Recruitment Industry 2019: Current Challenges and Future Trends for 2020

1. Recruitment Challenges
2. Technological Innovations
3. Top Recruitment Sectors for Growth 2019
4. Top Priorities for Recruitment Agencies in 2019
5. Industry Trends
6. Sources Index

1. Recruitment Challenges

Hiring challenges

The top three challenges projected for the recruitment agencies over the next 3-5 years are:

  • Talent shortage
  • Reskilling workers
  • Increased pay expectations

The most significant hurdle the recruitment sector faces at present is a skill-based deficit. This obstacle in the hiring process, projected to be an ongoing issue into 2020, has led to talent shortages across industries within the global workforce. Even highly skilled and experienced professionals may need to learn new skills and adapt to tech developments.

Tellingly, 73% of agencies stated this was the central area of concern for them in 2019. As a result, there is a need to re-skill workers and equip them to keep up with the way the world of work is working and evolving.

Another big challenge in the sector right now, noted by 38% of recruiters, relates to the reluctance of employers to accelerate pay increases in line with the expectations set by the candidate-driven market. An additional factor influencing pay rate calculation is the minimum wage, which is rising to meet the costs of living more closely.

Many people already in employment are motivated to accept new roles purely based on a salary offer. Consequently, recruitment companies lose valuable and loyal employees. At the same time, many agencies are constrained by budgets, while others are unwilling to raise pay to retain talent.

Operational challenges

Data confirms that digital transformation is just around the corner for the recruitment industry’s operational concerns in the next years to come. Embracing digital transformation offers pros and cons for recruitment businesses.

The upside: Digital automation for recruitment is designed to coexist with them rather than take their place
The downside: 49% of recruitment professionals wrestled with getting to grips with digital automation operationally

Overall, the benefits of embracing the capabilities of digital transformation outweigh the transition period and effort required to intergrade it into operations. Recruitment agencies in European and Asia-Pacific territories are in the early stages of learning how digital automation can unify their internal processes and revolutionize workflow. Their counterparts in North America are ahead of the curve, having adopted digital automation early on and surpassed any teething problems applying automation and new technologies into their business management.

When the gig economy kicked off, and freelance employment opportunities rose, many recruitment agencies saw it as competition capturing new talent. However, in 2019, just 27% of recruitment agencies considered this be an operational challenge. They now regard these platforms to be a sound source for candidate acquisition.

Uncertainty over economic growth

Unsurprisingly, nearly 50% of agencies felt the force of global macroeconomic and political instability in 2019. At its core, ambiguity over economic growth was unanimously the number one concern. Agencies operated cautiously toward volatile global markets and the ongoing economic factors in part due to the unclear conclusion to Brexit in the UK.

Legislative changes are a concern for 29% of agencies across the globe. Asia-Pacific based agencies, for example, have to contend with the end of the 457 visa scheme. The Australian recruitment market has also struggled with legislative amendments, such as the temporary skills shortage visa which has led to a decrease in skilled work visas granted.

A knock-on-effect of Brexit, if the UK does indeed leave the European Union, will be legislative change. Recruitment professionals foresee these posing challenges to the industry as a whole, complicating staff hiring. According to EY’s 2019 Attractiveness Survey, in the UK, there was a 13% drop in Foreign Direct Investment (FDI) in 2018 compared to the previous year. That said, overall, the UK is still a leading global economy, which continued to be the principal European recipient of FDI in 2018.

Current unemployment rates are a concern for 38% of recruitment professionals worldwide. Within the European Union, unemployment rates recorded in October 2018, were at the lowest seen since January 2000. These conditions drain the pool of talent that agencies sourced from, in a climate where the number of job openings now outweighs the number of candidates available.

The real challenge at hand: people

In the opinion of recruitment industry professionals, the power of people is profound: they are the backbone of everything they do. The term ‘people’ encompasses all the touchpoints where individuals have an impact, from agency staff to clients and candidates alike. At every step, quality people are an absolute must.

The most pertinent problem that reoccurs for agencies in the ‘recruitment lifecycle’ is sourcing candidates. Indeed, 44% of executives from mid-sized agencies identified it as a top challenge, while 45% of senior staff in smaller agencies stated it was a sore point.

Sourcing candidates is at the heart of the recruitment business. Engaging candidates is paramount to the process. At a micro level, there are specific concerns with reach and engagement that can be grouped generationally and by the level of seniority in a role. In Europe collectively, millennial candidates at staff level proved to be the hardest to engage. Looking at the UK in closer detail during 2019:

  • Millennial (Gen Y) at executive level posed the most challenging to engage for small recruitment agencies
  • Baby Boomers at the executive level were the least challenging generation of candidates to reach, especially for mid-sized recruitment agencies
  • Post Millennials (Gen Z) posed challenging to engage with for staff, senior manager and executive levels for enterprise-sized recruitment agencies

2. Technological Innovations

Recruitment marketing technologies
New marketing technologies are a blessing for recruitment agencies who need to be able to target and reach prospective candidates at any time, on platforms and deceives targeted to particular browsing times and online search habits.

Background checks become optimised with the use of screening technology that offers a full-service check pre-employment including drugs testing, criminal record checks and employment history verification. These tools can also be implemented early on in the screening process, with the use of AI-empowered chatbots which save recruitment agencies time by shortlisting the most suitable candidates upfront.

Real-time recruitment communications platforms are another example of marketing tech that speeds up the connection between candidate and recruiter, thus opening the jobs market up to a global audience. Multi-posting solutions allow recruitment agencies to publish job postings simultaneously to social media platforms and job board sites alike. Service providers like InGoedeBanen have been proven to expedite and automate jobs postings based on data-driven tools to make jobs marketing much more efficient.

Pre-recorded phone messaging allows calls to be authentic enough to capture vital data on the candidate’s suitability before reaching a hiring manager, or ‘human interaction’ stage. Equally, text interviewing can use targeted language without sacrificing on the ‘human touch’ to swiftly move candidates on to the next step or eliminate when necessary early on. Perhaps the most potent impression can be gained from a video interview. With this method, recruitment agencies get a clear picture when it comes to a candidate’s personality.

3. Top Recruitment Sectors for Growth 2019
It’s evident the key recruitment sectors geared up for growth reaffirm the requirement for reskilling the workforce to remain relevant to their prospective industries. While at the same time navigating their way through the unchartered waters of ongoing political and economic instability in the UK.

IT Sector
The IT sector is a lynchpin service for many industries; web designers, data analysts, SEO experts and developers are all examples of skilled specialists in demand, making it a lucrative profession in which to develop a career. The technology industry sees no sign of slowing down, and is on course for enormous growth, predicted to be the ‘fastest growing industry since the dot-com boom of the late 1990s.’

Despite the financial sector going into freefall post-2010 crash, the industry can now see the light at the end of the tunnel after the decline suffered from the recession. Reassuringly, financial services recruitment rose in January 2019 for the first time in nearly two years.

This resurgence links to the spending reinvestments banks are now making after successfully rebuilding. Indeed, Multinational Professional Services network Price Water House Coopers believes the sector can generate around 265,000 new jobs which would see a 3% rise in GDP by 2020.

Sustainable Energy
Renewable energy has slowly been on the increase in the UK since the mid-1990s and is now predicted to accelerate as sustainable forms of energy become more prevalent in the energy sector. As reported by the trade body RenewableUK, from 2010, the wind, wave and tidal energy sector has been boosted by a 74% increase in jobs.

4. Top Priorities for Recruitment Agencies in 2019
It’s all about candidates:
• Identifying and sourcing candidates
• Engaging candidates
• Candidate experience

Digital transformation
At the stage of identifying and sourcing candidates, recruitment agencies are exploring the benefits of social recruiting. Alongside jobs marketing on social media platforms, agencies are also using social channels to gather data on candidates, such as reviewing their career background on LinkedIn, gaining a reflection of their lifestyle interests on Instagram, or getting a flavour for their opinions posted on Twitter.

The current buzzwords in digital transformation for sourcing and selecting candidates are automation and AI. Automating lower-level touchpoints like screening, follow-ups and data entry improves operational efficiencies. Recruitment agencies welcome the integration of these technologies as they free up time for staff to focus on other business priorities, enhancing what they do operationally rather than completely replace a human member of the team.

Brand development and marketing
There is a lack of marketing leadership in recruitment agencies focused on branding and promoting their values and USP’s to candidates and clients. Data identified that 61% of over 100 recruitment leaders interviewed stated they did not have a Chief Marketing Officer or VP of Marketing in their agency.

Undoubtedly, prioritizing brand development leads to enhanced management of client relationships. Relationships drive the people industry, and technology can be harnessed to strengthen client relationships in real-time, in turn, yielding more opportunities. Notably, agencies are directing their efforts in this area to their outward-facing audience rather than building brand awareness internally, suggesting the industry has a firm hold of their business identities.

5. Industry Trends
Top Trend: Recruitment Marketing
Recruitment marketing employs marketing methods and strategic tactics to hook and reel in desirable candidates.

Styles of recruiting
• Inbound Recruiting
• Social recruiting
• Employee referrals

Inbound recruiting is a proactive recruitment marketing strategy employed to convert interested candidates into certified employees. By continued contact, this long-term approach to hiring allows agencies to engage with candidates long-term. Inbound has more impact than traditional outbound methods, viewed as outdated, which can come across as slapdash to candidates who prefer to build relationships with recruitment agencies and feel an affinity to their ‘brand’.

A shortcut to onboarding talent that’s also a money saver is the emerging trend for hiring through employee referrals. Recruitment professionals rate this style of hiring as it takes the shortest amount of time from the initial sourcing right through to onboarding. Equally, social recruiting is trailblazing through the industry as the preferred platform for hiring. As well as being able to gain data on candidates, social media is a powerful channel to capture, influence and connect with new clients.

A poll by TalentLyft confirmed the rise of social media as a tool for recruiting. A staggering 94% of respondents claimed that they currently use, or plan to use, social media for hiring, with 70% investing business development into the area of social recruiting, making it a mainstay trend for 2020.

Employer branding
An employer brand reflects a unique value proposition to employees and clients looking to recruit. It also encompasses an agencies reputation which is vital for retaining and attracting candidates and clients. How agencies are viewed outwardly directly builds the strong foundations of an employer brand. In reality, people are proactively doing their background research on recruitment agencies to gain a first impression, and first impressions count.

LinkedIn undertook research that revealed how candidates approach applying for work. Over 75% of candidates stated that an employer brand was a crucial factor they would actively research before making an application. To illustrate how powerful employer branding can be, 69% of those questioned claimed a negative employer brand would lead to rejecting a job offer, even if they were unemployed at the time.

A tactic to cultivating a positive employee brand is introducing employee advocates. Implementing employee advocacy programs is a top strategy for attracting top talent, where word of mouth, good or bad, can spread like wildfire, making or breaking a brands reputation.

Talent pools
Shrewd hiring managers have a database, similar to a little black book, of top-notch candidates waiting in the wings. Nurturing and keeping this talent pool full to the brim is imperative for optimum results filling job openings. This pool of candidates is an amalgamation of the full spectrum of candidates, from referrals to socially sourced job seekers and more.

Proactively sourcing talent is a given in the recruitment game plan for 2020. The facts speak for themselves to underpin the importance of this, with research carried out by LinkedIn that highlighted that 36% of talent active on the platform was seeking a job, with a whopping 90% of those active stating they were open and interested in new job opportunities.

An additional twist on traditional hiring is collaborative hiring, set to be a top recruitment trend for 2020. HR teams have found working hand in hand with other departments improves the quality of new hires, which in turn reduces turnover rates.

Structured hiring
Adhering to preplanned interview structures is a trend that will grow in 2020. This style of interviewing is advantageous. It bolsters legal defensibility while promoting objectiveness and fairness in the interview evaluation process. A more structured and strategic approach to how recruitment professionals do business is an industry goal for 2020.

Notably, 90% of HR leaders stated they needed to be more strategic. When we refer to a strategy in this instance, its end goal is business growth. The plan includes taking focused action towards identifying skills gaps and business objectives alongside strategic and structured sourcing and hiring.

Definition of GDPR:

The General Data Protection Regulation (GDPR) is a legal framework that sets guidelines for the collection and processing of personal information from individuals who live in the European Union (EU).

GDPR compliance is a risky zone for recruitment agencies due to the fines incurred and damage to an agency brand from data breaches. Staff across the board are required to be educated on the necessity to comply with GDPR to the letter. To be completely compliant requires a shift in industry culture and more rigorous processes in place to safeguard how a candidate’s data is acquired, kept, used and eliminated.

Cybersecurity is an offshoot of GDPR and a worrisome area for recruitment agencies. In actuality, 17% of agencies cited loss of client information a prime concern. Substantial care has to be taken by how this data is acquired, stored, used and deleted. This attention to detail pays off, as clients and candidates would instead collaborate with agencies that respect their data.

Data-driven recruiting
Data-driven insights are a trend that makes decision making more accurate for recruitment agencies, from cost to hire to quality hire. Many tech-savvy agencies are employing data derived from recruitment technologies such as Applicant Tracking Software to inform their HR analysis and action.

Candidate experience
Paramount to everything we’ve identified so far is candidate experience that includes the candidate’s perception of the recruiting process in its entirety. The full circle candidate experience starts with sourcing to screening, interviewing to hiring, and last but not least, onboarding. Each is as important as the other, the domino effect to the feelings and behaviours of each candidate.

The results of a positive candidate experience speak volumes. The best consequences of an expectational candidate experience are acceptance of a job offer, a referral and likelihood the candidate would reapply with the agency again. The downside to unsatisfactory candidate experience and a negative experience can be loud. It can cause permanent damage to a recruitment agencies brand, in turn leading to a long-term shortage of talent. A costly example of the customer experience gone awry is the case of Virgin Media, who reported bad customer experience costs them an astounding $5.4 million annually.

Conclusions on the future of recruitment
Overall there is an outlook of optimism and growth expected for the recruitment sector in 2020. Supporting this forecast for the future, 79% of global respondents expected revenue to increase in 2019. Global recruitment firms will reinvest in re-skilling and focus on harnessing the power of tech innovation and recruitment marketing to allow a greater connection to the essential part of what they do: people.

Adria Solutions
Information Age