{"id":430,"date":"2015-09-13T18:00:26","date_gmt":"2015-09-13T22:00:26","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/michael-page-recruiting-do-we-still-need-headhunters\/"},"modified":"2015-09-14T01:05:54","modified_gmt":"2015-09-14T05:05:54","slug":"michael-page-recruiting-do-we-still-need-headhunters","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/michael-page-recruiting-do-we-still-need-headhunters\/","title":{"rendered":"Michael Page Recruiting \u2013 Do we still need headhunters?"},"content":{"rendered":"

Recruiting today is changing dramatically. Greater access to information is enhancing the fluidity of job markets and our generation is looking for more reliable information on companies. Gone were the days where headhunters needed to \u2018sell\u2019 the companies to potential candidates. Today we want to hear from the companies directly about their business vision and values. We publicize our resumes, skills, interests and connections online for the world to view so that we are reachable to anybody and everybody. This is causing\u00a0a huge impact on the recruitment industry \u2013 worth approximately $400bn globally [1].<\/p>\n

Michael Page (LSE: MPI) is a UK-based public listed company with \u00a31.6bn in market cap today. It is a global professional recruiting agency, specializing in the placement of candidates by identifying and sourcing qualified candidates for their clients.<\/p>\n

How does Michael Page create value?<\/strong> They hire headhunters to do the talent sourcing for companies – shaking a lot of hands, getting to know people personally, storing their details in a database and referring them to companies when they find the right fit. Headhunters have deep skills in locating candidates, vetting their skills and attracting them to right positions.<\/p>\n

Michael Page captures value through success fees of job placements, where fees paid are derived as a proportion of the salary of the candidate placed. Industry average headhunter fees in 2014 is 21% of annual salary of candidates [2] – presenting a very lucrative business model that has thrived in the last few decades.<\/p>\n

How are they being disrupted?<\/strong> The proliferation of platforms such as LinkedIn, Monster and Glassdoor is giving\u00a0rise to the obsolescence of headhunters, where the information that they once held control of is now public. With information access\u00a0and the innovation of recruiting software, companies are increasingly using online platforms to find suitable talent. LinkedIn is now worth $25bn in market cap \u2013 bearing the resources and expertise to further squeeze out traditional recruiting firms.<\/p>\n

The job market is far more fluid today with millennials changing jobs every few years. With higher employee churn rates, candidates are constantly on the look out for new opportunities and companies have to be actively recruiting to fill those gaps. Paying for headhunters for each new recruit bears too high a cost, thus, companies now rely more heavily on\u00a0their\u00a0in-house recruiters to use\u00a0new digital solutions\u00a0such as Jobvite and Greenhouse recruiting software.<\/p>\n

One problem with traditional headhunting firms by Michael Page is the lack of engagement with their talent pipeline \u2013 18-35 year olds do not interact with headhunters until they\u2019re fairly certain about their industry of choice. This limits the liquidity of the market. There is no constant interaction between headhunter and candidate where skills and interests are being updated in real time. With the seamlessness of professional platforms in providing information and connecting both parties, the value proposition of headhunting firms is slowly deteriorating.<\/p>\n

The other problem is scale. Contrast how many potential candidates can one headhunter meet in a day with the number of profiles that software can process in an hour. The emergence of software that can analyze a candidate\u2019s strengths and preferences is quickly replacing the need for humans to make the judgment.<\/p>\n

Companies like Michael Page are losing out in this age of digital innovation. They will need to adapt their business model to stay relevant. Maintaining the status quo is not an option.<\/p>\n

 <\/p>\n

[1] Source:\u00a0http:\/\/www.ciett.org\/fileadmin\/templates\/ciett\/docs\/Stats\/Economic_report_2015\/CIETT_ER2015.pdf<\/a><\/p>\n

[2] Source:\u00a0https:\/\/www.bountyjobs.com\/blog\/2014\/11\/07\/average-headhunter-fees-2014\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Recruiting companies like Michael Page are losing out in this age of digital innovation. Disintermediation of the middle man is happening in many industries and looks set to disrupt the recruiting industry. The healthy margins that once made this industry an attractive one will be squeezed out by online platforms. 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