The Death of Recruitment Agencies & Why they will close down in 18 Months.

If you are involved in Recruitment Agencies in Singapore for the last 10-20 years, you will notice that the number of cases and sales value a recruitment consultant can close compared to many years ago is declining every year averagely.

10-20 years ago, a normal recruitment consultant in any recruitment agencies in Singapore will be able to close an average sales value of S$20,000 – S$30,000 per month but in the year of 2012, a normal recruitment consultant that is able to close a value of S$5,000 – $10,000 per month is consider to be quite good.

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If this trend continuous to decline, I can foresee that the whole industry can dis-integrated and falls apart. Many will failed, including the bigger players. There are many valid reasons why I have the guts to make this projection:

The Recruitment Agencies in Singapore Mindset

The Diminishing Factor 

Most of the newer recruitment agencies bosses comes from the background of being a consultantbefore in one or more of the agencies, the knowledge and skills they have learned from their “mentor” are always limited because the mentor never wants to teach them much things, don’t even talk about skill sets. Hence when the knowledge of the new recruitment agencies bosses are so limited, the new consultants under their wings under this new bosses will be even lesser because they are not able to learn much from their current bosses. To make matter worst, these new consultants will think they are so great that they gather together and form another recruitment agencies and hope to make huge income from becoming their own bosses. This cycle goes on and on and eventually the skill set of the consultants gets weaker and weaker.

The Secret Trap

Many recruitment agencies bosses never share their clients and database with their consultants because they are afraid that the consultants will steal their clients and database to use it when the consultants forms a new company. Assuming that the boss has 50 job orders and they are not open enough to share to their consultants, they will not be able to fulfilled these 50 job orders entirely because of lack of time and resources. They are very happy they are able to close 5 case and lose the other 45, that means the other job orders will be lost to other agencies…How’s that for been “Smart”? Get the picture? If he is open enough to throw the other 45 orders to the rest of the consultants, the company will be able to close more cases many time compared to just 5 job orders. (Assuming that the job orders are real and valid.)

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The Competitions Factors

10-15 years ago, there were about 500 recruitment agencies in Singapore but in the year 2012 there are coming to over 3,000 recruitment agencies in Singapore, hence the clients have more choices and better pricing, the smaller agencies will have problem even to break even at all, if times are bad, then the agencies will make a loss and eventually have to close shop.

Inadequacy of Skills

A recruitment consultant has to be a great sales person, a great presenter, a great interviewer, a great searcher, a great advertiser and a great negotiator, do you really believe a 2-3 days crash course can make a consultant to be able to become the superman? The hard fact is that it is almost impossible to find someone of such skills because most of them are not trained to be at that level! The entire industry is filled with people that DO NOT have the right skills, no adequate training, no investment done on training and no coaching and mentoring….Could this be the doom and the end of the Singapore recruitment industry?

The CEI Problem

Many smaller agencies will not have the resources and money to pay for the new recruitment consultant and even if they are willing to there is a risk that the consultant may leave the agencies due to some KPI issues or having a better offer. Hence the small players are very cautious and unwilling to pay for the total fees that are amounted to about S$600.00 per consultant. Bigger players with good brand and financial resources will be able to play this “BULLY” game as they are not afraid of losing the S$600.00 because the consultant usually got more to lose than the bigger agencies.

I am The Boss Mindset

Talk to any consultant out there and ask them the question: Would you want to have your own agency when you have the opportunity and the financial resource? I bet 8 out of 10 of them will say YES! Why is that so? Simply because they want to make more money and want to be their ownboss, many of them will go for the opportunity even if they were to partner with a few others, simply because they LOVE to be their own boss and apparently they will believe that they are going to be a better boss compared to the current one! (Oops did i rang any bell?) With this mindset, recruitment agencies are usually not able to retain good staff simply because the good ones decided to have their own firm. When there are no good staff, there will be lesser sales and eventually you will know what happen…

The time will come where the entire recruitment agencies system will face a crisis and there will be a total revamp and market will change and the first one to set the trend will be able to dominate the industry entirely. The time will come and when it happens, many players regardless of whether small or big, will face total elimination! Mark my words…it is already happening.

 

The Death of Recruitment Agencies – It is here! 

One of the recruitment agency boss proudly told me that he had more than 10 telemarketer to do business development and generate new clients and seek my professional advice on how to make it better.
The only sentence I gave– 

Close the department, you are wasting your money and your table space in your office.

He argued, many agencies are doing the same thing and my ex-boss were doing that and it seems to be doing well….

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My explanation to him:

1)      You paid over $1500-$2000 to the Tele-marketers per month and the business they generated is fine but it is not good enough. The numbers that generated from Telemarketing compared to the ROI is very low. You may able to generate 3-5 new business per day per tele-marketers….but still not good enough, here’s why..

2)      With the Market Tumors in the recruitment industry, 90% of the business the telemarketer generated will not be fruitful. Less than 2% will generate good income.

3)      With the 2nd Market Tumors and the 3rd Tumors, your ratio of closing overall is 1/1000, which is to say that you will need to have 1000 job assignment to close 1 case!

4)      With the problem in point 1,2 and 3, your total sales compared to your expenses will not be profitable.

I asked him a question:

Whatever other people are doing NOW, it does not mean it is workable, if ALL the recruitment agencies are doing the same thing and the number of clients are “constant” so who will be the ultimate winner? Or loser?

I further explained to him that with a change in tactic show in my book, Financial Success in Recruitment Industry, he is able to eliminate the First Tumor and reduce the 2nd Tumor to a ratio of 1:3, hence overall closing ratio is still 1:3, therefore compared to 1/1000 to 1/3, he is a much happier person because the consultants need not have to work long hours and the agency is able to close more cases compared to last time. Of course, taking away the whole department of telemarketing department cut his expenses by over $20,000 per month, meaning that he is earning extra $20,000 per month!!!

I do hope that many recruitment agency will realized that whatever they are doing now is NOT WORKING and it will continue to be that way for many years. Until one day the sales are lesser than the operating cost, it will be too late….mark my words…when the time when you remember this article and come back to read this, most likely it will be too late….

 

With the onslaught of many new agencies setting up everywhere and the market opening itself to more dimensions, the loyalty of a recruitment consultant staying in a company for many years is a distant memory. You see, the business of recruitment agencies can be easily duplicated, and apparently, when one of the top recruitment consultants in a company reaches the top sales for a few months, greed and EGO take over.

Many people who work in a recruitment agency handle the clients and candidates directly, and when they make over $10,000 – $20,000 per month in sales, they have a tendency to believe that they can earn more IF they were to start on their own.

What happens is that they will talk to many potential investors, and eventually, one of them who is not in the industry will be willing to pump in the money. Of course, that recruitment consultant will automatically become the Managing Director of the new company.

When the new agency is set up, the Managing Director will stop doing sales, and when there are new job orders, they will be pushed to the new consultants. Being trained by the previous manager who kept everything to himself, the skills the new MD has learned will also be limited, and most likely, he has not really had the experience of running a business before. They only know how to talk to clients and candidates!

In actual business, it is more than clients and candidates; real business involves the following:

– Sourcing for the best place to work (the office). Most people were slaughtered by this because they have no idea what is the best deal in the market. Nine out of ten of them will be misled by the commercial agents, as they are not IN the market.

– Creating a brand that has a deep impact. Many people think this is redundant because they are not into marketing and branding, and of course they do not know it is EXTREMELY important. The fact is that the brand says a lot about you, and if you cannot create the difference, you will be like any of them out there.

– Recruiting the right staff. Most of them who are recruitment consultants fail in their selection of the candidates because many of them are not even trained how to do so. They just go through many hundreds and thousands of resumes, and they believe they are good interviewers.

– Leadership and retention – This will kill many. Seriously speaking, these things usually do not exist in the new MD because they are not trained how to do so. However, many still believe they are good in these areas!

– Understanding the industry – Most new agencies do not even know about the Market Tumours, and when I explained them to the MT, most just stared blankly at me and were at a loss for words because I had decoded the entire recruitment agency industry and torn it apart to bits and pieces to a point they had not seen before.

– Managing the cost of operating – most of the new MDs do not have these skills because they are not trained at all.

– Generating sales – based on the 80/20 rule, eight of your consultants will not be producing and only two will produce. With that, the salary will be more than the sales, and any logical investor will pull the plug eventually. If the investor is the MD himself, he will feel even more pain in this issue.

– The MD will need to incorporate new ways to generate new consultants, new clients, and new candidates because they will find that the previous method they used will not yield good returns.

– Training – Your staff needs training in almost all areas. Most of them do not believe they need to train staff. Well, if the skill set of the company staff is not up to standard, eventually the sales and clients will go elsewhere!

Anyhow, managing a recruitment agency is not as easy as it seems. It takes more than hard work and sales to make it happen. You will need to focus, innovate, position, brand, change, and adapt to be able to make it big. Good luck!

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