| If your company entered the hiring market in late 2004 you probably got a small taste of what to expect in 2005. If you plan to add staff in 2005, you should find a market for employees similar to 1997-1999. In other words, it’s a tight labor market again. Unemployment is 5.4% and dropping, the same as late 1996. Few people recognize how tight the market is unless they are in the business like we are. Here is a sampling of what we saw in the last quarter of 2004.
Obviously, the first thing is more jobs. And, for the first time in 4 years, we’ve seen jobs in every industry and not just in pharma and medical devices. Over the last three months we have seen jobs in electronics, IT, chemicals as well as traditional manufacturing and metal banging. Not only are all industries represented, but also all disciplines are represented. The jobs we have seen are not just for specialists. They include buyers, production supervisors, sales, entry-level engineers and other "meat and potato" disciplines. The kind of people that companies hire when they are confident.
The second thing we have seen is a tremendous drop in ad response. The same ad that drew 200 responses in Fall 2003 will draw 10 responses today. Not only is the quantity of responses lower, the quality is lower too. Let’s face it; in a bad economy even good people get laid off. Those layoffs are over and most of the good people have been hired. Here is an example. In October a salesperson from a large employment website offered me a free ad to gauge the sites effectiveness. I advertised a $95,000 Senior Mechanical Design Engineer position. A year ago I would have gotten 50+ responses, of which 3 might have been on target. I only got a TOTAL of 2 responses, neither of which was right. Quite a change from a year ago. Even though I expected limited response I was still shocked.
Another change in the market is that you can’t expect a monopoly on candidates anymore. Over the last few years it was easy to be complacent about candidate availability. There was no need to hurry your hiring process because even if it took another few days or weeks, no one else was going to steal a candidate from under you. You can’t make that assumption now.
People who you want to hire will get counter-offers from their current employers again. I had two companies call me in November. Each one thought they had filled jobs but both positions had to be re-opened because the people they thought had accepted their job took counter-offers from their current companies. One counter was $20,000 more than the person’s salary. I guess that’s another way of saying you can’t be complacent about candidates again, even after they accept your job.
Some of your current staff will leave. More companies are hiring and sooner or later someone like me is going to knock on your staff’s door and let them know about opportunities down the street. Even if you don’t plan on adding staff you will have to replace some people who leave. When you are doing your budgeting for these replacements make sure to plan on salary increases. Tighter markets mean higher salaries. If you are replacing the guy you hired in 2001 who was out of work and took a pay cut you’ll need to spend more to replace him. His salary was a reflection of market conditions that don’t exist anymore.
Candidate motivations have changed. In 2001-2003 everyone was a pessimist. If your company had a stable track record you could sell that to a candidate. Now people are becoming optimistic again. Candidates are less interested in your past and more interested in your future, especially the good candidates. They will want to know if your company is going to grow and if they will be able to grow within the company. In other words, since good candidates will have more options you will need to sell a little again in the interviews.
Hopefully, you don’t see this as all bad news for you. The good news for you is that as the market has tightened, we have finally seen an uptick in the manager market. For the first time since 2000, last year brought an appreciable increase in jobs for managers. A rising tide raises all boats. While a tighter labor market can make your job as a manager tougher it can also give you more personal options.
Now comes the commercial message from Right Recruiting. A tighter market is good for us, of course, because more firms will have a need to use recruiters like us. However our industry has changed too and there are things you need to know.
First, if you haven’t used a recruiting firm since 2000 the firm you used may be out of business. If it’s been one of the few survivors, odds are your contact there, or your HR person’s contact there, is gone. Before starting Right Recruiting, I managed one of the regions largest IT and Engineering recruiting firms. I can tell you that in the last 3 years they went from 50 people to 7 people, none of whom has more than 4 years experience. Please understand that just because you or your HR person used Acme Recruiting in 2000 and liked it, don’t assume you will get the same results in 2005. Do your homework. Insure that the person that you expect to deliver a good Machine Design Engineer wasn’t selling cars last year.
Second, the recruiting industry here in our region has shifted from an industry dominated by large agencies to smaller shops like Right Recruiting. Most veteran recruiters like me left the big firms when they imploded and learned from their mistakes. I don’t know about my competition, but I have consciously kept my costs low and not hired new recruiters. The bigger my staff, the more administration for me and less actual recruiting. That affects two things: quality and cost. Large recruiting firms have more administrators and managers, which adds dramatically to overhead. It’s the reverse of economies of scale.
Cost leads us to the third thing that’s changed, fees. At least it’s changed at Right Recruiting. Honestly, the fee structure in the contingency recruiting business has always been insane. Companies pay 25% to 30% fees out of habit and never question why. What is so magical about those percentages? Here is why those fees are so high.
The blunt truth is that fees are so high because significant portions of the jobs recruiters are given to fill are a waste of time. Maybe the recruiter is one of 10 firms getting the assignment. Also, maybe the HR person is still trying to fill the job, in effect competing with their vendor. Maybe the recruiter resumes are being kept in a secondary file if needed but the internal recruiter really wants to "save a fee" and never passes them on to the manager. It’s a numbers game. Basically, the fees most agencies earn subsidize the wasted effort in the dead end jobs.
Of course, we’ve been very successful charging 25% or more and competing with our clients HR departments and 10 other recruiting firms filling jobs. If those are the rules that your company uses, we can work like that.
But, there are other options. Over the last few years we’ve added options to our pricing structure that allow us to charge 20% and sometimes 15%. The best example I can give is a $30,000,000/yr local manufacturer trying to fill a VP and a Director job. We had no trouble filling those jobs at 15% because we were dealing directly with the President who personally worked with us to fill the jobs. The jobs had been open for a year and we filled them in 6 weeks. We were happy to reduce our fee because, in exchange, the employer actually worked with us to fill the jobs. Everybody won.
We discount depending on a lot of factors. Do you call the job into us? That saves on our marketing costs. Will you work with us on the specs? One of the worst mistakes companies make is to come up with specs with no understanding of the market. How active are you with other vendors? Giving ten agencies a job to fill means you get minimal effort from all ten.
There are other criteria but you get the point. We at Right Recruiting want to work with you and for you. We’ve been a part of the region’s technical community for 25 years. Very few people can say that.
If you have questions about how we work, please call or e-mail. Happy holiday to all. Go Eagles! Jeff
|
