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There is a seasonal quality to the evolution of an industry, even one that is as inherently fractured as Electronic Recruiting. In the Spring, companies blossom. The Summer is a time of growth and production. The fall brings the Harvest. The Winter is a time of rest in preparation for the next growth spurt. In Nature, no one ever refers to Winter as a period of consolidation. But, that's what it is.

There are over 35,000 profitable (or nearly profitable) job board businesses. Their structure is straightforward. Four or five partners (one of whom is on the local Chamber of Commerce) handle the chores. One sells; one diddles with technology; one answers the phone; one provides customer service; and, one handles the money. In towns as small as 25,000, these are $1M businesses. The partners make more money than they ever believed possible. The formula is straightforward; the technology is simple; and, success is a function of regional and community issues. With over 7 Million potential customers (companies with more than 10 employees), the market is nearly infinite.

So, although TMP is clearly the "market leader", their 75,000 customers represent a 1% market share. In the historical staffing and recruitment advertising markets, no player has ever been able to grasp larger than 4% of the market. Highly profitable $1M businesses exist in very narrow niches with a market share of .0001%.

So, we've watched the absorption of Resumix by HotJobs, a move that drops revenue to the bottom line of a company that needs revenue. We've witnessed the merger of CareerMosaic and Headhunter (a move to drive traffic and revenue). Career Path appears to be teetering on the brink of extinction (As usual).

These moves are like the leaves falling from the trees in late fall. They portend more growth and diversity in the next season rather than less.

It's a slog, to put it mildly. Simply maintaining morale, in the face of such overwhelming odds, is an enormous accomplishment. From the trench level, it certainly must seem like the harder you work, the faster the pile grows.

From the perspective of these high volume shops, it seems like the current spate of offerings in all aspects of Recruitment advertising are bandaids on an arterial wound. We've begun to conclude that a part of the problem lies in its definition.

Everywhere we look, we see solutions that propose to reduce the recruiting cycle towards zero. Every system we review (except, possibly, Icarian) is reactive and administrative which means that the best possible performance is to thin the timeline to a week or so. Given the marketplace pace, this means that huge numbers of potential employees will continue to fall through the net.

Our conclusion? The objectives are wrong. Like a Just In Time Inventory system, the design of Recruiting solutions should focus on an objective of having candidates available 30 days in advance of the requirement, not a week to 60 days afterwards.

This notion, which we're fondly calling "Minus 30", demands a fundamental rethinking of the problem. In order to discover candidates in advance of requirements, the first move is an understanding of the evolution of hiring requirements within the organization. At the same time, data mining techniques need to be used to uncover indications of the likelihood of a shift.

For instance, at the entry level, the first indication of pending availability is college selection or the declaration of a major. Interestingly, much of this behavior is observable since many universities organize student web pages by department.

Alternatively, the death of a parent, the purchase of a home or car, the acquisition of a new computer, the birth of child, a 40th birthday, rapidly increasing real estate values in a particular zip code, sales of certain books by zip code (available from Amazon!) and other major and minor life events are all indications of pending availability and the statistical likelihood that candidates will emerge in a particular region.

The tools required to produce candidates in advance of formal availability also include the mining of existing resume databases. We recently heard the story of a highly successful staffing operation who improved their inventory production in a significant way by assigning all recruiters the task of scoring historical resumes. Once the database was complete (and it took a while to evaluate all 200,000), the company was able to predict the availability of candidates who had applied three or four years ago.

The combination of advance planning and availability surveillance, both made possible by currently available online data, should produce systems that drive the recruiting cycle time below zero days. While more difficult to achieve in small organizations, the repetitive nature of big company recruiting problems makes the task extremely similar to good inventory and distribution management. Once "Minus 30" is achieved, figuring out who bears the inventory carrying costs will be the next frontier.

Frankly, the move leaves us scratching our heads.

As we have noted before:

For the entire history of the application of search engines to resume databases, the world has been limited to two major approaches: Structured Lexicon Development or Intelligent Query Languages. In the pre-web marketplace, Resumix pioneered the former while Restrac (now Webhire) represented the latter. The two approaches are as different as, say, applied and theoretical engineering or Romantic and Classical world views.

Lexicon development (building a tree of related concepts that are embedded in the data entry and querying processes) requires highly accurate forecasts of skillset requirements and their relationships. In order to use a lexicon based system, someone has to identify relevant ideas and their relationships in advance of system deployment. It's exciting work for semanticists (who might well be otherwise unemployed). The sales pitch is generally that an up front investment will reduce life-cycle costs.

Intelligent Query Languages (by far the most prevalent form of web search engine) take the exact opposite approach. Rather than developing a hard to maintain structure, each query is (in theory) hand crafted to produce precise results. Relationships between skillsets are embedded in the query rather than the database.

Classical thinking (Lexicons) relies on the development of structure and preparation. Romantic thinking (Intelligent Queries) emphasizes the power of spontaneity and adaptability. They are just two sides of a coin with relatively similar validity. (In other words, once you've committed to using one approach, the risk accrues to the user.) In the final analysis, past the sales process, both approaches are equally valid. However, they represent world views that are nearly mutually exclusive.

We've always held the opinion that some organizations are Classical (structure oriented) and some are Romantic (spontaneous and more ad hoc). We believe that the applicant tracking (internal search engine) market segments neatly along this simple line and explains the neck and neck competition between Restrac and Resumix over the years.

In their current annual report, HotJobs suggests an expansion in their consulting business (which might be the rationalization behind the acquisition), unfortunately, Resumix consulting revenues (like so many others in the enterprise space) are held captive by the distribution channels. It will be interesting to see whether the combined company can really achieve synergy.

Icarian introduces the promise of real asset optimization in the workforce. By applying inventory management techniques to the personnel problem, the company is light years ahead of the competition. Like all capital, human beings should be managed to produce optimum returns. The Icarian suite of products holds that promise.

Why then do you suppose that this great idea is so slow to gain market traction?

It's no accident that HR is often considered the most liberal component of the organization. Swaddled in feel-good programs, regulated for diversity score-keeping, saddled with conflict management and labor relations, and buried in excuse making for managerial policy slips, the old Personnel Department is the aggregator of issues traditionally associated with liberal causes. Given this concentration of liberal idealism, it's no surprise that pragmatic conservative investment practice is basically foreign to the HR mindset.

This provides a huge market hurdle for companies like Icarian who have the wherewithal to help solve the talent shortage. The basic concepts embedded in the solution are frightening to the potential customers. At first blush, you'd bet that this market problem makes Icarian a non-starter.

We see it differently.

The talent shortage is severe, generational, multicultural and stretches across all professions (IT pundits to the contrary). Our current economic fortunes depend on a seamless supply of malleable human resources that can be optimized in the service of a larger goal. If the old way of solving the problem doesn't work, the new one will be ushered in. Icarian's ultimate market success (and we believe that it is inevitable that some player will have a major breakthrough in this arena) will be the beginning of a new era.

We highly recommend that career savvy Recruiters begin learning the language of conservative economists.

Imagine the perspective of an old school newspaper manager. Way back when (five years ago), building a classified advertising business was as simple as publishing the phone number and staffing the call center. The employment advertising cash cow simply rode the economy. No real investment was required to harvest marginal revenues. Advertising the fact that you had ads to sell was a ludicrous notion.

Building a national brand through television advertising is an expensive proposition. We've heard estimates as high as $300M/year to develop and sustain a distinct national image. Given the rough similarity of all online job services, we think the real homework has yet to be done.

Automobile advertising proves the fact that products with little difference can be marketed as distinct entities to tightly defined demographic niches. But then, automobile companies have lots of money and energy focused on demographic research, market demand and consumer preference. From what we see in the current crop of ads, job boards are all after the elusive job hunter.

It's the most expensive approach possible. Like most things, advertising requires a clear understanding of the intersection of the product and the market. That way, advertising costs can be managed while response rates that are worth the investment can be achieved. Market research drives the cost of advertising down while increasing its effectiveness.

The other problem is tougher.

Without significant functional improvements (and we don't mean silly resume pasting tricks), the current crop of competitors is going to stumble and fall. America's GDP continues to grow at over 5%/year while the pool of available candidates continues to shrink. The raw number of traditional managers is in absolute decline. The schools will produce a fraction of the required IT professionals this spring. Although NASDAQ fluctuations should loosen up some technical talent, it's a drop in the bucket.

Harvesting candidates through market specific research (probably coupled with direct human contact, not email bombing) will play an increasingly important role in the market. As candidate supplies continue to diminish, the level of concern about privacy and annoyance will continue to grow. Since real artificial intelligence systems are a long way off (unless you propose to force candidates to wade through profiling schemes), alternative methods that produce specific results for specific paying customers will become the name of the game.

While we're not saying that HR customers are going to become results oriented overnight, we are saying that market pressures will start to demand an increase in performance. All of the advertising in the world couldn't sell the Edsel. The market needs more performance and less noise.

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