Recruiting Firms Leverage Technology to Fuel Growth

March 1, 2023 – In the midst of a rapidly evolving economy, industry analysis from Staffing Industry Analysts, a global advisor on staffing and workforce solutions, says the recruiting industry grew more than 11 percent in 2022, and many firms made the most of the opportunities in front of them. What did the top performers do differently to beat the competition? And how are they using technology to get ahead in 2023 and beyond? Cloud computing company Bullhorn surveyed more than 2,000 recruitment industry professionals across industries and across the globe to answer these questions and more in its latest GRID Industry Trends Report. 

What are the top-performing firms doing differently? Heading into 2023, recruitment agencies have more to consider than ever before, the Bullhorn report said. Where should you prioritize your efforts? Bullhorn examined the practices of last year’s top performers (who saw year-over-year revenue gains greater than 10 percent) and those with major losses (who suffered year-over-year revenue losses greater than 10 percent) to help you navigate the challenges and opportunities ahead. Four key findings, said the company, stood out this year:

1. High-performing firms leveraged technology to succeed in a challenging environment.

At first glance, 2022 was a strong year across the board. Bullhorn found that two-thirds of firms (68 percent) reported year-over-year revenue growth, an improvement over the already strong rebound year of 2021. This growth held true for agencies of all types, sizes, and regions.

If company size, type, and region didn’t determine growth in 2022, what did? Above all else, technology and talent engagement separated the high performers from those that struggled, according to the Bullhorn report. 2022’s biggest winners demonstrated greater technology adoption across the board, three key practices emerged as especially significant.

Compared to the worst performers, the Bullhorn report found that high performers were twice as likely to:

Digitize: High performers digitized data throughout their business.

Automate: The big winners are twice as likely to use heavy automation throughout their business, an insight consistent with findings about how Bullhorn’s own customers use automation.

Redeploy talent at higher rates: For temp agencies, lining up talent for a role before an assignment ended was a major factor for success. The most frequent re-deployers were twice as likely to be high performers in revenue growth.

“It’s clear that agencies are leveraging technology to fuel their success, but the industry is just beginning to realize the benefits of digitally transforming their business,” the Bullhorn report said. “For example, less than one-fifth of respondents leverage automation throughout their business. Firms that continue to invest in their technology and talent pools will be well-positioned for 2023 and beyond.”

2. Top performers are doubling down on digital transformation and technology in 2023.

Digital transformation has come a long way since 2020, when only Bullhorn recorded that 25 percent of recruiting professionals reported a digital transformation strategy. 2023 represents the latest peak of this ongoing trend, as digital transformation comes in as the second overall priority for firms for the first time.

“Despite the fact that digital transformation initiatives are high on the priority list, companies are still early in their adoption and are struggling to implement automated processes to accelerate their candidate and client engagement,” the Bullhorn report said. “While there is room for greater technology adoption across the industry, not all firms are investing equally in expanding their use of technology.”

Compared to those that reported no growth, the report found that high performers were twice as likely to cite digital transformation as a priority and twice as likely to up investments in 2023.

“Given that the top performers are already twice as likely to leverage automation throughout their business and they’re the group most likely to ramp up efforts in 2023, firms that don’t keep up risk falling behind,” the Bullhorn report said. “Those who do step up their efforts may enjoy a significant competitive advantage moving forward.”

3. Developing new clients emerges as the No. 1 priority for 2023.

Last year, client development wasn’t the top priority for recruitment agencies, and it’s hard to understate how unusual that was, said Bullhorn. For the first time in the survey’s 13-year span, the company found that winning new clients wasn’t a top-three priority. While candidate acquisition had been the top priority for six consecutive years, last year, increased skills shortages and unprecedented demand led to a decisive talent-first approach. This year, winning new business makes its return to the top.

Why is this year different? In short, says Bullhorn, changes to the recruitment landscape have led firms to reprioritize winning new clients. In particular, pricing pressure, reductions in job requisitions, and economic uncertainty are major considerations new to the year ahead.

Three times as many firms cited economic uncertainty as a challenge in 2023 compared to 2022. Meanwhile, pricing pressure and job requisition reductions are top challenges after barely registering in the top 10 last year.

Just how challenging will it be to win new clients in 2023? Despite the uptick in economic uncertainty, the outlook is not as bleak as you might expect, says Bullhorn. In fact, the company found a nuanced attitude about their expectations for 2023 and what that means for the industry. While nearly half of respondents (45 percent) predicted that the economy will decline in 2023, most actually thought recruiting demand will improve.

“But even in a best-case scenario, agencies still must determine the most effective route to winning new business,” the Bullhorn report said. “Given that those who were most successful last year were all in on technology and talent, investing in digital transformation and building a loyal talent pool may be a winning strategy to achieve all three top priorities in the years ahead.”

4. The labor market remains tight, and firms are developing talent pools in response.

The Bullhorn report found that tight talent pools have been the top challenge for recruitment agencies for six of the last seven years (the impact of COVID-19 in 2021 is the one exception), and the findings suggested that the shortage may become even worse in 2023.

How are firms tackling the talent shortage so that they can meet the still-high demand for qualified talent?

Professionals cited sourcing as their top talent lifecycle challenge and continued to look for any edge in the competition for qualified talent; it’s the firms that build loyal talent pools that are seeing the most success in 2023 and beyond, said Bullhorn.

“While the majority of agencies report employing talent engagement best practices, the firms who lag in this area are paying the price with talent,” the report said. “In every instance in the chart above, firms that followed the best practice were 30 percent or more likely to report revenue gains in 2022.”

The two biggest talent pool factors correlated with success last year were redeployment and candidate database utilization, the report found. Firms that outperformed their peers when it came to lining up talent for new roles before the end of the assignment and firms that utilized their existing database to fill a position were twice as likely to report revenue gains last year and 50 percent more likely to expect gains in 2023.

Revenue Performance and Outlook

2022 represented another strong year for search firms of all types and an improvement over an already impressive 2021. As Bullhorn previously noted, technology adoption played a bigger part in success than company type, size, or region.

Heading into 2023, the Bullhorn report found, the majority of agencies again predicted growth in the year ahead, although the predictions are slightly more modest than the preceding two years.

Related: Retaining Your Employees During the Great Resignation

The most likely cause for modest growth expectations in 2023 despite an incredibly strong 2022 came down to concerns over the economy, increased competition, and pricing pressure.

Top Priorities and Challenges

“After a 2022 defined by a candidate-first approach, clients are back on top for 2023,” said the Bullhorn report. “That’s not to say that the need to provide top talent amidst an ever-present skills shortage is any less urgent. Firms still aim to provide a better talent experience in 2023, and look to use technology to drive those efforts. While clients are the overall top priority for 2023, it’s far from a consensus pick. In fact, several types of agencies instead chose digital transformation or talent acquisition as their top priority.” 

Without exception, recruiting firms of all types and specialties overwhelmingly cited the talent shortage as their top challenge for 2023, according to the Bullhorn report. “Otherwise, challenges look markedly different in 2023,” the study said. “Economic uncertainty and pricing pressure are new to the top five after barely registering in the top 10 last year. Unreasonable fees are a top-three challenge for 2023, but it isn’t affecting everyone equally. Last year’s lowest performers were twice as likely to cite unreasonable fees as their top challenge than 2022’s biggest winners. Firms that use technology to improve efficiency will be best positioned to weather potentially shrinking margins in 2023.”

Recruiters reported that challenging job requisitions are the top hurdle to maintaining clients in 2023. “Relatedly, the inability to provide talent for those roles also landed in the top five,” the Bullhorn report said. “Those who can build and leverage a talent pool of qualified candidates have the best chance to keep clients happy — and away from their competition. 2023 brings a host of new challenges, but the path to success remains consistent: leveraging talent and technology to meet client demand and future-proof against any obstacle.”

Related: Hiring Top Talent in Unprecedented Times

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