Supporting startup growth with the new recruiting ecosystem

1Executive Summary

Talent acquisition and retention are critical to the growth of startups and midsize companies. Many things affect talent management, including corporate culture, company reputation, compensation, career path and so on. But an employee’s first exposure to a company is usually through the recruiting process.

According to some estimates, traditional recruiting firms consume a third of hiring budgets but produce fewer than 10 percent of the results, due to fees that range above 20 percent of first-year salaries. However, professional social networks like LinkedInand Viadeo are changing the rules. These companies leverage a much larger database of candidates and already play a big role in talent acquisition. Companies likeBranchOut, Jobvite and Monster, meanwhile, are building Facebook apps for hiring and career development. Indeed, a 2011 study commissioned by Jobvite found that 89 percent of respondent companies planned to use social media for recruiting versus 83 percent in the previous year. The same survey stated that 55 percent of companies would raise their budgets for social recruiting and that 87 percent used LinkedIn; it also found that 64 percent recruited via two or more social networks, and 40 percent did so through three or more.

Of course, the power of these platforms is only as strong as their reach. Facebook’s reported 845 million user base would make it the third-largest country in the world if we went by population, and firms like BranchOut and Rypple want to develop apps to leverage their members, which are soon to number 1 billion. Internet technology changes the recruiting landscape in another fundamental sense, too: For many knowledge workers, physical location becomes unimportant. As long as they can get online, they can contribute.

Especially in tight labor markets, recruiting cannot just be the job of human resources. Services like Jobvite encourage employees to share job postings with their personal networks. Many companies pay a bonus to those staff members who recommend a successful candidate (typically paid out after a probationary period), while other companies make recruiting part of regular “building organizational capacity” duties.

Incidentally, the propensity of a company’s employees to recommend their friends is an excellent harbinger of morale and employee satisfaction.

Key findings in this report include:

  • Small- and medium-sized businesses can benefit from innovative technology that will help their recruiting efforts, and the cost for doing so is reasonable (and decreasing).
  • Technology enables the recruiting process to be more streamlined, scientific and democratic.
  • The technology-recruiting ecosystem is quickly evolving. The technology itself is becoming more innovative, and the industry is consolidating mostly through acquisition. These trends benefit small businesses and high-growth companies, since it is easy to experiment with different solutions without having to lock into a long contract.

In the following pages we will look at what is driving these changes in the workplace.

Relevant Analyst
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Mike Dover

Managing Partner Socialstruct Advisory Group

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