How start-ups are bypassing recruiters

By Mic Wright on June 8th, 2012

Recruitment is prime for disruption and, well, would you look at that, start-ups are doing it:

John Dennehy of Zartis is pushing the idea of employee referrals as the silver bullet that will finish off the lower end of the recruitment business: “Employee referrals are a better source of new hires than those coming from recruitment agencies. They’re usually a better cultural fit, get productive faster, stay with the company longer and cost much less to hire.”

He argues that every company should have an employee referral scheme: “In the tech sector where every employee is using social media it’s insane that a company would not have an employee referral program. Good companies hire over 50 per cent of all new hires through referrals. It works equally well, or better, for small companies. And the rewards don’t have to be costly. Some employees even opt to have the reward donated tax free to charity.”

Dennehy makes a compelling argument: “Great people know other great people. If staff buy into the company vision, they’ll tell their friends about job openings. It takes a couple of seconds to post a job to Twitter, LinkedIn or Facebook and one well-placed post could save the company thousands in recruitment fees.”

Other start-ups are also trying to disrupt recruitment. Simon Swan of Hiring Hub has effectively built a comparison site for recruitment agencies: “Employers upload their vacancies and specialist recruitment agencies from our approved network will compete to fill them for a fee set by the employers.

There’s no haggling over fees or terms. You upload a vacancy, state what you’re prepared to pay an agency and it’s broadcast – anonymously to shield the employer from cold calls – to our network who will tender to work on the role. The employer decides which agencies they want to work with and even how many CVs each can submit.”

He continues: “Hiring Hub is a SaaS product and it’s free to use: we’ve made it easy for businesses to manage their recruitment online with a built-in Applicant Tracking System, Vendor Management Tool and Messaging Centre. We make our money by deducting a commission from the fee when a transaction is completed on the site, so effectively it’s the recruitment agencies that pay us.

We have over 600 agencies within our network covering all sectors and we work with a number of VC-funded tech startups that are growing quickly and where recruitment is a headache. There’s no cost unless you hire, so there’s no risk. And it means the recruitment industry comes to you, instead of you having to go out and meet with multiple suppliers, agree fees and so on.” It’s an impressive pitch.

Another start up approaching recruitment with a fresh eye is WorkFu. Adam Martin from the firm explains how it works: “Recruiters check a person’s CV, they might even buy them a coffee. WorkFu thinks CVs are bullshit. All the data about what you’re skilled at, where you worked, who you’re connected to, it’s already available across fragmented networks, from LinkedIn to Facebook, Twitter, Stackoverflow, GitHub, even Pinterest. We look at all that data about you and in seconds create a smart profile. Not a static CV but a profile that adapts dynamically according to the job opportunity. No recruiters talking bullshit, just well organised data mapping.”

Martin believes the “black books” recruiters tout are over: “The recruiter’s contact list went south with Yahoo!’s acquiring strategy. Any HR can scour LinkedIn or post an advert and crawl through applicants but that takes time and time is money and so recruiters prosper by claiming to save you all that time and then charge you more money. WorkFu suggests relevant talent for your job opportunity instantly, in the same way a recruiter approaches people already gainfully employed, so we identify which people you should be hiring and leave the persuading them to join you, to you.”

He also disputes the idea that recruiters are good at filtering: “It’s a ‘we save you time and money’ ploy. WorkFu orders every suggested applicant and every applicant who applies to your opportunity by their relevance and connections, so everyone comes like a popular Belgian ale, pre-filtered.”

He ends his pitch like this – and, like Dennehy, he’s all about referrals: “WorkFu sings when the person posting the job opportunity is connected to the role, i.e a developer posting a job for a developer, social media manager posting a job for someone to manage the company Facebook page, the CTO for the CEO – this is because the strongest chance of finding the right talent is through referrals.

WorkFu automates all of that, looking at the CTO’s connections and networks, a recruiter can’t do that, they haven’t invested 10 years in your business area, built up connections and reputation. The richer results and richer talent suggestions come when you, the CTO, post the job via WorkFu or authorise HR to post and manage on your behalf. Recruiters can’t replicate that, the data about them just says they are recruiters and best suited for hiring other recruiters and nothing much else.”

Outside of the start-up space, businesses are actively challenging the current recruitment model. Andrew Carr, sales and marketing director at Bull Information Systems, the high-performance computing specialists, is working hard to take recruitment agencies out of his hiring strategy:

“We’re building an associate network of HPC specialists to identify and build the people with the right skills whether we contract them or employ them permanently. We’ve also started a graduate scheme and are bringing people in from university to learn support and admin skills. That extends to working with research universities to provide post-grad and pre-grad education to introduce valuable skills to the market.”

Working in a non-commoditised sector, Carr says he deals with specialised recruitment agents only and therefore gets a better level of service: “We identified an agency that does well for us. The recruiters spend less time researching skills and personality traits than keyword searching. If I was a recruiter, I’d be looking to differentiate.”

He continues: “Our positive experiences with trusted recruiters have been with specialised recruiters, they spend time with us and really understand what we’re looking for. In the end, they deliver up probably only two or three candidates but those candidates really fit. From a management point-of-view, it saves a lot of time.”

But he hasn’t been able to totally avoid bad recruiters: “One of the current trends in recruitment seems to be over-selling the candidate in cold emails. It’s a real frustration to me. That person knows nothing about me!”

Carr believes the biggest opportunity and issue for recruitment is the internet:  “Whilst it brings many positives for recruitment such as LinkedIn and social media, the negative side is that when someone publishes a CV online, lots of others will start selling it without the candidate even knowing.”

As with many other organisations we talked to, Bull is seeking to leverage employee referrals more and more:

“We engage very effectively with our own employees and their networks. In a lot of the recruitment we do, we always start with internal advertising and internal referrals. People we already employ are very well-networked and connected. We go out to the industry and the market. The awareness of Bull in the market is how many people would like to work for us and the employees want to introduce friends and peers to us.”

After spending weeks talking to industry figures about recruitment, The Kernel found Carr’s words to be the best summation of where the recruitment industry must go if it is to survive and not be extinguished like a deviant dodo. He says:

“What I’m looking for in recruitment is not the lowest commission but someone who can deliver value. It is not about cost. There is time cost too. Getting close to customers, understanding the culture matters a great deal.

“The traditional recruitment market will disappear between three to five years. One word for why that is: LinkedIn. Recruitment firms need to change from transactional sales to value-based sales immediately they are going to fail.”