Inefficient Recruitment Market

The current recruitment and onboarding process is broken. Approximately 3.32 billion people are employed worldwide with an estimated value of USD$100 trillion, serviced by a USD$700 billion recruitment industry. The sheer quantum of recruitment required to service a market of this magnitude cannot be handled with systems that are cumbersome and overburdened with process. Legacy solutions support too many intermediary players, such as job boards, agencies, and advertisers. With so many unintegrated recruitment channels being utilized, the amount of fragmentation and counter party risk we see is hardly surprising. It creates operational friction, candidate segregation, and inferior outcomes. The employment market demands more efficiency in the shape of broader and seamless accessibility between employers and candidates. In the legacy system, when an employer is looking to on board someone the process is often proves convoluted, as depicted below

Process heavy mechanics generate an abundance of hidden costs. Severe fragmentation, candidate leakage, operational friction, and lost opportunity are not the only symptoms of engaging in legacy recruitment methodologies. Talent pools are often siloed, which is caused by a lack of integration by competing platforms who are financially motivated to maximize unique traffic flow. Silos, by definition, create unique applicant batches. The obvious issue is how do candidates and employers get paired seamlessly and accurately without being entangled in this dysfunctional network?

Further candidate slippage is caused by elongated recruitment processes; studies show the average time horizon for professional recruitment can be up to 42 days. This is detrimental particularly in tighter labor markets where the issue of speed is paramount. Inefficiencies often result in hiring mistakes. The US Department of Labor puts the cost of a bad hire at up to 30% of the employee’s annual wage, meaning an employee on USD$100,000 will cost USD$30,000. Taken in isolation this might not seem like a huge cost, but for small and medium size businesses it is prohibitive. If the problem is endemic, it can be crippling to any size business. The direct costs are not the only aspect to be considered. Studies show 34% of CFOs claim that not only do bad hires cost them productivity, but managers allocate 17% of their time supervising under-performing employees. The opportunity cost implications given all the challenges are immense.

It is widely considered that these estimates are conservative. Recruiter Jörgen Sundberg, CEO of Link Humans, puts the cost of hiring and onboarding new employees at USD$240,000. According to CareerBuilder, almost three-quarters of companies who made a bad hire reported an average of USD$14,900 in wasted money, with 74% of employers stating they hired the wrong person for the job. Research by Gallup estimates that actively disengaged employees in the United States cost businesses anywhere from $450 billion to $550 billion in lost productivity each year. This is to say nothing of the spillover effects to other employees and overall business morale. Ultimately, bad hires are strongly correlated to poor recruitment practices.