How will recruitment be affected by the credit crunch?

I was chatting to a friend of mine the other day and he said to me: "You should be worried: recruitment's going to stop dead during the recession so no-one is going to need your software..."

Clearly, my chum is wrong with this rather sweeping statement because even during a recession companies need to hire people. Yes, there are a number of large companies going to the wall, Yes, there are high profile retailers either feeling pain, or going bust – and Yes, even banks are having major dramas. However, none of this stops the need to recruit new people.

Think for a moment about a 25,000 employee company, they hit the headlines by saying they are making 10% of their workforce redundant – that's 2,500 people - a lot of people. Firstly, only in rare cases are these mass redundancies undertaken immediately, they are normally carried out over two or three years – in fact I would say that a fair number of these statements exist only to keep analysts happy. Secondly, every company still has its level of natural wastage or job turnover – these people will need to be replaced.

Another element to all of this is that just because your company is not recruiting, or is recruiting less, that doesn't mean to say that people aren't applying for jobs at your company. In fact it would be fair to say that because there are less jobs around, the number of applicants for each job will be much higher. Either way, you are going to need a recruitment system.

Clearly, the recruitment industry will be hit, this is inevitable. The kind of recruitment services that are more likely to be cut back are:

• Offline advertising – maybe clients will use one less job advert or maybe make the ad smaller
• Online advertising – simply post on three job boards, not four.
• Agency rates – get them down from 20% to 17.5%. (or 30% to 25%!!)
• I've heard that some companies are even closing down their graduate schemes (short sighted in my opinion)

Finally, we are entering a phase of having a candidate-rich market. This is a great opportunity for companies to make their direct recruitment channels easier for candidates to find and use. I'm still staggered by companies who simply don't even list their own jobs on their own website.

- Mike

Comments

[Lis Wilson]

Great article Mike.

I have to agree with you in most areas. We are finding that the majority of companies we speak to, are looking to invest in their own careers sites, recruitment software, ATS and talent management systems. This seams to be due to the reduced recruitment budgets (at last organisations are starting to become proactive and think of ways they can improve the recruitment process whilst reduce costs) With this impending candidate rich market they appear to be thinking more about attracting top talent in the most cost effective way and build their brand through careers sites & recruitment communications. (finally the message is starting to get through)

I would hope that those of us who are at the forefront of online recruitment will continue to grow and develop throughout the recession, whilst recruitment agencies and advertisers who do not innovate and develop will probably suffer!

[Kelly Yehling]

I agree. Great article, Mike. Now is the time for recruitment agencies (and all businesses) to evaluate their processes and technology and figure out how to use their resources more efficiently.