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(March 22, 2001) Jobs.com has filed for Chapter 11. Isearch clients are having "issues" with abandonment following the firm's decision to "wind-down". A few companies have received additional "funding" recently. The money came with the agreement that the companies would "reduce their burn rate". The number of impending business disasters seems to grow daily.

The folks who think our industry is a horse race between Venture-funded operations are proclaiming the arrival of the long heralded "consolidation". In that world view, the internet somehow manages to grant huge market shares to companies that didn't even exist two or three years ago. The old businesses of recruiting and recruitment advertising bear no relevance, according to this perspective. It seems that Recruiting on the web is limited to placing ads on huge job boards. We say "pshaw".

A quick look at the alliance development successes of operations like CareerCast (new clients every day), RecruitUSA (a constantly growing and improving distribution network), Salary.com (new advertising methods), little guys like bajobs (who profitably describe a market in one square mile increments), Recruitsoft (huge new client momentum), and the emergence (lawsuit or not) of new starts will leave no doubt that the industry is experiencing spring rather than a dark winter.

The recent "crashes" should serve to highlight several important issues, however. If your service providers are not profitable, you should be worried. Pricing in the industry, which had been artificially lowered by Venture Capital subsidies, will rise to reflect the real costs of doing business. A dollar spent on erecruiting tomorrow will go about one third as far as one spent yesterday. The freebies (and there have been an awful lot of them) are over.

There are a couple of more subtle questions:

  1. Check to see if anyone involved in the vendors you use has any actual business experience. It's surprising how little training in the fundamentals many CEO's have. Bad pricing and financial decisions are at the root of a lot of the current failure.
  2. Is your vendor chasing a "visionary's dream"? Really good ideas developed in interesting companies have been able to gain market traction over the past several years. Unfortunately, visionaries often fail basic checkbook problems. The Jobs.com problem can be traced directly to their insistence on the core "universal resume" that wasted so much of their early money. The "visionary thing" is better used for marketing purposes than managerial decision making.
  3. What is your vendor's customer satisfaction policy? With rumblings about class action suits (Isearch, TheWorksUSA, Resumix), customer satisfaction issues are hitting the hot burner. Be sure to be clear about your recourse if you are unhappy.
  4. How fast is your vendor growing? Many companies encounter severe growing pains when they try to sustain growth rates over 200% for more than three years. Essentially, the original management team is ill-equipped to deal with issues of growth and scale. Do you know how dependent your vendor's organization is on its founders?
  5. How dependent is your operation on "free" services? A number of "training companies" have made a great deal of money selling techniques that depend on the continued generosity of Venture Capitalists. Remember, lunches aren't free.
As a customer of online Recruiting services, it is a time to be wary while bracing for logical price increases.

Here's a gem. The most comprehensive listing of HR mailing lists we've ever seen is available at: http://www.hrprosgateway.com/listserv.html. It's a small service of a website called "The HR Pro's Gateway to the Internet"

Keep your eye on Hailstorm (Microsoft's code name for their new .NET service structure).

- John Sumser © TwoColorHat. All Rights Reserved.

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