The Coming Commoditization of Processes , by Thomas H. Davenport [quote style=”1″] Throughout the history of business, most firms have built their own processes for almost everything that needed to be done. Producing widgets. Paying vendors. Administering payroll. Whether the processes involved were critical to the organization’s strategy or incidental to it, they were generally performed by people within the organization. Sometimes they were done well, sometimes they were done badly—but since a company had no way of determining how well an outside business might perform these processes, they were kept in-house. [/quote]
Seems it has been a while since I wrote this article. In 2005 I theorized about future development of the industry and below is Enzine article I published at the time. Looks like to me that we are not there just yet.
Few industries are poised to feel the winds of change as strongly as the Personnel Recruitment industry. A significant factor that will be a major influence on the change will be the commoditization of service brought by new technology.
Compressions of service deliver time, peeling of recruitment process and industry standardization are three other chief factors with major impact on recruiting beside commoditization of service offerings. This will undoubtedly position certain players to prosper and others to suffer in this new paradigm, as globalized service practices become the norm.
The prime drivers of these changes are new technologies, particularly those around the Internet. It’s needless to say that the internet allowed us to achieve a degree of interconnection that has never been possible before. Today’s inexpensive and reliable communications are allowing recruiters to access clients and candidates via VoIP or e-mail from any web enabled location. Physical proximity to the talent pool used to be a key advantage in the talent wars in the old days, but not any more.
In this scenario, as you peel business processes into “high” and “low” talent pool co-location needs, the workforce needed to execute “low” talent pool co-location processes can be anywhere in the world. With the political storm now raging around outsourcing and “off-shoring,” one fact seems to be that outsourcing is inevitably the key driving force responsible for changing today’s business landscape; whether we like it or not. Conventional wisdom teaches us that we should draw conclusions from IT Industry and find the way to embrace this trend.
Several years ago, only “very low” customer co-location kind of work was sent to remote locations – like software code development. With success stories building up, and wider availability of cheep communications, we are steadily moving towards the day when certain portions of recruitment process will be outsourced to more cost competitive labor markets. No one is immune, and soon enough recruiters in developed countries who have traditionally been insulated from global market forces will be faced with competition as they have never seen before: recruiting consultants from global outsourcing hot spots capable of offering comparable-quality service at perhaps a tenth the cost of their counterparts will get in the game.
However, overall more likely than not, outsourcing will bring definite advantages. I am sure that most of us would appreciate help in meeting and greeting applicants so that they do not feel like their resumes have only been sucked into an ATS (Applicant Tracking System) black hole. But initial correspondence, introductory e-mails, first level of selection, test administration, preliminary interviews, only to name a few, could be purchased externally at more competitive costs than internal resources.
If we disregard our feelings about major job boards and other technology based recruiting tools effectiveness for a moment, we will realize that every single recruiter who is serous about their business performance has access to those tools; and they don’t come cheap. I guess where I am getting at is that recruiting technology vendors are going to be in the forefront of outsourcing and price reductions. There is no technological solution for recruiting problems, human touch is a necessity. That has to be achieved all the while cutting the cost of the service.
It would be something like having a free job board like Google BASE and you would pay only for add-on services such as support call center where candidates would receive basic info about their job application status and hiring process, sort of live FAQ section. I am sure that simple “Hello and thank you for applying at XYZ corp.” from a live person would beat auto-reply (Don’t call us we’ll call you!!!) via e-mail any time of the day. This approach would definitely improve candidates experience and it would go a long way in building a relationship with applicants.
Outsourcing will not reduce the number of jobs, it will create jobs. Since some of the functionalists of the technological recruiting solutions that were automated will have to go live.
On top of everything, not since the Black Death has our society been facing the prospect of such magnitude in demographic shift as we will experience with retirement of baby boomers. This looming candidates market will put pressure on corporate world to reach for their bag of tricks in order to attract the best employees. This will just reinforce outsourcing and commoditizing of recruiting services as obvious choices.
600 hours of Candidate Sourcing & Resume Evaluation
This climate in the industry will eventually call for the development of a trading platform for the job market where employees will be price tagged according to the current availability of their skill set. Basic laws of demand and offer will impact employers’ cost per hire more then ever. Fierce competition for top talent will also drive employers to expand their recruitment services vendor lists.
The mechanics of this business approach will complete the process of commoditizing recruiting services. At that point employers will have the option to buy X hours of unbundled recruiting services from XYZ company at $X/h for “run of the mill” recruitment operations and, for more difficult assignments, paying premium fees for full cycle recruiting services. In order to gain buyers confidence, vendors will have to adhere to (for the sake of argument, let’s say) to ASA (American Staffing Association) standards and all employees will have to acquire CPC (Certified Placement Consultant) and AIRS designations. Outsourcing and commoditization will force the long overdue issue of standardizing the recruiting industry.
Let’s step back for a moment and take a look at the things from the third party recruiters’ perspective. Commoditizing of recruiting services will certainly be a bad news for some. Same was the nuclear winter for dinosaurs. It is only natural that anyone who fails to evolve and adjust to a new environment will most likely perish in to obscurity. On the other hand, those embracing the changes will prosper.
But third party recruiters’ should not look at commoditizing of recruiting services as a threat, rather as an opportunity. Peeling of the business process and outsourcing its menial components will create an increased need for recruiting experts who will provide those critical services like relationship building, negotiation, strategic evaluation and selling. That type of expertise will be available only at premium rates.
Third party recruiters’ will improve their bottom line by taking advantage of next generation support tools and services that will be free or very inexpensive. This will enable them to focus on core aspects of recruiting process, where there is no low cost substitute. Outsourcing and commoditizing of recruiting services will certainly improve overall profitability of top performers in recruiting industry since they will be doing more business at lower overhead cost.