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It’s been a rollercoaster ride for recruiters over the past few years. Despite record growth in 2021, hiring freezes in 2023 put the brakes firmly on revenue for staffing agencies. Despite some trepidation about the economy in an election year, the outlook is back in the positive-vibe zone.
Confidence is being bolstered by the fact that unemployment remains low (its lowest in 50 years), and there’s a severe talent shortage in all industries. Nearly half of U.S. workers plan to seek a new job in 2024 (LinkedIn’s latest Workforce Confidence Index survey). Unsurprisingly, there’s renewed optimism regarding growth in the staffing industry.
Staffing Industry Insights You Need to Know
- Most businesses predict significant growth this year
- Automation is a game-changer and if not adopted, will stunt your agencies growth
- AI is rapidly becoming a standard tool and will continue to be adopted at an accelerated rate
- The two top recruiting challenges are:
- Getting candidates to respond
- Finding qualified candidates
- Fast-growth companies are more profitable and resilient to hardships
- Fast-growth agencies spend more of their budget on software and technology
- Referrals and LinkedIn are still rated as the best sources for finding new candidates
- Mergers and acquisitions are on the rise, particularly among high-growth firms
The Biggest Recruiting Challenges For Staffing Firms
The 2024 staffing landscape presents a complex tapestry of challenges, and according to The 2024 State of Staffing Report, particularly in three key areas:
- Client acquisition & sales
- Economic challenges
- Talent acquisitions
Client Acquisition & Sales
Agencies are grappling with a slowdown in demand from existing clients and the increasing difficulty of attracting new ones. This is further complicated by the growing trend of businesses opting for direct hiring, putting pressure on agencies to clearly demonstrate their value and differentiate themselves in the market.
Economic Challenges
Economic uncertainty and rising costs are casting a shadow over the industry. Talent acquisition expenses have surged, particularly in sectors like healthcare and engineering. Coupled with inflation and potential recessionary concerns, these economic pressures are forcing agencies to re-evaluate their strategies and spending.
Talent Acquisition
The talent acquisition landscape is proving increasingly challenging. Agencies are reporting a diminishing supply of qualified candidates, slow response times, and difficulties in reactivating dormant talent. This is compounded by a disconnect between employer and job seeker expectations, with the former often favoring on-site work while the latter seeks more remote options. Additionally, outdated recruiting practices and insufficient technology adoption may be hindering agencies’ ability to effectively identify and engage top talent.
Impact on Agency Performance
The challenges faced by agencies are reflected in key performance metrics. Fill rates and redeployment rates have declined across most industries, while time-to-fill has increased. Agencies that have contracted in size are struggling across all recruiting activities. However, high-growth agencies are bucking this trend, demonstrating resilience and adaptability in the face of these challenges. Their success highlights the importance of strategic investment, innovative solutions, and a focus on building strong client relationships in a competitive market.
How Recruitment Businesses Will Drive Growth in 2024
Adopting Technology
The increasing adoption of automation tools reflects a shifting attitude towards technology in the industry. While high-growth agencies were previously more enthusiastic about technology, this gap is narrowing. Automation is widely seen as a key driver of future success, particularly in expanding reach to both candidates and clients. However, challenges remain in implementing and integrating these technologies effectively.
What are the challenges faced when adopting new tech?
- Selecting the right tools for digital adaptation
- Change management for new tech
- Selecting the right sourcing tools
Interestingly, slow-growth agencies found almost all of the tech challenges mentioned more difficult than fast-growth agencies. Unsurprisingly, fast-growth agencies already spend more on tech and plan to invest a higher percentage of their budget in technology moving forward, and that seems to be paying off.
So, while attitudes towards tech in slow-growth agencies are more optimistic, there are still hurdles to overcome regarding which tech to choose and how to implement it.
So, what technology should agencies focus on?
According to Staffing Hub’s survey, the five top staffing software solutions, include:
- Applicant Tracking System (ATS)
- Job Board (on your website)
- Recruiting automation
- Data management
- Timesheet automation
What recruitment processes are being automated?
The top five processes agencies plan to automate are:
- Resume screening
- Sourcing
- Candidate communication
- Job descriptions and posting
- Interview scheduling
Applicant Tracking Systems and Staffing Platforms
The market for Applicant Tracking Systems (ATS) is vast and varied, with almost endless platform options available. While agencies seek comprehensive solutions offering automation, scalability, and seamless workflows, many are utilizing multiple specialized tools to meet specific needs, including referral platforms, vendor management systems, mobile apps, and job board management solutions.
Tools used by recruiters
Recruiters are increasingly relying on technology for core job functions, with most utilizing tools for job posting and applicant tracking. There’s a also a growing desire for newer technologies, including AI-powered sourcing and various automation solutions, to enhance efficiency and effectiveness.
Focusing on Candidate Experience
Candidate experience has emerged as a critical success factor in the recruitment industry, with high-growth agencies recognizing the value of building strong relationships with candidates and clients. Relationship-oriented recruiters, who prioritize transparency and communication, are increasingly sought after. And with candidates looking for more open and honest conversations, it make sense.
Getting Back to Business Basics
Building a strategy for success isn’t as easy as it sounds, but if you focus on the essential elements, and get those right, you will be setting your firm up for success moving forward. Here are the top ‘back-to-basics’ elements that every company should focus on:
- Setting primary goals and objectives
- Increasing marketing and branding efforts
- Candidate experience enhancement
- Employee training and development
- Implementing new tech and automation
- Refining performance metrics and KPIs
Setting your agency up to face the most significant challenges
It is essential to reflect upon the most significant challenges. There are several questions agencies should consider in relation to the top characteristics every staffing firm should embrace:
- Adaptability: How flexible is your business model?
- Transparency: How clear and explicit are your communications, pricing models, and mission statements?
- Consistency: Are your processes and communications aligned? Are all staff working with the same vision and goals?
- Uniqueness: What is your USP? How do you differentiate your agency?
- Attracting more candidates: Are you robustly reviewing and adopting new and inspiring techniques and software tools?
- Sales and marketing: How effective is your marketing? Are you utilizing data effectively for insights?
- Efficiency: Is your agency optimizing automations?
Growing an agency doesn’t necessarily mean rewriting the rule book. Business basics are a critical foundation.
The Biggest Opportunities For Driving Growth
- Adopting Technology – specifically automation and AI technology
- Improving candidate experience – going above and beyond and getting to know candidates better
- Getting back to business basics – looking after staff, setting goals and objectives, implementing new tech, increasing marketing and branding efforts, refining metrics and KPIs, and utilizing data insights.
Key Takeaways From The 2024 State of Staffing Report
- Learn from fast-growth agencies
- Embrace new technologies and AI
- Focus on the candidate’s experience
- Adopt a relationships-first approach
- Get back to business basics
- Continue to learn and network
- Look after your staff
For more information or to download the full report, please click here.
