Why modern recruitment is broken, and how we’re fixing it.

Recruitment Agencies are well known for being expensive, with companies paying an agency 15-30% of the annual base salary for each candidate they hire.

To put that in to context, using an average agency charging a 20% fee, hiring a mid-level role with a £50,000 salary, would likely cost the company £10,000 in recruitment fees.

That, by any measure, is expensive.

So why are recruitment agency fees so high?

Historically, recruitment was hard, expensive and time consuming and so the fees were appropriate for the work required.

For example, in the 1980’s, if you needed to hire a Head of Sales, you would have engaged a specialist agency.

That agency would have their own private list of candidates, kept in a filing cabinet, that they’ve built over years of work.

They would have to conduct real research to find companies to headhunt from, they’d have to pay money to advertise the vacancy in relevant press, they’d have find and speak with these candidates outside of working hours, often travelling around the country to do so.

They would then share the best candidates they had found, enabling their client to make the hire.

Their role was seen as critical, because without them the company had a significantly lower chance of finding the best candidate to hire.

It was hard work, but the fee was sizeable to made it worthwhile for agencies.

Barriers to entry were relatively high. An agency needed a candidate network to operate, and that took time to build.

It also meant agencies really did need to specialise to be successful. You may have used a specific agency because one of their consultants specialised in a specific role, industry and geography which was relevant to you as a hiring manager.

Today, things are very different.

Technology has helped recruitment agencies become incredibly efficient and dramatically increased the speed at which they can go to market, source candidates and make placements.

But this same technology has also levelled the playing field, giving companies and other agencies access to the same pool of candidates.

The idea that Recruiters are still using their database size as part of their sales process seems archaic, when every one of those candidates can also be found publicly on LinkedIn.

Looking at the above scenario again, the same search today would be fast & relatively easy.

The recruiter could spend 5 minutes writing a job advert, and their technology will send that to countless job boards in a single click, with applicants being auto-filtered based on question responses, so the recruiter only needs to spend time reviewing those that match key criteria.

They can use their LinkedIn Recruiter account to quickly find suitable candidates, and with a single click contact them all with a multi-step outreach cadence.

Alternatively, they may just decide to start calling the candidates that look a particularly good fit, as many tools can now find private mobile numbers for candidates on LinkedIn.

Further to this, it’s rare for Recruiters to meet candidates anymore.

The idea of driving around the country, meeting people at lunch or after work to interview them seems laughable today. A video call is often more than enough, with most candidates just being screened over the phone.

Whilst the nature of recruitment has evolved significantly, the way recruiters engage with their clients hasn’t.

Recruiting through an agency is still just as opaque and expensive as it’s always been.

In theory then, Recruiters should all be earning millions.

Their fees, calculated as a percentage of base salary hasn’t changed much, let’s say over 20 years.

But average salaries in the UK have more than doubled over the same period.

And technology has made the process of recruiting simpler and faster than ever.

But yet, Recruiters aren’t making more money than ever. So why?

It’s all about competition.

Barriers to entry are now so low, anyone can start a recruitment agency.

You can start an agency today and have access to the same database of clients and candidates as a business that’s been operating for 20 years, all with a LinkedIn account.

Costs are incredibly low and it doesn’t particularly take any experience.

Anyone can start today and begin chasing jobs they’ve seen online, emailing hiring managers offering their recruiting services.

There are over 30,000 Recruitment Agencies in the UK and 80% of these are micro-businesses with fewer than 10 employees.

That means there could be hundreds or thousands of agencies which could potentially fill a company’s open role.

So it’s hard, almost impossible, to stand out.

However, it’s not just other agencies that recruiters are now competing with.

Their clients now have access to the same talent and enjoy many of the same efficiencies so don’t need to use an agencies, or will work with them but compete against them on the same hire.

Then there’s a plethora of hiring platforms and other quasi-recruitment solutions out there which are repackaging the access to talent and selling it to hiring companies as a new solution.

Why is this important?

With competition higher than ever, success in recruitment is based largely on quantity metrics, rather than quality. A ‘more is more approach’.

Recruitment has become a sales role, not a recruiting role.

Most hiring managers who have engaged a recruiter to work on one of their roles would likely be shocked if they saw how little time that recruiter will spend working on it.

Recruiters generally structure everything they do around selling their services to new and existing clients, trying to win as many jobs as possible.

Once they’ve won these jobs, they’ll quickly send a handful of candidates and move on to the next.

Unfortunately, this is how modern recruitment agencies have to operate.

Not only is competition rife and it’s harder than ever to win jobs to work on, but even then, fill rates are incredibly low.

Statistics suggest average agency job-fill rates are 25-40%, but based on conversations with other agency owners, we think it’s actually considerably lower than this.

From the perspective of hiring managers, they’re bombarded by Recruitment Agencies daily, all offering their services.

When they do work with an agency, there’s a high chance that agency won’t fill the role and they’ll have a bad experience.

And so the negative cycle continues.

How we’re fixing this.

We think the core problem with modern recruitment is that fierce competition has lead to a survivalist mentality with agencies.

This survivalist mentality means they focus on themselves, rather than thinking about their clients or candidates.

It’s forced recruiters to become sales people, so much so that people who are truly passionate about the candidate focused side of recruiting have little place in modern day agencies.

We’re changing this, by separating sales and recruiting.

Our recruiters focus only on finding, engaging and screening the very best talent for each of our clients roles.

We know this approach works, because are fill rate is 100% (Q1 2024), significantly higher than the industry average.

Obsessed with hiring experience for both their clients and candidates, they’re free of the worries of winning new jobs or expanding client relationships.

We partner with companies, using the advantages technology has brought to recruitment and passing on those savings.

Because technology does so much of the heavy lifting for us, combining this with high fill-rates, means we’re able to offer fees 50% lower than other agencies on average.

We see ourselves as the hiring partner of choice to agencies, available to assist with every hire, rather than being an expensive last resort as so many other agencies are.

We exclusive work with high growth tech startups, so if you’re hiring and want to explore a better way of recruiting, get in touch with us today.

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