidation plays. “It is has never been this active over the 32 years Hunt Scanlon has been tracking the sector. We’re as bullish as the rest of them.”

The Bullhorn report found that 77 percent of global recruitment firms said that employers must accelerate worker pay increases in order to compete for qualified candidates in 2020. Forty-four percent of respondents also identified this need for higher pay as one of their top three hiring challenges over the next three-to-five years, up from 30 percent in 2019.

The reason so many firms cited increased pay as such a priority is the need to address the continuing tight labor pool – their second-most-cited hiring challenge. Employers and recruiters must compete more effectively to attract candidates into the workforce and into new roles. Fifty percent of those respondents, for example, said skills shortages are worse now than they were five years ago. Further, 43 percent said that candidate acquisition is the top priority for 2020, a need highlighted by the talent shortage.

Skills Shortages and High Churn Rates Among Top Hiring Challenges for 2020

In addition to being among the top hiring challenges, skills shortages was seen as the top-named recruiting challenge overall, cited by 49 percent of respondents. Seventy-four percent of recruiters also said reskilling is effective against skills shortages and resultant tight talent pools. However, slightly less than half – 47 percent – said their reskilling efforts will actually increase in 2020.

Respondents were asked to cite their top challenges overall. From a pool of 25 choices, nearly half cited the talent shortage as a top-three challenge for 2020.

For years, we have been hearing about talent shortages and how they are a top challenge for the search industry. In many sectors, it seems like there simply aren’t enough qualified people with the right skills to fill existing job openings. But just how troublesome are talent shortages? Are they getting any better or worse? Bullhorn asked search firms if they think skills shortages are better or worse now compared to five years ago. Half (50) replied that they are getting worse.

Related: 6 Competitive Strategies for a Tight Talent Market

The recruitment industry is rife with challenges, but what is the single biggest issue impacting an agency’s ability to achieve its future growth goals? Overwhelmingly, responses centered on one thing: people. Bullhorn respondents said that finding quality candidates, working with the right clients, and hiring quality staff matter most in running a successful business. Increased competition also emerged as a recurring challenge.

Digital transformation: More See the Need, But Readiness Still Lags

Historically, the recruitment industry has not always been known for embracing technology, but that no longer appears to be the case. How do search firm feel about digital transformation—the integration of innovative technology into all areas of the business for the purposes of improving operations and delivering more value to clients and candidates? The results are clear: The digital transformation of the industry is both a positive development and an essential one.

For 2020, the Bullhorn report found that digital transformation is once again the top operational challenge for recruiters, named by 55 percent of respondents. Moreover, 83 percent said that digital transformation could help their business, and 86 percent said businesses must embrace digital transformation to remain competitive.

To be ready to embrace innovative technologies like automation and artificial intelligence and realize digital transformation, staffing firms need to embrace and use their existing recruiting technology, and GRID responses revealed a gap: 20 percent cited little or no adoption of their technology.

Thanks to the globalization of business and advancements in technology, workers are more mobile than ever. The industry is increasingly global in nature—more than 80 percent of the 100 largest recruitment companies operate in multiple countries. Is the increased globalization of the industry a good thing or does it just create more hurdles?

Most respondents said globalization and the increased mobility of talent is an opportunity for their business. Perhaps unsurprisingly, C-suite executives and respondents at enterprise companies are the most bullish on globalization.

With the emergence of online talent platforms, questions have swirled in the global recruitment sector. Do these platforms pose an existential threat to the industry? While their impact can’t be denied, recruitment professionals aren’t feeling the heat yet: 28 percent said online talent platforms have made recruiting easier, compared to 13 percent who said they have made the process more difficult.

Sixty-five percent of global search firms said that demand for online talent platforms in the growing gig economy will increase in 2020; increased competition from these platforms is the third-ranking operational challenge recruiters said they will face in the next three-to-five years. However, 58 percent said they are unsure these platforms make recruiting easier or harder.

Related: Upbeat Hiring Plans Heading Into the New Year

Technology spending is expected to increase, but will it be enough? Showing that anticipated financial support still lags behind the desire to advance digital transformation efforts, 55 percent of recruiters said they expect an increase in technology investment next year, though only five percent expected a decrease. Only 22 percent of respondents reported that have changed to a new staffing technology within the last year, while 37 percent said they have either never changed providers or have not done so for at least five years. The top barrier to further technology investment among firms unhappy with their core staffing technology was a fear of disruption.

Diversity Issues Persist in the Talent Pool and Within Search Firms

The recruitment industry is uniquely positioned to contribute to the conversation on diversity and inclusion in the workforce. Recruitment professionals face questions surrounding diversity and inclusion internally in their own businesses and through the needs of their candidates and clients. This year, Bullhorn asked search firms a variety of questions about representation and inclusion within the industry as well as the D&I demands of their client base. Two-thirds of respondents said they believe diverse organizations are more effective, representing a six percent uptick from last year. Women (71 percent) were more likely than men (61 percent) to answer affirmatively.

To Improve Diversity, Recruiting Sector Must Set a New Course
Improving diversity is something that most well-run companies and mission-driven businesses are now implementing. Progress is slow and many times it feels as if we are all taking one step forward, two steps back. But no organization is more important to the success or failure of these initiatives than executive search firms. They hold powerful sway over who moves into the boardroom and into C-suite positions, where all of the most important corporate decisions are made. That power, according to Dale E. Jones, CEO of Diversified Search, raises more questions than answers these days.

All respondents were asked to disclose their identified gender, ethnicity and role within the industry. The findings revealed a large discrepancy in gender representation in C-suite roles and practitioner roles (recruiters, salespeople, sourcers, etc.). According to the study, women make up 60 percent of recruiters and salespeople but only 32 percent of senior executive roles. People of color represent 30 percent of all practitioners but just 16 percent of leadership.

What about candidate diversity? Are clients requesting diverse candidates and is there a shortage of diverse candidates in the talent pool? Here’s what respondents told Bullhorn.

The majority of recruitment professionals have at least some clients that require diverse shortlists of candidates. Depending on the vertical market served, the likelihood of a shortlist request varied dramatically: recruitment businesses specializing in sales and marketing, for example, were considerably more likely (65 percent) to receive these requests than those in healthcare (37 percent).

Bullhorn also asked search firms if there is a diversity shortage in the talent pools from which they find candidates for their clients? Most respondents said there’s a shortage of diverse candidates in the talent pool. Respondents at large companies were the most likely to claim a shortage of diverse candidates (59 percent).

Final Thoughts

“The global recruitment industry continues to roll with optimism for growth in the New Year, focusing on practical solutions to challenges rather than fear of a potential economic downturn” said Gordon Burnes, Bullhorn’s chief marketing officer. “The focus on the need for employers to increase rates of pay to remain competitive in the labor market stands out as a new emphasis on finding ways to draw talent into a tight labor market. Firms are also clear about their need to embrace digital transformation to remain competitive, whether that’s moving to the cloud or embracing automation, and over half of the respondents said their technology budgets are going to increase in 2020, in part to facilitate this transformation.”

Related: Demand is Rising for Executive Recruiters . . . Here’s Why

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor  – Hunt Scanlon Media

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