Tech Recruitment: Towards a Better Way

Tech Recruitment: Towards a Better Way!

A quick internet search will reveal that many companies and individuals in the tech industry have suffered at the hands of recruitment agencies. The complaints are legion, and don’t need to be repeated here. But as a concerned member of the tech recruitment industry, we do need to consider the most compelling issues and ask ourselves what we are doing to address them.

In the first instance, we need to understand why the industry has a somewhat tarnished reputation. We can gain this understanding by applying two analytical models developed by Michael Porter, a long-time Professor at Harvard University and one of the great thinkers in the field of Strategy.

The first of these is Porter’s Five Forces Model, which identifies the factors determining the competitiveness of any industry. The five ‘forces’ identified by Porter are:

The competitiveness of the industry
The barriers to entry
The power of suppliers
The power of customers
The threat of substitute products or services

A quick consideration of the first factor shows that the tech recruitment industry is highly competitive, with many players competing fiercely against each other. It also has very low barriers to entry – it doesn’t cost much to set up a small agency, and even small agencies can get access to sophisticated online job boards and recruitment tools.

Suppliers, i.e. the candidates that recruiter’s approach, are bombarded by emails and cold calls from multiple agencies, giving them a big pool of recruiters to select from. The same applies to customers, the companies looking to use an agency to recruit on their behalf – there is no shortage of recruitment agencies vying for their business. In the tech recruitment industry, the power rests hugely in the hands of the suppliers and customers, and not with the recruiters.

Finally, companies also have several alternatives when it comes to recruiting; they can hire an internal recruiter, use online recruitment platforms, or use any number of agencies that offer a similar yet different route to sourcing talent.

The fact that tech recruitment is a hugely competitive industry goes a long way towards explaining its problems. Many recruitment companies are simply bad, or struggling to survive, or both. This helps to explain the short cuts taken, the questionable approaches employed, the lack of professionalism displayed, and the hard-sell tactics used. Sadly, the many bad companies give the industry a bad name with even the good companies initially being regarded with suspicion.

How do companies compete or gain a competitive advantage in such a competitive industry? This brings us to Porter’s second model, which suggests that companies can gain a competitive advantage in an industry by using one of three generic strategies. Firstly, they can employ a Cost Leadership strategy, producing their products or services at the lowest possible cost and thereby competing based on lower prices. Many tech recruiters do this, looking to undercut other agencies just to stay alive. But cutting corners on costs generally means a lower quality service, as a small pool of overworked recruiters try to serve too many customers.

The second strategy is known as Differentiation and suggests that companies can compete by delivering a ‘different’ and essentially superior service to that of their competitors. This generally allows them to charge a premium price compared to competitors. Many of the better recruitment agencies use this approach, with ‘better service’ taking different forms, depending on the agency.

Finally, businesses can use a focus strategy, concentrating on a certain market segment or niche. Businesses taking this approach still must choose between a cost leadership or differentiation approach to get a competitive advantage in their chosen niche market. Again, there are a small number of tech recruiters who employ this strategy, but this is the exception rather than the rule.

Before looking at the approach that Source Coders is beginning to favour, let’s first consider the two valid objections that even good recruitment agencies must face. Interestingly, both potential candidates and the companies looking to source talent share the same concerns.

From the candidate’s point of view, dealing with a third-party recruiter places a barrier between the candidate and the company. The candidate therefore feels that the recruiter is unable to provide enough information about the company, its culture, and its work teams (and the team of which he or she would become a part).

In its turn, the company doing the recruiting fears that candidates sourced by the recruiter may have the required technical skills but may not fit in with the organisational culture and may not gel with their future work team. Third party recruiters can find it difficult, based on an interview or two with the company, to get a sufficiently good grasp of these issues.

In terms of strategy, Source Coders has taken what is known in the strategy literature as a hybrid approach, combining and slightly modifying two of Porter’s generic strategies, namely cost leadership and differentiation. This implies superior service, and a reduced (but not rock-bottom) pricing structure. Secondly, we looked at ways in which we could address the above-mentioned concerns of both candidates and companies.

This is how it came about

Last year Source Coders partnered with a new client to make three hires. In our initial discussions with the client it became apparent that they were strongly mission-driven and were looking to recruit people who shared their values and altruistic objectives. They also wanted to use this hiring round to increase diversity in the company, requiring a more targeted search by Source Coders.

In addition, they made it clear that this brief would require more than an arms-length relationship with us. They required Source Coders to be an integral part of their business, representing them as an employee in their interactions with potential candidates.

For this reason, we suggested a project-type approach, with the Source Coders recruiter to be a senior employee who, for the duration of the contract, would spend a specific number of days each week on site at the client. This would allow the recruiter to better understand the client’s culture and ethos, and to be directly available to key stakeholders within the company (e.g. the team members that new employees would be interacting with).

The model agreed was an initial two-month contract with the client, involving a fixed monthly fee plus a percentage of the annual salary of each hire made. This hybrid approach led to a reduction in the cost per hire for the client (compared to the Contingency Model), and the embedded approach allowed Source Coders to get a much better understanding of the company and the client’s culture, and of what team members were expecting from any new hire.

The success of this approach led to the client to extend the contract by a further four months, and to recommend Source Coders’ services to a similarly mission-driven company.

Other beneficial aspects of the contract model

The Source Coders employee approached candidates as an internal recruiter representing the client, thereby creating a more positive dynamic in terms of company-candidate interactions.
The recruiter managed all aspects of the agreed interview and hiring workflow process, booking interviews directly into the calendars of the client’s managers and communicating internally by way of the client’s internal communications network (Slack).
After agreeing the hiring workflow process with the client’s managers, the Source Coders recruiter fully ‘owned’ the recruitment process. Managers therefore had a single point of contact for all hires.
The buy-in from the client’s managers was a considerable part of the project’s success. Positions were clearly defined by management, there was agreement around the hiring plan, and full cooperation from managers regarding interview timings and the provision of prompt feedback on candidates to the Source Coders recruiter.

Conclusions

We believe that our success comes from hiring the best people, understanding the industry, acting with absolute integrity, and taking a long-term view in our approach to business. A focus on building relationships with clients and delivering nothing less than an excellent service at a fair price, is far more likely to lead to success than the opportunistic, ‘hit-and-run’ approach favoured by bad tech recruitment agencies.

There will always be a place for contingency recruiting, and with a thoughtful and values-centred approach it is possible to overcome the issue of achieving a suitable person-organization fit.

However, from our experiences to date it seems to us that mutually beneficial relationships can be built based on the project model, and that these can extend well beyond the initial contract. It is also an approach that is likely to result in more referral work.

It takes an initial leap of faith from new clients, but if the tech recruitment agency involved has a reputation for the efficient application of this model, the risks diminish considerably. It is early days yet, but this approach could lead to happier candidates and clients, and a brighter future for the better players in our industry.

In this blog post we have only touched on the uses and potential benefits of the collaborative approach outlined above. Whether you rely on external recruiters only or have, or are considering, the use of an internal recruiter, contact us via our website to find out how we can add value to your talent sourcing approach.