Customer Value Chain: Strategy for Recruitment Firms
Recruitment firms work as matchmakers connecting candidates with relevant opportunities. Seen from this viewpoint, the business model of these firms in some ways mimic those of marketplaces where the platforms bring together buyers and sellers. Similar to marketplaces, where either or both parties may be charged a fee for the services, recruitment firms too have different models wherein they charge either the candidates or the firms or both. Based on who is paying, the recruitment firms need to align their business model to cater to the needs of the paying clients. More often than not, most of them tend to focus on the paying clients forgetting that they need the counterparty to make the deal happen, in a manner similar to marketplaces.
When developing strategy for recruitment firm/platform, this marketplace analogy helps to keep the focus on the value created by the firm/platform for both the ‘buyers’ and ‘sellers’. Keeping in sync with the ‘commission model’ of marketplaces, I will be using the term ‘buyer’ for the one paying. The ‘seller’ in my terminology will therefore be the counterparty. The exception will be the scenario where both are charged, in which case both become ‘buyers’. For the sake of this discussion, we will ignore the case where both parties are not charged and the platform makes money through other ancillary activities such as advertising as in this scenario the paying party’s value chain needs to be analyzed, which can be varied based on the targeted audience.
While there are various ways to develop strategy for any business, in this discussion I will be using the ‘customer value chain’ and associated principles to highlight the focus areas for developing the strategy for recruitment firms. So, to begin with, let us look at the key activities that form a part of the customer value chain (CVC) from both perspectives — that is from the viewpoint of candidates and companies.
The bedrock of developing strategy utilizing CVC lies in the understanding that all steps in the CVC can be classified into one of the following three:
Value Creating
· Value Charging
· Value Eroding
The primary value created by recruitment firms’ is at the following stages of CVC:
· For Candidates: Searching and applying for relevant roles
· For Companies: Attract candidates
All other activities in the CVCs of candidates/companies, other than the primary value creation activities mentioned above, can be thought of as value eroding activities that they have to perform in order to fulfill these primary value creating activities. Platforms/firms can develop business models wherein some of these additional activities may be converted into value creating activities as well as value charging activities. For example, many recruitment platforms help the candidates create resumes or help the companies shortlist candidates based on pre-defined criteria. They may also charge a fee for these additional services thereby converting them into value charging activities.
There are numerous examples of firms/platforms which believe they are creating additional value for their customers but, in reality, end up eroding value if not implemented properly. Using the same example, if the candidate has an existing resume and the platform asks them to enter the details again then the platform is actually eroding value for the candidate rather than creating value. Similarly, if the shortlisting criteria is resulting in irrelevant profiles getting shortlisted or relevant profiles being rejected then the platform is actually defeating its purpose.
Sometimes they may not even realize this aspect because their strategy might seem to create value for the ‘buyer’ but erode value for the ‘seller’. A marketplace needs both buyers and sellers and, therefore, it is imperative that any business which runs like or resembles a marketplace needs to create value for both the segments — buyers and sellers. Value creation for one segment while eroding value for the other will be detrimental for all the stakeholders in the long run as growth of both segments is necessary for the effective functioning of the marketplace. This aspect of marketplace makes them one of the toughest business models to scale and grow effectively.
As a strategy, some examples of how recruitment firms can create (and also charge) additional value for the ‘buyers’ while not eroding the value for the ‘sellers’ are:
Companies are the ‘buyers’
· Create ‘Job Description’ for the roles
· Shortlist relevant profiles keeping in mind the above-mentioned example and associated caveat
· Expert interviews and selection services
· Candidate lifecycle management
· Roll-out job offer to the selected candidate
· Background verification services
Candidates are the ‘buyers’
· Create Resume and Cover Letters
· Preparation for interview/selection process
· Expected salary suggestion based on industry data
· Company and role-related information
· Relocation services
It is not necessary for the recruitment firms to provide these additional services themselves. They can create a consortium of relevant trusted firms who specialize in these add-on services and provide these services as a package to the ‘buyers’ resulting in a win-win for all the stakeholders.
