I admit it – I love graphs. As an ex-economist, ex-consultant, and lifelong geek, I love how data friendly recruitment is as a market. Never before have I worked in an industry where individual success (and failure) is so painfully black and white, and reputations can be built and lost on the back of a month’s figures.
The availability of, and devotion to, data is what I both love and fear about the recruitment industry and it makes for some incredibly interesting analysis.
What surprised me when I first started exploring the market was the lack of data sharing in a lot of recruitment firms. In work places where the writing is [quite literally] on the walls in billing figures, there seemed to be lack of transparency in terms of the information filtering down from the top. The ‘So what?’ ‘What does this mean?’ ‘Where are we headed?’ ‘How are we getting there?’ and most importantly ‘How are we going to do it?’
I now run the fastest growing recruitment venture capital fund in the UK. In my line of work, I have the pleasure of meeting a lot of ambitious and talented recruiters and I get asked a lot of questions that they haven’t been able to ask their managers (for obvious reasons). So I have decided to use this column to take one of those ‘FAQs’ each month and respond using proper analysis and data – unravelling recruitment industry one graph at a time! – or something that sounds equally noble. Hopefully I can dispel some recruitment myths, probably I will reinforce a lot of them too. But mostly I just want to make sure that someone is doing something with all that wonderful data.
So for my first column I am going to address a question I get a lot when I tell people what I do:
“If it’s that easy to start a recruitment company, why isn’t everyone doing it?”
Unfortunately, the short answer to this questions is: “they are.” The UK recruitment landscape is at odds with other professional services companies. There are over 18,000 recruitment companies registered in the UK today. If we compare recruitment companies to, say accounting firms, the fragmentation in the recruitment market is startling. Only 2% of UK accounting fees are generated by companies outside of the top 9. In recruitment the equivalent number is 71%.
So why are so many people starting recruitment companies? The average fees generated per Partner in accounting is between £0.5 and £1 million per year. In recruitment, a strong Senior Consultant can generate that much in fees. So why do so many people assume that starting and building a recruitment company is so much easier? Perhaps it is the lack of regulation in recruitment, as opposed to accounting or legal? In theory – yes – anyone can start a recruitment company.
So then, are we an industry of entrepreneurial ‘giant killers’? Is this level playing field just healthy competition and a perfect example of Darwin’s ‘survival of the fittest?’ Or are we cannibalising our own industry? Having so many companies sharing this amount of revenue, also makes it very different for there to be checks and balance on quality of service in the industry. Perhaps this lack of regulation and low barriers to entry leads to recruitment often being less well regarded than a career in law – despite the similar earning potential.
The problem becomes that, unlike most service industries, you are competing for market share with 18,000 others and judging by these statistics – it is even more difficult to stand out.
Next month I will be looking at the breakdown and performance of these 18,000 companies – and exactly what the barriers are, not to starting a recruitment company, but to scaling one.
To find out more about Recruitment Entrepreneur please visit http://RecruitmentEntrepreneur.com