The Recruitment Rollercoaster

In this issue, I want to focus on what went VERY wrong for recruitment last year and why it’s crucial for recruitment businesses - and all businesses - to read the market better and react much faster.

The highs and lows…

2022 was a record year for the recruitment industry. But in 2023, business almost fell off a cliff. When recruiters have a good year, the first thing we tend to do is hire more consultants because the best way to grow your business is to increase your headcount and your fee-earning capability. And that’s exactly what happened. Everybody went out and hired a bunch of people. But by April 2023, the market had started to soften and work dried up. The global economy took a dive - interest rates and the cost of capital started to really bite, and companies stopped hiring. So then the industry was overstaffed. And in the second half of the year, everybody started letting people go. So, we all spent a ton of money that delivered no results, and the profits of all recruitment businesses around the world tumbled.

So what are the key lessons we've learned?

1. It’s crucial to learn how to read the market better before you take bold decisions.
2. Understand that when you hire people, you don’t get immediate results - it takes people a while to get used to a new environment.
3. In today’s global market, understanding the market and the sector trends is even more important than ever. If certain sectors are retracting, then it’s time to react and adapt.

You have to understand how sustainable growth is before you take on increased overheads and costs. Sometimes as an industry, we have a couple of good months, we begin to believe our own hype, and we start increasing our overheads and our costs - but it turns out that the growth that we experienced probably wasn't sustainable. So, we need to learn how to read the market better before we take bold decisions. And we’ve also got to understand that when you hire people, you don't get immediate results. It doesn't matter how good somebody is; it takes people a while to adjust to a new company and a new environment.

In today’s global market, what’s happening in Asia, Europe, or the US ripples across the world. We need to get better at reading data and understanding market trends. If the evidence is that certain sectors are retracting, then we've got to react much faster. In 2022, as an industry, we just reacted too late. And we burned too much capital because we didn't respond quickly enough.

We saw that companies in our portfolio who didn't overhype in 2022 still maintained a good degree of profitability even though revenues were down. So the more prudent businesses who read the data well were still quite profitable in 2023, despite the market conditions. We also found in our portfolio that companies that were very niche, with deep-rooted relationships with clients and who didn't overhire, were still able to outperform the market. So deep-rooted sector expertise played a pivotal role in some of the successes that we saw.

Functional Specialist vs. Customer-Centric

When there's a lack of job flow, you can become more customer-centric. When there's an abundance of job flow in your niche vertical function, you can be a functional specialist, but you have to have the ability to pivot.

The Functional Specialist:

Christopher Adamson , founder and director of Adamson & Partners

"We have two specific functional specialisms - Intellectual Property and Legal. In an increasingly saturated recruitment market, the need for suppliers to demonstrate their ‘differentiators’ to clients has never been more acute. In that context, Adamsons’ long-standing specialization in the IP market, with deep roots globally, has served us exceptionally well, as evidenced more than ever during the post-Covid era. Additionally, despite growing understanding and recognition of AI, it remains a developing area, and one whose commercial importance to businesses is arguably more critical in periods of downturn.

My advice to anyone wanting to become a specialist is to ensure that your branding and messaging are clear in terms of your specialization; clients need to see your track record or, if you are a relatively new business, why you are focusing on your key area. Secondly, be prepared to turn down work outside of your key area: this will reinforce the above message while highlighting the fact you wish for your client to only benefit from true market expertise. This can be a difficult pill to swallow, but clients will appreciate your honesty and are more likely to come back to you at an appropriate time in the future."

The Customer-centric Expert

Grant Kaveney , Founding Partner at GKR International - Real Estate Talent Specialists

"I firmly believe that a customer-centric approach is non-negotiable in navigating the complexities of the recruitment industry today. Placing our clients at the forefront of every engagement is paramount to fostering enduring relationships and sustainable growth. I advocate for tailoring our services, anticipating their needs, and actively listening to ensure we deliver unparalleled value and consistently exceed expectations. Specifically in real estate, where property professionals are inherently people-centric, prioritizing the client experience is not just a strategy but a fundamental principle for success. We've made a concerted effort since the pandemic to be more human in our interactions with clients and candidates, focusing on building trust, actively listening, and providing guidance rather than solely pursuing quick wins. Additionally, as we've expanded internationally, we've had to adapt to diverse cultures; what may work seamlessly in the UK might not necessarily resonate in Asia, highlighting the importance of understanding and tailoring our approach to different markets."

Thanks for reading, and as always, I hope you’re having a great week and month.

Don’t forget - always surround yourself with the right kind of insight and support.

And if you're an entrepreneur building a recruitment business, and you want somebody to go on the journey with you to help you achieve a profitable exit - then you know who to call!

Until next time, James.