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It is better
to not be on
the web than
to be on and
not know why

John Sumser

is more
it seems.
John Gall

It's better to
do a few things
really well than
than to do
a lot of things
If you can't
make the necessary
commitments of
time and energy
to your
scale back
your plan.
John Sumser

© 2013 interbiznet.
All Rights Reserved.

Materials written
by John Sumser
© TwoColorHat.
All Rights Reserved.

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The Connection

(January 14, 2000) As a component of the 2000 Electronic Recruiting Index, we've been immersed in an extremely detailed analysis of the performance of the stocks we track (see the right side of this page). Several very interesting things emerge from the analysis. It's quite clear that stock price is related to web investment.

In the past, we've written about the demise of Traditional Staffing companies. Comparing them to blacksmiths, we've suggested that, while many functions will continue to be executed, Recruiting will be deconstructed by the web. In other words, existing businesses will be rethought from the ground up. Although Henry Ford's factories used the skills and functions of blacksmiths, there were no smithies on the assembly line. What had been a profitable economic niche disappeared overnight. It was replaced by companies who performed similar functions in a different way.

Obviously, the relationship is deeper than Web Investment = Stock Performance. The most important investment happens along non-financial lines (although it can probably be understood in financial terms in the long run.) The worst performers in our group of staffing companies don't mention the words "jobs, careers or employment" on their sites (if they have them). The best performers launched freestanding web operations or wrapped their operations entirely in the web in some other way. The mediocre middle toyed with the concept of web operations.

On the whole, Traditional Staffing Companies grew their stock prices at 7% last year. The Top performing companies were:

  1. Hall, Kinion and Associates (201.75%)
  2. Heidrick and Struggles (200.44%)
  3. Korn Ferry (179.81%)
Their performance completely dwarfed the returns from other Staffing stock investments. The closest competitors in the segment delivered 50% stock price increases through a pattern of acquisition (which provided temporary and somewhat artificial growth). It appears that the market understands the equation far better than management.

Our top level findings:

  • Companies that used their websites to communicate exclusively with investors fared particularly badly with an average market performance of -50% (that's a 50% decrease)
  • Half-baked "whole company integration" projects like CDI's "Brilliant People" limited performance to under 20%. This partially explains Romac's performance (-34.45%)
  • The more separated the web endeavor was from the core operation, the better the performance
  • Companies with a company news section on the home page (if there wasn't an additional web operation) performed worse than average
  • Companies that used their websites as ads or brochures generally produced negative returns.
  • Companies whose use of the web is limited to ad placements through a posting service produced negative returns
  • In an odd dichotomy, several companies blamed tight labor markets for their financial performance on their home pages. This class of company fared even worse than the average. The dichotomy is that successful players used their web endeavors to solve the tight market problem.
  • A reduced emphasis on the web from prior years (level of investment compared to web leaders) produced negative returns. This was particularly true in the Temporary segment.
In all, it was a dismal year for staffing companies. Unfortunately, that leaves them even more cash-strapped as they try to recover in 2000. Without freestanding web services, directly focused on candidate acquisition, we expect that even more of the corporate sites will use their sites to blame a tight labor market.

We may be pollyannish, but it seems that staffing companies ought to profit enormously during a labor shortage. We can't think of another market where shortages don't translate into higher profits. Even though we've emphasized the web component of stock performance, there was a relatively direct relationship to profitability. We'd say that the level of web investment correlates directly with profitability.

It looks like the revolution is here.

- John Sumser, © TwoColorHat. All Rights Reserved.

What's In A Name? (From the Vault)

(January 13, 2000) With over 1350 websites and companies using the word "career" in their name, it's a bewildering mess for job hunters and recruiters alike. While we still haven't seen CareerBordello or CareerGinMill, the rest of the analogies are wearing thin. With Careerbabe, Careerbs, Careercafe, Careerchamps, Careercave, Careerconcierge, CareerDoctors leading the cluster, it's amazing that any brand distinction exists in our space.

In a fit of silliness, we decided to actually look up the definition of the word Career:

  1. progress or development of a person through life or some aspect of life:
    example: a long and fruitful career.
    synonyms:development, progression, course, march, road, movement, journey, trip, trek, progress, way, direction

  2. a profession or occupation chosen as a life's work.
    synonyms: profession, occupation, vocation, trade, business, calling, pursuit, craft, métier, job, living, livelihood

  3. swift movement forward:
    example: the horse's furious career toward the cliff.
    synonyms: movement, progress, course, progression

Astonishingly, none of the dictionary definitions of the word career seem to mean "large database of job openings" or "job advertisement distribution system". They all imply development and personal improvement, however.

We wonder whether the job hunters who visit the various Careerxxxx sites experience an initial disappointment. Since the word career used to at least infer planning, training or constant personal improvement, some form of language deflation is happening here. If the word Career now means job listings, what word are we using to describe the intentional movement forward within a chosen field?

- John Sumser, © TwoColorHat. All Rights Reserved.


(January 12, 2000) Let's compare two piles of people. Group A contains all of the Americans (including illegal immigrants) between the ages of 21 and 24. Group B contains all of the people between 25 and 27 (again, including illegal immigrants). There are almost exactly half as many people in Group A compared to Group B. Group B is in the workforce, for the most part. Group A is entering.

Half as many people in Group A means that entry level (and college) recruiting, which has been tough for years now, is getting extremely competitive. It means that the same recruiting budget that produced ten new employees last year will produce five this year. It means that the people in Group B (which is smaller than the crop of 28 to 31 year olds) who aren't in fast track opportunities are still doing entry level jobs that can't be filled. It means that qualifications are going out the window.

It means that the minimum requirement for many jobs is a measurable pulse.

Meanwhile, we seem to be buried in schemes from companies who are trying to get candidates to fill out complex forms that measure cultural fit with increasing precision. Sometimes we wonder if there isn't waaaaay too much money floating around. Cultural fit ceases to be an issue when pulse is the minimum job requirement.

Take a look at JobTrak's current evaluation of Job Openings for college graduates. From our perspective, it's 17% more openings for 50% fewer people:

                                        JOBTRAK.COM INDEX
           Job Listings Posted at University Career Centers Nationwide
                     Coverage Period January - December 1999

    Job Category                        Average    % of total    # of jobs
                                        starting  jobs posted      posted
                                        salary    for college     compared
                                                    grads by     to December,
                                                    category         1998

    Accounting & Finance                $33,965      13.0%          +4.7%
    Business & Management               $35,199      11.6%          -4.4%
    Clerical & Secretarial              $26,641       7.5%         +11.5%
    Communications/Media                $28,905       6.0%         +27.4%
    Computers & Information Science     $43,062      12.7%          +6.6%
    *Education                          $37,021       9.7%        +120.7%
    Engineering                         $42,281       8.9%          +2.8%
    Public Affairs & Social Services    $29,381       4.6%         +55.5%
    Sales & Marketing                   $34,161      13.8%         +12.3%
    Other                               $30,932      12.1%         +31.9%

    Total                                             100%
    Increase/Decrease                                                +17%
    Average                             $34,433

The labor shortage is generational and real.

- John Sumser, © TwoColorHat. All Rights Reserved.

Recruiting Is Advertising

(January 11, 2000) Recruiting Is Advertising. It's really that simple....and that complex. The skills of the traditional Staffing industry, refined with sophisticated data-mining techniques and communicated interactively through the web boil down to the next generation of advertising.

In the rush to proclaim a revolutionary market, prices were artificially lowered for the first wave of Web Recruiting. Low prices created an odd set of expectations in the marketplace. Even today, we are undergoing a revitalized Resume Database giveaway trend.

We think there should be a plaque handed out to all web entrepreneurs that says: "It's easier to lower prices than it is to raise them."

Really, how could this process be less expensive? It has lower "friction", for certain. The distance between the candidate and the opportunity is being squeezed, every second of every day. But, the cost of tailored communications, as everyone knows, is higher than the cost of bulk communications. The cost of having a relationship hasn't changed. The cost of acquiring one is going up rapidly. The available number of relationships to be had is in an aggressive decline.

While Recruiting IS Advertising, the conditions for both have changed. Today's Recruiter works in an environment where candidates are scarce and inventory management is everything. That's the exact opposite of historical conditions. The financial fundamentals of Recruiting have changed in profound ways as a result.

Advertising is also undergoing a radical change. In an earlier time, it was funny to quote Ogilvy, who said "I know that half of my advertising dollars are wasted. I just don't know which half." In today's universe, advertising can be quantified. Major, non-recruiting advertisers are shifting to a skin-in-the-game, pay for performance model. Web advertising requires authentic one to one communications (and therefore more people on the response end).

So, when we say Recruiting Is Advertising, we mean the new Recruiting is the same as the new Advertising. It's more expensive, more direct, more prone to failure and more proactive on the Recruiter's end. The burden of adding value to the Recruiting relationship has shifted from the Candidate to the Recruiter.

We're amazed at the resilience of old outmoded ideas. The labor shortage is permanent and can only be solved with radical improvements in productivity accompanied by a massive wave of immigration. Candidates are not going to flock to use new screening tools. When we say the Resume is dead, we mean that the idea that a candidate has to market him or herself to get a job is dead. Good 21st Century advertising is proactive and identifies targets rather than depending on them to identify themselves.

Recruiting is advertising if you understand that today's advertiser is 100% accountable for results.

- John Sumser, © TwoColorHat. All Rights Reserved.


(January 10, 2000) The world's largest media company formed this morning. In the merger, AOL shareholders get 55% of the combined company. Obviously, the exclusive advertising/co-branding deal Monster.com cut with AOL caught the attention of Ted Turner.

Well, maybe not exactly. It's probably better understood as a vote for cable modems. From our perspective, it's best seen as the coalescing of one helluva Recruiting platform.

Although the vision is hardly new, the deal inspires thinking about cradle to grave relationships with customers that includes more than enough insight to solve work and placement related problems. Targeting, from an employer's perspective, and reach, from the reader/employee's side creates an entity to be reckoned with. The leadership turnover we've been describing continues unabated.

This is now officially unlike any other media revolution that preceded it.

Imagine how it feels when your three generation old newspaper-media empire has suddenly become interesting as a 4% division of an Internet company. After all, in today's market, you could buy all of the major newspapers for less than 35% of Yahoo's current valuation. All of them!

The question for deep consideration is "how far will this Media-ization go?" Clearly, the phones have been through it. Microsoft is in the process of being media-ized. Lots of 'portles' claim to be at the vanguard (although they may well be the new desktop utilities). Romac, with its k-force, believes in the Media-ization of Recruiting. Korn-Ferry has been setting the Media-ization pace in some ways. The question, asked differently, is "How far will the Media-ization of Recruiting actually go?"

We are constantly amazed by two things:

  • The depth of newspapers/media companies expertise in direct marketing (and their complete inability to harness it for Recruiting purposes)
  • The Traditional staffing industry's inability to see the competitive power of their subcontractors (those same media companies)
For the most part (except KForce [maybe], TMP's far flung empire [if they can harness the synergy], CareerCentral and TheWorksUSA), current ERecruiting endeavors leave out the human touch that is the most important part of real recruiting. This is not likely to be the case for media companies when they wake up.

Ultimately, the Media-ization of Recruiting will be executed by teams with demonstrated expertise. For trench-level Recruiters, this probably means "expect new management".

- John Sumser

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Material written by John Sumser © TwoColorHat. All Rights Reserved

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