Is this the death knell for cheap recruitment?


Let me tell you a story… 

It’s 1998 and I’ve been working at my recruitment advertising agency for about 3 months. I’ve had my first ‘national’ in – an advert printed in the national press, in this case the Financial Times. The ad was tiny, perhaps a quarter page size. The role was for an Account Manager (albeit a senior one). I quoted it up for the client – a print management company if I remember correctly – and it came to £38k. The client approved it in less that 45 minutes. I couldn’t believe it. To put it into perspective, my wage at the time was £8k and I was trying to buy a house. Our budget was £70-80k for a 2/3 bed house in Reading. This ad was nearly 5 times my salary and half the price of a house I wanted! I can tell you I was very nervous booking that ad. 

Fast forward 25 years and recruitment is very different. Print has become extinct and even weekly campaigns with that kind of budget aren’t approved with that speed. Candidate attraction has changed significantly, something that began with the evolution of the job boards. Companies longer in the tooth than me (an ever decreasing number) will recall the days of million pound budgets for even the most modest sized business. Today the million pound budget is probably worth around £400k. Job boards made recruitment advertising cheaper and that pushed out the print industry. From a staffing and recruitment agency perspective, it meant that getting candidates to apply for jobs was now cheaper, faster and easier. We slowly saw the traditional high street agency disappear in favour of cheaper offices out of town as candidate behaviour changed – no-one walked into a recruitment agency. Instead, they’d apply online. 

In early 2000, adoption of job boards was slow amongst the corporate businesses. However, recruiters and staffing agencies – who have always been fleet of foot, especially when it comes to finding either jobs or candidates – did turn to the job boards, lured by their pace. But nothing is free in this world, and where the job boards benefited from hundreds of advertised jobs, they were pushed on price. Recruiters are savvy negotiators and they drove the cost down. Crucially, this decision would come to haunt them but not for another 20 years. 

The reduction in advertising costs meant that recruiters could be more profitable and higher profits meant increased competition. Good recruitment consultants learnt their trade in a decent agency and then set up their own venture. Eventually that increase in competition forced recruitment businesses to reduce prices and rates to win business. Today there are something like 40k recruitment businesses in the UK – double the number in the US, which is 40 times larger than the UK. Companies benefited as hungry consultants hustled for their business and we saw the birth of the flat fee recruiter, the RPO service and outsourced recruitment. The one thing the UK is and will always be is an entrepreneurial island. It was a competitive landscape and, in a market saturated with recruiters (the bad, the average and the occasional gold recruiter), corporate clients had plenty of choice when it came to outsourcing their recruitment. However, with much of the process commoditised, clients would accept poor quality service in exchange for cheap recruitment. 

The great recruiters rose to the top, expertly balancing the fine line of candidate attraction advertising across job boards such as CV Library, Reed, Monster and Totaljobs, as well as LinkedIn and Indeed. They concentrated on maximising their candidate and talent attraction, getting the most bang for their buck. I know this because it’s my job to advise, negotiate and buy space across all these channels for them. The great recruiters use posting tools like WaveTrackR to know which job boards work for them and which don’t. They make sure their website is optimised for search engines and advertise their roles on their own platform, benefitting from the free traffic that the likes of Google offer them. They charge a fair rate and are profitable. 

The industry is not without its challenges, its rogues and those chancing their arm, but name me an industry that doesn’t. The winners in this? The successful agencies were profitable and the clients had competitively priced or even cheap recruitment. I say cheap as I refer you back to that print ad I placed. However, the candidate experience was pretty poor, all round. Recruiters rushed to get candidates to managers, managers never rushed to review, candidates were lost but replaced by others (candidates and agencies). There were calls for change to the process but no one wanted to go first. Demand impacts supply and the view was that while clients are being supplied cheap candidates why would they want to pay more?

But is all this about to change? Totaljobs/Jobsite, owned by StepStone, have made the decision to increase their rates in some areas by 400%. Some see it as crazy, it has infuriated many and the sudden change of pricing has left thousand of recruiters out of kilter when it comes to budgets. Others will no doubt follow as the job boards attempt to correct a decision they made years ago when they allowed the standard rate for an online job (£250) to be driven lower and lower for agencies. As it happens, corporate clients are still charged around £250 per job all these years later. 

This will take some correcting and I can foresee a few different routes in the way we advertise and the way we pay for advertising but ultimately the time is up for clients paying low rates to agencies for their services. We’d already seen this in the last year or so as the candidate supply dried up and jobs increased, the balance of power shifting from the hiring managers to the recruitment agencies, but I expect this will increase further. This will spell further bad news for those recruiters who have only just about recovered through COVID and I fear for some business. But just like the energy companies who shift their costs to the consumers, I can foresee recruitment companies shifting these costs to their clients. Now, I’m off to buy a copy of the FT to see if they are running any recruitment ads.