The Destruction of the Head Hunting Industry

This is a random thought that just popped in my head.

With information becoming increasingly available, I’ve been thinking that the headhunting business will go through a major destructive phase in the next few years. There are two things the Internet changed:

• Better distribution of information on job openings
• Better distribution of information on candidates

Definition: For those of you who are unaware, head hunters are professionals that search for employees and pair them up with open positions in companies. In a typical scenario, a company will pay a recruiter (head hunter) a fee that equates to 2-3 months of that employee’s yearly salary. Companies pay this because recruiting employees is expensive. I’ve done a lot of hiring in the last few years, and I know how time consuming it is to review hundreds of resumes and then interview. A head hunter is basically an outsourced HR department. Additionally, candidates often approach head hunters who re-post job openings in various job boards.

And there’s a third trend that will come based on increasing information available to the public:

• Automation of job and candidate pairing

A long time ago, I was business partners with a man who was formerly a head hunter. I remember him telling me how wonderful the internet made his job. He told me that when he was my age, recruiting meant shaking a lot of hands, memorizing every face and name you ever met, and storing large piles of business cards. For him, recruiting was now about posting jobs on Craigslist and Monster and referring the candidates. To him, he was still the gatekeeper. These days, anybody can be a headhunter with a little Internet know how.

head hunter productivity goes up first, then down (we are in the middle stage now)

However, sites like LinkedIn can change all that. The one true value proposition that headhunters provide is that they serve as matchmaker. But as more information is available and technology improves, this process should become more and more automated. For example, right now, LinkedIn has job postings. On its own, it’s just a new competitor to Craigslist, but what makes things interesting is that LinkedIn also has the data points to find all of the candidates out there that might fit the job requirements — without anybody lifting a finger.

Right now, the information stream is mono-directional: job postings (and recruiters) broadcast information. The goal is a bi-directional system where seekers fill out their requirements (a.k.a. their resumes) and both sides let the system do the matching. This can only work if both sides have maximum information about the other. Think of it like a dating site for job seekers. It’s a hard problem to solve given the time-sensitive nature of job searches, but it’s an inevitable outcome as more and more information centralizes onto the Internet.

5AM thought of the day.