While Australia and New Zealand's recruitment industry is overall optimistic about 2019, the year brings some challenges related to hiring and operations, as well as macroeconomics and politics, that might create some hurdles for agencies. Let’s examine each of them and how they impact agencies in the region.
The Top Three Hiring Challenges
There’s no end in sight for the talent shortage as it continues to plague the recruitment industry. Once again, a skills deficit is one of the top-ranked challenges, with 74 percent of agencies citing it as one of their biggest areas of concern for 2019.
One way to address the talent shortage is through reskilling, or updating workers’ skills through education and training. Enterprise firms were significantly more likely to cite reskilling workers due to the changing nature of jobs as a top hiring challenge relative to other agency sizes (17 percent vs. 10 percent). Only 18 percent of Australia and New Zealand agencies listed reskilling workers was a top challenge so there is undoubtedly an enormous opportunity in reskilling the workforce. Some agencies have already taken the first step; for example, Adecco acquired digital retraining firm General Assembly in 2018 to help shape the future of work and talent.
Reskilling employees is one of the biggest opportunities in recruitment right now.
Getting Employers to Accelerate Pay Increases
One of the top challenges this year will be getting employers to accelerate pay increases as 32 percent of agencies noted it as a big hurdle. This is because it’s currently a candidate-driven market, where people are quitting jobs to seek more lucrative opportunities, and minimum-wage rates are going up to more closely match the cost of living.
One way to address the talent shortage, albeit not one that most employers will embrace, is to increase compensation ranges for open roles. Incorporating this strategy can help agencies attract the best possible talent for the best opportunities.
32% of respondents say getting employers to accelerate pay increases for workers is a top hiring challenge in 2019
However, the real challenge is getting agencies to actually pay employees more since some agencies simply don’t want to pay more or don’t have the budgets to do so. Australia and New Zealand agencies were less concerned with this challenge than North American and European firms.
Worker shift to non-traditional labour models (e.g., freelance/gig, SOW, etc.)
The increased use of new technology has meant we’ve seen a rise in non-traditional labour models and the gig economy. Candidates now search for work, select the types of jobs they want to take and the companies in which they want to work for.
So are these non-traditional models friends, or are they foes? 27 percent of respondents thought online talent platforms would make recruiting for sought-after roles easier, while only 10 percent thought be would be harder. Interestingly, 63 percent were unsure on the impact of online talent platforms. Clearly the jury is out on the effect of online talent platforms but it points to a more helpful than harmful impact.
That’s good news as agencies start to see these platforms as viable sources of new talent as opposed to competitors thwarting their business.
The Top Three Operational Challenges
What are the top hiring challenges the staffing/recruitment industry will face over the next 3-5 years?
|Embracing digital transformation to improve operations||19%||25%||26%|
|Pricing pressure/margin compression||21%||17%||18%|
|Increased competition from freelance/gig platforms||13%||10%||11%|
|Expanding breadth of services||10%||11%||12%|
|Increased competition due to globalisation||9%||9%||9%|
|Cybersecurity and data protection compliance||6%||12%||7%|
|Diversifying business into complementary sectors||8%||6%||9%|
|Expanding the proportion of VMS business||7%||3%||4%|
|Increasing demand for SOW, outcomes-based, and non-traditional models||6%||6%||4%|
Embracing Digital Transformation
Digitisation will be the name of the game in 2019, but it’ll undoubtedly present some barriers for firms. Eighty percent of recruitment professionals selected embracing digital transformation as their top operational challenge. Compared to Australia and New Zealand agencies, North American firms were significantly less likely to view embracing digital change as an operational challenge.
As automation increases, the sell will be more consultative than transactional, focusing on how to solve bigger problems rather than just making core processes more efficient.
It’s worth clarifying that when we talk about automation, we’re mostly referring to process automation - not some ambiguous notion of a new Industrial Revolution. Automation in recruitment isn’t intended to replace recruiters. It’s designed to complement them and allow them to focus on higher-value tasks such as building relationships, instead of using their time on repetitive lower-level tasks that automation can easily undertake.
The skills of effectively building relationships through meaningful conversations and understanding the needs of clients and candidates will continuously be paramount for success. In fact, automation will actually help advance the human workforce by removing lower-level tasks such as cutting and pasting job requirements into databases and mining job boards—responsibilities that can easily be solved by technology and automation.
Pricing Pressure and Margin Compression
Those concerns are compounded by the expansion of VMS business models. Although very few agencies ranked expanding their VMS business lines as a top 2019 priority (only 13 percent), 12 percent of global agencies labeled it as a top operational challenge. North American firms were much more likely to view expansion of VMS business as a challenge than their European and Australia and New Zealand colleagues, likely because large buyers of labour in Europe and ANZ aren’t leveraging VMS to nearly the same extent as of yet.
54 percent of agencies listed pricing pressure/margin compression as a top-three operational challenge for 2019.
Expanding breadth of services due to clients’ desire to consolidate preferred suppliers
Recruiters in Australia and New Zealand ranked improving the management of client relationships in the top 5 priorities for 2019. So the desire to expand the breadth of services for clients among agencies (35 percent) comes as no surprise, but how should recruiters go about it?
One huge opportunity for agencies is reskilling—the process of helping workers transform skills that are outdated to be ready for the modern world. By investing in the reskilling of your candidates, you can literally create new qualified candidates for your clients. Major players in the industry are already seizing this opportunity.
The Top Three Macroeconomic and Political Challenges
Uncertainty over Economic Growth
As the global economy continues shifting, it’s no surprise that nearly half (48 percent) of agencies in Australia and New Zealand expressed uncertainty over economic growth as their top macroeconomic and political challenge. With volatile markets all over the world, agencies want to remain cautious because external economic factors such as Brexit in the UK can create cascading conundrums in numerous countries.
48 percent of respondents say uncertainty over future economic growth is the top macroeconomic and political challenge for 2019.
Legislative amendments across Australia and New Zealand will have direct impacts on the recruitment industry as 39 percent of agencies indicate legislative changes as a top macroeconomic and political challenge.
In Australia, agencies are much more likely to view legislative changes as a challenge because the end of the 457 visa scheme — or the temporary skills shortage visa — has negatively impacted Australian recruitment agencies. Between July and December 2017, the number of skilled work visas granted dropped by a third compared to the same period the previous year, according to reports.
Restrictions on use of foreign labour
With local and national legislative changes directly impacting the restrictions on use of foreign labour it comes as no surprise they are both found in the 3 top priorities for agencies in Australia and New Zealand. To overcome these restrictions, recruiters need to leverage technology to source candidates, engage them and improve the candidate experience overall to make sure candidates are ready for when a new opportunity comes along.
31 percent of recruitment pros in Australia and New Zealand view restrictions on the use of foreign labour as a top macroeconomic and political challenge.
Other Notable Challenges:
The Recruitment Lifecycle and Generations of Candidates
Back office administration. Gathering requirements from clients. Screening and validation. Australia and New Zealand recruitment agencies identified these items as some of the top challenges related to the recruitment lifecycle.
What’s the single greatest challenge for agencies related to the recruitment lifecycle, according to respondents? Sourcing.
Why is sourcing so important to tackle as a challenge? Simple. Strategically identifying and sourcing candidates is the bread and butter of recruiting. Candidates are an agency’s great assets — and the value they deliver in order to get paid — so effectively finding and engaging them should be an absolute must. With rising hiring needs creating an increasingly competitive market for a recruitment agency, agencies must prioritise candidate acquisition and sourcing if they want to remain competitive.
Generations of Candidates
Additionally, recruitment agencies have expressed concern over challenges related to reaching and engaging with specific generations of candidates. Each set of generations has its own preferred methods. Forty-three percent of recruitment professionals in Australia and New Zealand agencies found communicating with Millennials the most challenging.
Overall, the most challenging engagements are between executives and Millennials (53 percent), and the least challenging engagements are between executives and baby boomers (11 percent). Among post-Millennials and Generation Z candidates, enterprise firms have the most difficult time with engagement.
Which of the following generations of candidates do you find the most challenging to reach and engage with?
|Baby Boomers: Born 1946-1964 (54-72 years old)||11%||18%||18%|
|Generation X: Born 1965-1980 (38-53 years old)||16%||20%||21%|
|Millennials (Gen Y): Born 1981-1996 (22-37 years old)||53%||41%||41%|
|Post-Millennials (Gen Z): Born 1997-Present (0-21 years old)||20%||21%||21%|
|Size of Recruitment Agency||Enterprise||Mid-sized||Small|
|Baby Boomers: Born 1946-1964 (54-72 years old)||13%||18%||14%|
|Generation X: Born 1965-1980 (38-53 years old)||23%||22%||17%|
|Millennials (Gen Y): Born 1981-1996 (22-37 years old)||37%||41%||48%|
|Post-Millennials (Gen Z): Born 1997-Present (0-21 years old)||27%||19%||21%|
|Region||Australia and New Zealand||North America||Europe|
|Baby Boomers: Born 1946-1964 (54-72 years old)||16%||17%||14%|
|Generation X: Born 1965-1980 (38-53 years old)||17%||20%||20%|
|Millennials (Gen Y): Born 1981-1996 (22-37 years old)||43%||46%||41%|
|Post-Millennials (Gen Z): Born 1997-Present (0-21 years old)||25%||17%||25%|
The Real Challenge at Hand: People
Hiring, operational, and macroeconomic and political challenges aside, what’s the single biggest issue impacting agencies business ability to achieve their future revenue and growth goals? The overwhelming response from respondents can be summarised in one word: people. In 2019, it’s all about quality candidates, quality clients, and quality staff. For agencies to be successful this year, they’ll need to focus on networking with people because relationships fuel opportunities, and strengthening relationships ultimately yields business growth.
Building up detailed knowledge of your market and developing long-term relationships with both clients and candidates provides a significant competitive advantage.
How will these challenges transpire over the year — will any of them take greater precedence over others or will some of them fall to the wayside? It’s unclear. Nonetheless, 2019 will certainly be a game-changing time for the recruitment industry in Australia and New Zealand.