Every industry has been impacted by the pandemic, catching businesses unprepared and leaving many struggling for survival. The crisis has emphasised the need for businesses to adapt, innovate, and diversify in order to de-risk; and for recruitment firms, this includes reviewing their sector focus.
Historically many successful recruitment firms often operated in a narrow-targeted niche, recruiting for a relatively small clearly defined sector. This enabled them to establish themselves as industry experts, reach the best candidates, and deliver more successful hires. In turn leveraging their position as sector experts and charging premium fees.
The impact of Covid-19 on the recruitment sector
However, Coronavirus has re-written the rule book and those businesses able to diversify and supply multiple sectors have understandably displayed more resilience. Coronavirus restrictions have decimated hiring activity in many sectors – retail, hospitality and leisure, being some of the worst hit. Whereas, other sectors such as IT and logistics have bucked the trend and seen an increase in activity levels. With UK unemployment at its highest level in three years and likely to rise further; recruitment companies need to be asking themselves how should they be preparing to ride the storm and thrive in these challenging times?
Sound strategic planning is as much about managing business risk as it is maximising revenue and profits. Despite the obvious benefits of a focussed/niche approach, well managed, forward- looking businesses will have already been conscious of the business risk associated with reliance on a narrow sector, long before Coronavirus became a reality. Many of the successful firms that we work with regularly review their sectors and markets as part of their longer-term strategic planning.
Should recruitment businesses be diversifying?
However; the fallout from Covid 19 and sector fluctuations has resulted in many more companies taking a reactive approach to the current market conditions and diversifying in an attempt to secure alternative revenue streams.
Diversification can be a key strategy for risk management but simply identifying a new sector and trying to generate activity is fraught with challenges and unlikely to be overly fruitful. Successful diversification is reliant upon a number of factors. The first is the ability to identify the right markets to target and often this requires “baby steps” to explore sectors which have some parallels to one where the business has established credibility or relationships. Using existing customers as a stepping-stone into a new market can often be a low risk, yet surprisingly successful approach. After all your existing clients understand your business, ethos and approach – they have worked with you previously and know how good you are so why not explore other hiring needs they have.
Having a well rounded workforce starts with the recruitment process
Success will also be driven by the transferability of employee skills and their ability to develop new relationships. Making sure your employees have “rounded” skillsets and the common attributes of a successful recruiter is vital if you are to diversify successfully. Sector knowledge and experience are important, but this can be developed if the basics are in place. The ability to be agile and diversify, starts therefore with the business’s own recruitment process. It is also about how you develop your team and motivate and retain talent. It is vital that firms invest in talented people and find different ways to keep employee engagement and motivation high. In difficult times, when cash is tight, innovative ways to remunerate employees should be considered. Non-monetary rewards, such as share options and employee ownership plans can be popular ways to reward performance when cashflow restrictions limit the possibility of the usual employee bonus programmes. Business owners should not shy away from equity as a motivation tool for high performing staff, After all, it is much better to own 75% of a successful high valued business than it is to own 100% of a struggling business with no real value.
It is important to also be conscious of the impact of remote working on the level of employee engagement and motivation. Regular communication is critical in ensuring employees have a sense of purpose and remain committed to the business.
Relationships outside of the organisation also present opportunities to diversify further. Strategic partnerships allow expansion into new markets with relatively low risk and investment, ideally building on strength of the individuals concerned and addressing and gaps or weaknesses through collaboration with others outside of the organisation.
Long term strategic planning is crucial
Longer term strategic planning is more important now than ever. Whilst short term strategies to protect cashflow and manage working capital are relevant, there is no doubt that the impact of the pandemic will be felt in the UK labour market for a long time to come. For recruiters now is the time to be looking at longer term planning, revising business plans and revisiting the business model. Not just in terms of financial planning but also critically challenging sector focus, route to market, client relationships, revenue streams, business structure and systems.
Prior to March 2020, the UK recruitment market was highly competitive, with a shortfall in candidates compared to vacancies driving this competition. The pandemic and its impact on the UK labour market will undoubtedly shift the balance of power towards employers. It is no longer a candidate led market, but market conditions remain very competitive with many applications for most new positions advertised. This competitiveness does present a challenge for recruiters but also a real opportunity for good recruiters to work closely with their clients and help them secure the best talent efficiently. Potential employers are finding themselves swamped with the volume of applications for vacancies. Good recruiters provide support for employers using their experience and intuition to help sift through large volumes of CV’s being received. The increasing emergence of AI as a tool for recruiters is only likely to continue and provides a valuable ally for recruiters when handling a large volume of applications. Although, arguable the most powerful tool available to recruiters remains experience.
‘Recruitment Consultants’ – Adding value
Successful recruiters should be looking to add value to their clients’ businesses, recruiters looking to just drive revenue through volume business are in for a rough ride. Events of 2020 have added momentum in terms of diversity and inclusion, along with an increased focus on employee well-being. For many employers talent management is becoming a minefield of increasing legislation and growing public sentiment and scrutiny. Recruiters able to offer guidance on positive employment strategies, and supporting business owners in endorsing diversity, inclusion and employee well-being, all as part of a comprehensive talent management strategy have an opportunity to really differentiate their offering and cement a strong position in the market. The term “recruitment consultant” is more relevant today than it has ever been.
Adapting to market and economic changes is vital, as if 2020 has taught the recruitment sector one thing it’s that even the most efficient of business models can suffer substantial disruption. By taking a long-term view which may well include creating a more diverse portfolio and revisiting their business model firms can spread their risk and start working their way back to a productive and profitable future.