Applying the 80/20 rule to recruitment

The Pareto principle states that 80% of your output will come from 20% of your inputs. If applied to a recruitment business, this could mean:

• 80% of your fee income comes from 20% of your billing consultants;
• 80% of your revenues comes from 20% of your clients;
• 80% of the time spent by your consultants is spent on 20% of your clients.

However, without having hard data on what is happening in your business, it is impossible to say which, if any, of those statements hold true. The challenge is making sure you capture information in a way which enables that to be worked out.

With the first statement, this should be straightforward enough to analyse. Every recruitment business has a finance system which will show who is billing what. Shared deals may distort the findings somewhat, but it should be easy enough to calculate. The question which this should then raise is why do certain people do better than others? Also, are client lists spread evenly? Is it the case that someone has all of the key accounts for no reason other than they have been around the longest? If revenues are broken down by client, that should also be easy enough to determine.

What is much harder is understanding where time is being spent on a by-client basis and what that translates to in terms of monetisable return.

For example, if you are working on an instruction but there are five other recruitment companies competing for the same pitch, that means that arguably you have a 16.6% chance of completion, potentially lower if the company has its own candidate pool which it can draw upon by using internal recruiters. In this scenario it is completely understandable for a recruiter to only make a cursory assessment of suitable candidates and to spend minimal time on the instruction. Compare that to a scenario where your consultant is working on a job exclusively, meaning that then the only competition which exists for the role is the company’s internal recruiters. At that point you may realistically have an 80% chance of filling the role, meaning the percentage chance of conversion is higher, making for better business overall.

Given that perhaps only 20% of your clients are likely to work with you on a retained or exclusive basis, this then makes sense, but should that be acceptable? Should a recruitment firm knowingly operate a dual service standard between exclusive and non-exclusive instructions? Why should a client look to work with a recruitment firm exclusively if their experience of working with you is normally one involving shoddy service?

Instead reflect on this: given that there is always demand for top-tier talent, focus on acting as the professional advisor of choice for star candidates, those who will always be hireable. Operating as their career advisor regardless of whether they are looking or not means that when the time that they are looking to make a change comes along, they will only want to work through you. If you can be sufficiently well briefed on market activity that they feel they can trust you to advise them on what their options are, that would then mean you can approach any target company and suggest that person as being a suitable candidate, where it doesn’t matter how many other agencies are competing, as that candidate is only working with you.

Applying this strategy – treating the candidate as the client – may seem difficult at first, but factor in this: if someone is a genuinely good candidate, as long as they understand that the energy and investment you put into them is on the basis of sole representation, you are guaranteed to get the fee when they next move. Even if a key client gives you a role exclusively, you have no such guarantee. Assuming a professional changes jobs every three years, this means that each consultant having 100 candidates who they solely represent will result in them always beating their monthly targets, and it becomes far easier to charge higher fees as the reliance on key clients falls.

Over the last ten years Vacancysoft has worked with recruitment firms of all sizes to help them map out market activity in order to identify changes in demand. For more information about how we can help, please contact us.

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