Press Coverage
Head-hunters failing to hold on to their key staff
Sunday Business - 1999-12-12
The UK recruitment industry, which earns more than £16bn per year overcoming the skills shortages of its clients, has admitted to having problems finding and then retaining its own staff.
Business magazines are littered with profiles of youthful entrepreneurs running multi-million-pound recruitment businesses and most of us now accept headhunters as part of modern-day business life.
But, in a survey by recruiters' recruitment company, Perriam & Everett, which involved the UK's top 200 recruitment firms, 69% reported that they have problems recruiting and 40% admitted they encountered problems retaining good staff.
This is a situation that would be considered intolerable by most other industry sectors, even those growing as quickly. How can business recruit through external suppliers when it would appear they cannot practise what they preach?
The Perriam & Everett report reveals that the average stay of an individual within the private employment services sector is only five years, the average age of a recruitment consultant is 25, with few sticking around past 30. If you ever wondered why the person on the other side of the table giving you careers advice seems short of grey hairs, then now you know. They probably have less actual business experience than you. And even then their boss has difficulty replacing them if they leave. The report also reveals that 98.5% of recruitment bosses predicted an increase in the size of their business next year, growth that will surely be restricted by their inability to find and hang on to the high-calibre sales staff they need.
It is the emphasis on sales, rather than consultancy, that seems to be at the heart of the problem. The recruitment industry, with a few exceptions, has always been a commission driven business, paying handsome dividends varying between 5% and 30% of placement value. On an average basic salary of £30,000 successful consultants can earn up to six-figure packages - particularly in the notoriously hard sales environment of IT contract recruitment where graduate-level recruiters can expect to earn about £35,000 in their first year of work.
It is hard to match these earnings levels in most other careers apart from the City. But, while their Square Mile equivalent earn big bonuses on top of relatively substantial basic salaries, much of the recruiter's remuneration comes from individual commission earnings on lower basic salaries. This enforces the stressful, target-orientated culture, more akin to 1980s estate agencies than 1990s consultancies.
But, of course, we are entering a new millennium and money isn't everything nowadays. Many recruiters are making the decision to cash in their chips and leave - to a less pressurised form of selling or to cross the fence and work in human resources departments.
It would appear from the Perriam & Everett survey that the pressure continues at management level. Those making it to the top of the greasy pole seem to get paid on a percentage of their team or division's ability to hit revenue targets, rather than the profit centres advocated by their management text-books.
Although their basic salaries increase, their earnings still depend substantially on a bonus or commission element. Presumably this reinforces the pressure on their subordinates to get those bums on seats. And of course, the knock-on effect of this pressure is ultimately placed on the hapless applicant seeking impartial career advice from his or her local agency.
If the recruitment industry is to grow at the pace it forecasts (at least double-digit growth next year) it needs to examine its own staffing policies carefully. This awareness is definitely rising in the client base.
Undoubtedly the 'bang-the-gong' culture of some recruitment companies works, but we are finding that increasingly our clients are changing their environments to attract and keep the more consultative type that current business demands.
Eight years ago, when we started Perriam & Everett, recruitment agencies wanted anyone who could know down doors and bring in new business for them. Now, there is not much demand for these individuals. We need relationship-builders who can really understand their clients' needs and add value to the recruitment process. Recruiters of this calibre have different drivers for their own careers and respond more to secure and supportive cultures.
They want high earnings but not at the expense of all else. The recruitment firms that recognise this and restructure accordingly, realise that ultimately it benefits their customers so can only improve business performance.
Recruitment firms must, however, be doing something right or they wouldn't manage to contribute £16bn to the British economy every year. Yet the recruitment game is still very much embryonic. Mergers and acquisitions within are only just starting to happen as the entrepreneurs who spotted the niche and milked it in the first place are starting to think long-term. Recruitment firms need to introduce a paradigm to encourage staff to plan a new consultancy-led recruitment career with more investment in training, family-friendly policies and flexibility with contract work and projects. With the state of the economy now so different to the early 1990's, many different companies are struggling to find staff at the levels of professionalism that they are seeking.
If recruiters who we rely on to find us the right person cannot attract staff long-term, what is the hope for the rest of us? The recruitment industry needs to act to make sure that their staff stay long enough to mature with the industry and complete the cycle, to staff us all into the next millennium.
