While the recruitment industry in the UK and Ireland 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 global staffing and recruiting industry. Once again, a skills deficit is one of the top-ranked challenges, with 73 per cent of agencies citing it as one of their biggest areas of concern for 2019. In the U.S., for example, workers are quitting their jobs at unprecedented rates — and, if workers haven’t quit yet, they’re already starting to evaluate their next move — all thanks an economy that seems to break with historical trends in its forward momentum.
One way to address the talent shortage is through reskilling, or updating workers’ skills through education and training. Enterprise businesses were significantly more likely to cite reskilling workers due to the changing nature of jobs as a top hiring challenge relative to other firm sizes (17 per cent vs. 10 per cent). There is undoubtedly an enormous opportunity in reskilling the global workforce and 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 38 per cent 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 global 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.
38% of respondents say getting employers to accelerate pay increases for workers is a top hiring challenge in 2019
In 2019, millions of U.S. workers will see increased pay due to minimum-wage hikes in 20 states and 21 cities. According to the National Employment Law Project, eight states — Arizona, California, Colorado, Maine, Massachusetts, Missouri, New York, and Washington state — are phasing in increases that will eventually put their minimum wages at $12 to $15 an hour. While this measure is federally mandated, it might have dramatic impacts on agencies as candidates seek new opportunities to better their lives.
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. North American recruitment agencies were more concerned with this challenge than European and Asia-Pacific agencies.
High Churn Rates
According to The Wall Street Journal, “Workers are choosing to leave their jobs at the fastest rate since the internet boom 17 years ago and getting rewarded for it with bigger paychecks and/or more satisfying work. Almost one in seven of the nation’s 6.1 million jobless Americans in May were voluntarily unemployed, having left a previous position to look for another, the highest share of voluntary unemployment in more than 17 years… The recent uptick in quitting suggests the economy is running hotter, though it doesn’t necessarily reverse the long-running trends leading to less churn.”
In 2019, 27 per cent of agencies listed high churn rates as one of their top hiring challenges. North American agencies were the most concerned with high churn rates, followed by European and Asia-Pacific agencies. As expected, executives (defined in this research as C-Level, firm owners, and primary owners of lines of businesses) were more concerned with high churn rates than senior managers (defined as managers, directors, and vice presidents) and staff (defined as frontline recruiters and salespeople).
Clearly agencies want to prevent customer churn. Business leaders know that it’s much easier to keep existing customers than to get new ones, so agencies that don’t invest in maintaining strong relationships risk high churn rates, which can jeopardise 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 agencies. Forty-nine per cent of recruitment professionals selected embracing digital transformation as their top operational challenge.
Embracing digital change as an operational challenge is a concern almost equally shared by European and Asia-Pacific agencies. However, less so by North American businesses. This is mostly because some are already incorporating strategies related to automation, artificial intelligence, and “transformative” technology into their workflows and processes.
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 3 per cent), 12 per cent of global agencies labeled it as a top operational challenge. North American agencies were much more likely to view expansion of VMS business as a challenge than their European and Asia-Pacific colleagues, likely because large buyers of labour in Europe and APAC aren’t leveraging VMS to nearly the same extent as of yet.
44 per cent of agencies listed pricing pressure/margin compression as a top-three operational challenge for 2019.
A lot of people are used to working with an old VMS, when you were just throwing candidates at it and would never hear anything back. The VMSs of today are not like that.
Increased Competition from Freelance and Gig Platforms
Are they friends, or are they foes? That’s one of the biggest debates about gig — or digital staffing platforms—or is it? This year, only 27 per cent of agencies ranked increased competition from freelance and gig platforms as a top operational challenge. That’s good news as agencies start to see these platforms as viable sources of new talent as opposed to competitors thwarting their businesses.
How should agencies navigate the gig economy to recruit the best possible talent? Skills.
What we find is that people are an amalgamation of their skills, and if you just removed title A or title B from someone’s work, all of a sudden, you find they’re applicable and skilled today to do job D, E, and F, which they’ve never had that title for but they do have the skills they’ve built in their other roles.
The Top Three Macroeconomic and Political Challenges
Uncertainty over Economic Growth
As the global economy continues shifting, it’s no surprise that nearly half (50 per cent) of agencies 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.
Thirty-eight per cent of global recruitment agencies are concerned with unemployment rates. In fact, North American agencies are much more likely to view unemployment as a challenge. While the unemployment rate edged up to 3.9 per cent in the U.S. in December 2018, job creation for that month surged to 312,000 compared to 176,000 predicted. Economists suggest that these numbers illustrate a favorable U.S. economy.
38% of global recruitment professionals are concerned about low unemployment rates
In the European Union, the unemployment rate sat at 6.7 per cent, as of October 2018 — the lowest unemployment rate since January 2000. In Asia-Pacific, the unemployment rate clocked about 4.2 per cent — it’s expected to remain low by international standards as the region continues to create jobs at very fast rates, according to the International Labour Organisation.
So what does this mean for recruitment agencies worldwide? There are more jobs available than candidates, and agencies will have to be more creative in how they source talent.
Legislative amendments across the globe will have direct impacts on the staffing and recruiting industry as 29 per cent of agencies indicate legislative changes as a top macroeconomic and political challenge.
In Asia-Pacific, 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.
And, of course, there’s Brexit and the General Data Protection Regulation (GDPR) in Europe. Brexit will have a profound impact on the global economy, should the UK withdraw from the European Union. And GDPR has created hefty ramifications around adhering to consumer data protection best practices.
I think there’s a panicky feeling around GDPR at the moment. It’s making people a bit jumpy and perhaps a little too militant on the enforcement side. There’s a growing realisation that we can’t be perfect and won’t be expected to be, but as long as we show that we have the proper structures in place and are trying to be compliant, then we should be okay.
Other Notable Challenges:
The Recruitment Lifecycle and Generations of Candidates
The Recruitment Lifecycle
Gathering requirements from clients. Back office administration. Screening and validation. Global 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. In fact, executives at mid-sized agencies find sourcing candidates much more challenging, compared to small agencies.
Which part of the recruitment lifecycle do you find most challenging? Executives weigh in.
|Mid-sized agencies||Small agencies|
|Back office admin||8%||18%|
|Gathering requirements from clients||18%||12%|
|Screening and validation||11%||9%|
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 great assets — and the value delivered 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 staffing and recruiting agencies, agencies must prioritise candidate acquisition and sourcing if they want to remain competitive.
Also noteworthy: administration tasks related to the back office. Executives at small agencies find handling back office administration much more challenging, compared to mid-sized agencies, mostly because of the number of staff at their agencies.
Generations of Candidates
Additionally, global recruitment businesses have expressed concern over challenges related to reaching and engaging with specific generation of candidates. Each set of generations has its own preferred methods. This year, the most challenging engagements are between executives and Millennials (53 per cent), and the least challenging engagements are between executives and baby boomers (11 per cent). Among post-Millennials and Generation Z candidates, enterprise businesses 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 businesses to be successful this year, they’ll need to focus on the power of people because relationships fuel opportunities, and strengthening relationships ultimately yields business growth.
I’ve always been moved by the power of establishing strong connections with the people who’ve made the biggest impact on my career. It’s through these relationships that people can grow their careers and their businesses because – in an industry that is fueled by relationships – people are the catalysts for change.
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 across the globe.