People vs Technology: can the recruitment industry attract more investment?
While researching recruitment industry trends and how it has been performing recently, I found this really thought provoking article from one of the investment companies on what attracts stakeholders to invest in recruitment industry. They noted that usually Investment Managers try to evaluate the growth potential and future earnings of a recruitment agency and this is based on the specialism, scale and business model they chose. There isn’t much information on any other aspects that would be recruitment industry specific as investing in technology or other “tangible” industries is a more popular option at the moment.
Who’s winning the investment game?
The recruitment industry as a whole has a strong history of performing well compared to other industries, but not all agencies have been able to secure funds or implement their mega growth plans through Mergers & Acquisitions. Agencies that support digital and engineering recruitment have received the most attention from investors so far due to rise of the ‘technology economy’. On the other hand, recruitment companies working in more traditional industries such as finance, healthcare or oil & gas will have to look at other ways of attracting investment because those markets are becoming more regulated and more difficult to recruit in.
Source of differentiation
Elite Leaders also mentioned that the business model is a source of differentiation when it comes to investors choosing which company they are interested in; and the nature of the recruitment business calls for strong performers and high billers to show that they can recruit in permanent/contract and/or private/public sectors.
Looking through the article, I couldn’t help but think that all of these points on whether investors are interested in your recruitment business are sort of out of control. If a specialised market slows down, you have to be flexible and look for new markets; if temporary placements are bringing more revenue than more profitable permanent recruitment, you have to jump on it to attract investment. You can hire more experienced staff to help you with the transition, but so can any other recruitment agency really.
Investing in technology to… attract investment?
And here comes the point that I was trying to get to. This is a bit blue sky thinking as recruitment is a people business and heavily relies on intangible assets such as mentioned above, but what if you had more control through more tangible assets? For example, investing in technology that helps you identify new market opportunities quicker than your competition does; maybe looking at automating certain parts of your recruitment process through innovative technology to reduce the impact of your own staffing needs.
Recruitment industry leaders constantly mention the need for innovation to be able to adjust to changing market conditions quickly, but usually it doesn’t go further than social recruiting paradigms. Maybe having a more tangible competitive advantage such as technology used in the recruitment process might actually help to differentiate and become more lucrative for the investment community? What are your thoughts?