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Quality is cheaper than cheap is

Many years ago Bill Shipton came to me to tell me about the new way of recruiting, People Bank. Bill was going to be the Peter Woods of recruitment, (you know, the little red phone and tooty tooty toot!). His new idea, online recruiting, was going to take over from agencies just as telephone insurance took over from brokers. He then asked me to advertise on his job board which wasn’t called a job board then but it is now, as I was amusingly reminded at the recent On Line Recruitment 2010 Conference. The conference was hosted by a very lively Giles Guest and had an atmosphere that reminded me of the early days of recruitment. A theatre of dreams rank with mismatched statistics leading to any interpretation you liked with the main prize being a seat in Dragon’s Den.

At the conference, I learned that Bill Shipton’s ghost is walking tall. There are now apparently over 3000 job boards in the UK alone and they are still going to take over from the agencies, or rather they are selling less and less to agencies and more and more to direct recruiters. I think I was listening. That means that the new world will be "disintermediated".

What does that mean? This is the word of the moment and what it means is, somebody gets closer than you to your client, offers to deliver your services cheaper than you are already doing and will take a cut. If you think I’m mixing my metaphors, you are wrong. I am eliding trends and marvelling at the dreams of primogeniture, and world domination that clouded the brains of the delegates.

Did you know that you could get an appointment with my consultancy quicker by phoning the number on the Times ad we posted twice a week, than you can through the internet? (And still can).

Does anyone know how to find the telephone number on the Virgin Atlantic site? And frankly, if the web site doesn’t do for you what you want it to do (and the only thing you can do is buy), do you actually want to make the call? Only if you’re a canned music lover.

Many years ago when computers were called IBM and Microsoft Office was called Wang I went to a conference where a man said "computers don’t solve problems they simply accelerate them." There are many other things about technology we should know.

Technology has not improved the quality or the productivity of recruitment or recruitment companies.

Disintermediation has not cut costs and sales margins, although under pressure, remain fundamentally where they were or better than 30 years ago with terms of business significantly higher. Profit margins are not under pressure from outside forces.

If this is true, why are so many naked emperors allowed to parade the myth of their sartorial elegance unchallenged you ask? Why does anyone think that the best candidates are going to walk into the cheapest agencies, or talk to robots, or people who are not allowed to deviate from the script?

Direct recruiters are using job boards more because they are fed up with agencies who simply CV mine, spam what they find and charge a full service commission. Agencies with any sense of their competitive value to their clients have long ago stopped using job boards which are so all pervasive, they simply cancel each other out. Job boards that work tend to be niche or work for niche reasons and the fundamental value is the quality of their relevance to the job seeker. We have come full circle; as in 1980, 60% of the people we see come to us direct, or through our own job board. The quality of our stats stands out a mile from the next best job board we use.

All this means is that there is an unsatisfactory situation which will not be solved by chasing the same old chimera. Recruitment is not going to be computerised any more tomorrow than in poor old Bill Shipton’s day.

I am currently moderating a series of webinars, subject being, why the large corporates are being out-recruited by Small Medium Enterprises. We believe that companies that are, or behave like small companies, recruit better people who add more value and stay longer, more cheaply than large companies. The series is not over yet and we are learning as we go along, but it is beginning to look like a comparison between organisationally clean process, versus fallible but passionate humans. The humans are winning,..on all counts. Not any old human beings, particularly not disintermediated human beings (see web site, but human beings who care.

In our "Blue Book 2009" publication, (publishers Angela Mortimer Plc) an annual survey of salaries and attitudes in employment, we discovered a curious mismatch. When asked what makes an attractive employer, of some 1500 respondents, 60% of employers thought being a market leader was attractive to employees while only 20% of employees agreed.

There is a clear lack of understanding here. Understanding employers is difficult, but not as difficult as they find it to understand successful recruitment. In the end, there is a huge question of trust and trust is lacking.

There is also a huge failure for organisations to trust fundamentals, hence the ludicrous triumph of process over end result. It is the process that is in question, but because the process is being enhanced by technology, everybody dreams of the process taking over. Stand up Bill Shipton.

Will the computers ever take over? Not this side of global warming taking us all out, and actually we all know it. Anyone who has phoned Roy in Bangalore to get a copy of their bank statement for more than 3 months ago, been told it wasn’t possible (the computer), then got a copy a week over the next six months, with a computerised letter of apology, knows!

There is a deep sense of mismatch and frustration in the world of recruitment between agencies, advertisers, websites, clients, and candidates. Pretty much all of that disappointment finds outlet and expression in the financials of the relationships, particularly between client and agency. Candidates are aware of it and are sometimes directly affected when the frustration breaks out into unintelligent and unprofessional behaviour. But generally they are ok with letting dog eat dog. This reflects well on nobody, but the frustration blinds so successfully, that companies who spend millions on their client branding, frequently ignore the value of their recruitment branding to their competitive cost.

The desire to punish agencies for the poverty of their collective branding is all centred on the attitudes to the financial transaction. This is weird, since the proportion of cost this represents in the investment of the new recruit is at worst around 7.5% of the total first year cost and if the agency and the client are any good, generally less that 3.75%.

At least as costly, are the invisible costs.

The better quality of your consultancy, the less work you do, the less your costs. Generally the greater the service, the cheaper the invisibles.

However this is the area, and limit of the disintermediationalists (sic). The sell for disintermediation is largely driven by the promise to lower the visible cost. But it doesn’t matter what money you use, the rule is the less you pay the less you get. Disintermediation is a stunt which has so far not worked, or rather, has sold, and disappointed.

By far the largest cost contributors are in the quality of the recruitment decision, where the humans are. Thus, if your recruit stays two years, your annual recruitment cost is discounted by 50%.

Even more importantly, if your recruit does what the manual says, add value, the cost of failure can completely outstrip anything so far mentioned. A productivity analysis by Mckinsey’s once suggested that the productivity gain of having the right recruit in the right place, can improve productivity by up to 50-60%. This, by the way works at all levels. No modern company can afford to hire bodies, even on a temporary basis.

Since that difference is almost all pure profit, it is huge in both absolute and competitive terms. It is that which makes recruitment best when handled as an investment, by intelligent humans.

Everything we know about recruitment screams at us but remains largely unheard when the experts start to re-engineer the logic of the process. Human beings who care do it best, the opportunity and the environment must be progressive and the process must be thorough and welcoming. Technology must be helpful to the above.

When people do it properly, it’s called quality recruitment. It produces more effective and more lasting outcomes. It is more attractive to candidates and quicker in response time. It is significantly more profitable for all parties and more cost effective when the total costs of the recruitment process are considered.

Quality is cheaper than cheap is.

Oh, and Bill Shipton is a genuinely nice guy who got it wrong, but at least he got it wrong first!

Download the PDF version of this article here.

Written by John Mortimer on 22/02/2010.

John Mortimer is co-founder and CEO of the Angela Mortimer group which includes Katie Bard in Birmingham, Ruth Halliday and AMTec in Manchester, Central Appointments in Bristol, Progressis in Paris, Excel in Brussels, Knightsbridge Recruitment, Pathfinders Media recruitment and of course, Angela Mortimer in London. The Angela Mortimer Group has a very strong reputation for the quality of its recruitment service and the recruitment decisions its clients make.

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