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January 21, 2009

Comments

Bob Corlett

Hey Jim,

I’m glad you found my blog post compelling enough to write about.

While not all your math is exactly right, you were close enough, and you clearly read my blogs and did some serious thinking about my business model. And that’s a good thing. In a recession we all need to be more innovative and if history is any guide, we will be. Old business models fail all the time and frankly, I’ve thought the search business was overdue for an overhaul for about 20 years – particularly the midrange contingency search model. (Don’t believe me? Sample 20 random companies who are not your customers and see what they tell you). AESC used to post some amazing studies showing astonishing client unhappiness even with retainer firms.

As a fellow search professional for over 20 years, I did some serious research on how to rethink the search firm model. The fair question you asked was this: “How do you properly compensate the salesperson?” Because, we can agree, you can’t build a sustainable business model based on ripping off your employees.

I just asked a different question, “What if there was no salesperson…then what is possible?” What value does the salesperson bring to the candidate or the client? Remove the salesperson (and commission) from the equation, replace them with a more effective way to attract clients and a smarter use of social media to recruit, and voila! You can hire great interviewers who have a great non-confrontational job and who would not even consider working at any contingency search firm. Our internal team has a completely different job and a completely different skill set than what you would find in a typical search firm, and they are well paid, because that’s how you keep great people.

Jim, I don’t assume that the recruiting industry exists from greed. Really – I’ve been in it 20 years, and “greedy” is not the first word I use to describe myself or my colleagues.

I just think most search firms are trapped in an outdated mode of thinking and an obsolete sales model. Need proof? Just look at your own analysis of my business model. You weren’t asking where my (many) efficiency gains were, or how we make a sustainable profit at a lower price, or even what my customers think… your analysis was about how I pay my people. But you know what? Your customers don’t care how you pay your people, they don’t even care who you helped them hire. They care about what business results you got for them. If you don’t believe me, just read some of the comments people have about our process. You’ll notice that nobody talks about how I pay my people.

Jim Durbin

An excellent response Bob. I'm not surprised that you've found success - and I actually wish you the best - but the attacks on the recruiting industry - they strike me as unfair.

For each angry client story, I have a dozen stories of clients who don't know how to hire, underpay their people, can't offer a valid reason to work for them, or are even outright tyrants that drive their employees away.

Recruiters become an easy target for folks like that, who are afraid of looking at their inadequacies, and the damage they do reverberates through the entire employment sphere.

The best recruiters are not just at the high end. I know quite a few recruiters who do fantastic work in all ranges - from office temps to midrange employment. They do that work despite the obstacles, and to malign them to boost your business is, well, it's why you got this post and video.

Clients should be careful who they work for, and large public staffing firms do have issues with their models, but I'm a firm believer that staffing firms and search firms are reactionary. We react to the failures of our clients and the structure of the employment system.

Anyone blaming recruiters as a whole without a a whole heap of blame heading back to the hiring companies, isn't providing accurate analysis - they're spinning a story. Vendors do it all the time, which is why the title of my post is what it is.

No salespeople - I understand, which is why the math is convoluted, but 8% still makes a lot more work for your employees. That's not a matter of fair - it's a matter of talent and work.

If your model yields better results, it's because of you personally driving and training your employees. I don't see how that's scalable.

Bob Corlett

Jim,

We can agree on many things. One thing is this: There is a whole lot wrong with the recruiting process at most companies and search firms are not to blame for that.

Because my blog readers are primarily company owners and HR professionals (not recruiters) I blog about company responsibility all the time:
http://thestaffingadvisor.wordpress.com/2008/12/18/if-staffing-looks-so-easy-why-is-it-so-difficult-2-of-2/
and here
http://thestaffingadvisor.wordpress.com/2008/12/17/how-can-you-tell-who-is-right-for-the-job/
and here
http://thestaffingadvisor.wordpress.com/2008/11/05/why-are-search-firms-thriving/

That said - at the risk of preaching to the social media choir - I'm confident that social media will be a disruptive innovation (http://en.wikipedia.org/wiki/Disruptive_technology) to many industries. I know it will threaten the established order at many search firms - forcing a radical restructuring of how they work. Some firms will make the transition, many will not. No this is not the tired, old, discredited "Monsterboard will eliminate recruiters" argument. That short-lived dot com delusion reduced search firms to simple finders of people. And as you noted, companies need ALOT of help with the hiring process, and both hiring managers and candidates need help connecting the dots.

I'm just saying that the finding of people part (for many mid-range jobs) can now be done a whole lot more effectively (and less expensively) than cold calling - and that calls for a serious rethinking of how search firms staff, pay and charge for services. A dozen years ago, Clayton Christensen's book "The Innovator's Dilemma" made this point perfectly.

Personally I hope the big search firms take a long time to figure this all out, I like the competitive advantage we have :)

Jim Durbin

We can certainly agree that social media has and is disruptive to the recruiting business.

So you know - I train recruiters on how to use social media to find candidates - that's the big banner on your right over there. I train internal recruiters and search firms and even throw in the occasional candidate training - leveling the playing field for all.

It's my contention that recruiters can and should still be charging 25-30% for a search - and at least 20% for the big firms. Bad recruiters can charge all they want - clients should figure out when to use them and when not to - but the price for me finding someone is that high because it's worth it.

Of course, internal recruiters are welcome to compete - and many times they will be successful - but not as quickly and not with the sort of quality I can produce.

As for the large staffing firms - the quality is dependent on each branch and each sales and recruiting team. The model may be flawed, but I can't think of billion dollar firms where the model isn't flawed in some way. They're billion dollar firms because they make a lot of money at the fat part of the curve. They're just reacting to what the industry demands.

Josh Letourneau

Bob and Jim, interesting discussion. Bob, I commend you on engaging here. At the same time, I imagine you knew the time would come when the Recruiting Industry took issue with the consistent condemnation.

At the same time, I commend you on your positioning statements, such as: "When you pay fees to old-school, traditional search firms, you are paying them to cold call." In my eyes, most Internal Recruiters I know don't like the notion of 'cold calling' or 'direct sourcing', so you're doing an outstanding job of empathizing with their aversion toward true headhunting. This is intelligent on your part, and no, I'm not being tongue-in-cheek. You're feeding the wolves what they want to eat . . . and I imagine that it's quite easy to build rapport by differentiating your initial sales conversation by leveraging what is considered an ever-present 'Cold War' between Third-Party Search firms and HR.

Now, I know this might come across as comical, but let me suggest that telling Clients that "cold calling [or direct sourcing] is spam" would go over like a lead balloon with progressive organizations that utilize an investment mindset in their Talent Acquisition efforts.

My personal stance is that we need to help Talent Acquisition and HR move toward an intelligent view of how an investment mindset leads to increases in EBITDA, share-price, or whatever financial metrics they deem critical to success. I imagine we could have an insightful and intelligent discussion about this matter.

If I may offer one small thought to conclude here, a main value proposition on your site is price reduction (from 25% to 8%). In the "Innovator's Dilemma", Christensen describes the *lower-end innovation* as one aimed at mainstream customers for whom price is more important than quality. I would argue that 'mainstream' HR theory falls into the category of cost-cutting . . . at the cost of 'quality'. Until HR embraces modern finance theory (EVA, for example) and modern marketing theory (portfolio theory, for example), the constant focus on cost-cutting will persist (especially in a down economy).

Bob Corlett

Hey Josh,
I agree the staffing industry needs to move to an investment mindset, but more on that later. First a few corrections to a persistent error in all the comments here.

Price is NOT our main value proposition (although I acknowledge it's what other search firms find most threatening about our model).

If you read them all, you'll notice that my blog posts rarely mention price. Similarly, the company website (www.staffingadvisors.com) also barely mentions price, and only two of the dozen or so testimonials from our clients mention price (www.staffingadvisors.com/clients).

So if not price, what is our main value proposition? We're very fast and predictable. Nobody asked how we do this, but I'll tell you anyway: business acumen. The "crackerjack surprise inside" of our search process is all the business acumen that goes into defining the job spec and what success looks like on the job. I hire people with extraordinary business acumen but I don't ask them to sell.

At the end of the day, clients just want business results...and right away. Everything else we're talking about here is just insider baseball -- like who works for me, how we pay them, how hard my people work (BTW, less hours than in any agency I ever worked for).

What our clients value is a fast, clean process and a rock solid business orientation in how we define the spec and select the candidates. hey, c'mon clients all have the same motto: "Don't waste my time or money, just get me results." Sure I could charge more, but then we'd all have to spend more time selling new business - and that brings no value to my customer or to me. Sure I could cold call recruit like everyone else, but we developed a more efficient way to recruit (which also, nobody asked about). If I staffed internally like everyone else in the biz - with people willing to cold call - I'd trade the one thing clients value most(our business acumen) for the one thing they value least, but have to pay more for (sales ability).

Josh, full disclosure here: These thoughts are not original, I learned many of them from a client of ours - Doug Davidoff. If you really want to talk ROI for your customer, read Doug's blog.
http://thefastgrowthblog.com/2005/12/20/the-hidden-truth-about-creating-value-if-you-don%E2%80%99t-create-it-you-destroy-it/

TZ

I think Bob is clearly experimenting his marketing strategy. A low fee to gain client accounts is not new for startup and useful to kick off in 3rd party recruiting industry.

But it hardly turns to a sustainable (or successful) business model. There are many new business models (with true technology not just marketing or pricing strategies) trying to break into this very traditional recruiting industry, only a few stands to the last.

I don't see the real differentiating factor in Bob's business model other than the really low price quote. Maybe Bob is hiding his secret weapon/campaign behind the web and blog, or I cannot be very optimistic about the pricing strategy.

Happy Ox New Year!

Carrie Williams

It may be a 'disruptive innovation' but it's reality. You have to keep up with the times and just dismissing the use of social media would be a huge mistake.

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