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. Last Updated: 07/27/2016

Changing Global Business Trends Affect the Recruitment Industry

UnknownCraig Atkinson
Despite ongoing weakness in the United States, the global economy remains healthy. Strong economic growth is expected to continue from many countries around the world, placing increasing pressure on the labor markets to keep up with demand. Economic growth from emerging markets such as India, China and Russia is expected to remain well above the global average of 3.5 percent for 2006 and 2007.

Talent shortages and enabling technologies are creating a labor market that is increasingly more global and flexible. Long-term skills and labor shortages are placing upward pressure on wages and employer costs and forcing companies to focus on improving work force retention strategies. There is an increased need for work force flexibility. Acceptance of workplace diversity, increased use of cross-border labor and the introduction of the freelance agent are all part of the drive toward workplace flexibility. The ongoing development in enabling technology has also seen a rise in "virtual work" environments, which employers need to understand and adopt to remain competitive in the pursuit of talent.

Markets across the globe are facing falling unemployment rates, growing needs for skilled talent and a shrinking labor pool due to demographic shifts. In Russia, the 2006 unemployment rate of 7.1 percent is expected to decline gradually as the economy transitions into a global marketplace. However, in Moscow and St. Petersburg the level of unemployment is well below the country average and causing real challenges for employers as they respond to market demand for their products or services.

In the face of global talent shortages, the legislative environment favors policies designed to increase labor mobility and encourage participation in the work force through delayed retirement and worker re-entry programs. Evolving Russian employment legislation is creating a less-restrictive labor market where policymakers are looking at programs like maternity payments and expanded child care facilities to curb the shrinking and aging population trends we see today. The future regulation of the temporary labor market will also help the market become more balanced and will assist in addressing the current skill shortages.

The recruitment industry plays a very important part in managing the supply of labor skills and has seen major changes to the way it interfaces with the market. The industry first emerged in the United States 60 years ago and is now a global industry expected to grow by 5.4 percent to $289 billion this year, outpacing the projected global growth rate of 3.5 percent. China, Spain, Switzerland and Italy are the fastest growing markets, with double-digit growth figures. Traditional service lines, such as office and industrial, represent about half of the global staffing market, while the fastest growth opportunities are in the specialty staffing segment such as professional and technical. The recruitment industry faces an environment of evolving legislation, increasing consolidation, continually expanding services and technological advances, which are all impacting the industry. Liberalization of labor markets, greater protection for temporary workers, greater emphasis on permanent placement business and the expansion of outsourcing and consulting services are all affecting the industry today.

On more of a micro level, the recent emergence of the trend for large multinationals to outsource part or all of their recruitment processes to external suppliers is a reaction to finding more efficient and cost-effective ways to attract and retain talent for today's business needs. As companies engage with specialist recruitment suppliers who have the expertise and experience to develop and manage customer-specific recruitment, on-boarding and talent management programs, we are seeing a rapid shift from the traditional recruitment relationship toward one of strategic partnerships with the recruitment provider, where the success of the relationship is dependent on very specific and measurable outcomes. The growth of the so-called recruitment process outsourcing, or RPO, segment, while not entirely new, is taking on significant importance as companies strive to find a competitive edge in the hunt for talent.

Another recent development is the use of vendor management models to improve the performance of a panel of recruitment providers. Companies are looking to reduce the time and effort required to manage multiple supplier relationships and centralize this activity under one vendor responsible for ensuring service standards and selected performance measures are achieved. These vendor management models drive performance improvements, contract compliance and reduce the "cost per hire" through the elimination of contract spending and improving the hiring-to-interview ratio.

The global market is rapidly changing and recruitment suppliers must be innovative enough to continually bring new "value-added" services to the market to help companies win the war for talent. Those who can prosper, while those who do not will find themselves shut out of the marketplace. Companies operating in the Russian market place need to be ready for the surge in demand for RPO and vendor management solutions as the Russian market begins to adopt many of the successful strategies already in place in the United States and Western Europe.