The Australian petroleum industry is facing a major crisis in the availability of skilled human resources to deliver projects and manage operations.
Put simply, the reasons for this shortage include an ageing workforce leaving the industry, high commodity prices causing increased project activity and therefore high demand, and a reduced supply of appropriately trained people.
Organisations looking for recruits have a choice - they can do it themselves or outsource to a recruitment agency.
Because of the time and effort involved, many organisations choose to shift the burden of recruiting permanent and contract employees to agencies.
But there is evidence to suggest that this is no longer delivering satisfactory outcomes to clients.
The cost and delivery models typically found in employment agencies aren't suited to the current, unprecedented market conditions. This is hardly surprising, given that the recruitment industry's normal business models are more than 30 years old.
One criticism of permanent agencies is the time taken to conduct successful recruitment processes.
Despite many agencies employing capable consultants, and purporting to have extensive databases, the time to successfully conclude recruitment processes is extending, sometimes reaching up to 12 months.
Not surprisingly, escalating cost considerations can quickly become prohibitive in recruiting permanent staff when the cost model is a percentage of salary.
While using agencies was an affordable way of managing previous attrition rates, the effectiveness of this model doesn’t necessarily stack-up when large numbers must be recruited.
Contracting can also be costly, especially when the client refers candidates to an agency to be pay-rolled. This transaction frustrates clients and procurement specialists who have difficulty accepting that - although they have supplied the personnel - they must still often pay a standard commercial hourly margin.
In addition, the competitive nature of contracting means the agency is rewarded for speed and not necessarily for sourcing and screening staff. This often leads to clients being swamped with resumes, which in effect transfers the burden of screening candidates to the client.
Clients also frequently express dissatisfaction with the ownership of intellectual property generated through the execution of any recruitment assignment. In most instances, the IP is retained within the agency or at best, shared with the client.
Nevertheless, there are alternative business models that replace or complement agency strategies, and these models apply to organisations of all sizes.
One of the primary strategic considerations for an organisation to consider is whether it should handle it own recruitment. If moving down this path, the organisation must ensure that the internalised function adds real sourcing power, rather simply becoming an administration and processing service.
An internalised function has several benefits that agencies do not.
The greatest data source on the whereabouts of skilled resources is people with similar skills, for example employees within the client environment.
This IP is highly valuable when recruiting new staff and needs to be gathered and repeatedly used.
Quite rightly, HR departments are reticent to allow a recruitment agency access those networks as the IP could end up benefiting a competitor.
However, the technology and business models do exist to retrieve and reuse the information in a manner that is far more effective than company referral programs.
The net effect of recent industry developments is forcing clients to second-guess the diminished effectiveness of advertising through agencies.
The jury is clearly out over whether the recent practice by some agencies of flooding newspapers and web boards with "spec jobs” - that don’t exist - in the hope of attracting candidates who could then be "floated" to clients is ethically correct.
This practice was of such concern that the Minister for Fair Trading recently introduced the Fair Trading Amendment (Employment Services) Bill to provide authorities prosecution powers over those who participated in this conduct.
Sadly though, the impact of these shonky practices has tarnished the already damaged reputation of recruitment industry in the eyes of the candidate market at large. Not surprisingly, many who are new to the Australian market remain wary of responding to non-branded advertisements.
Anecdotal evidence suggests employers can become far more powerful "brand magnets" than agencies in the advertising market, particularly those who are clear about their value proposition.
Jobseekers, some of whom have been burnt by less than scrupulous advertising tactics, are more inclined to trust and respond to advertising that is branded and owned by the company.
Another reason for internalising the function is cost. Ask your CFO how much your organisation spent on recruitment agencies fees, contract and permanent? In many instances the number is significant and it takes very few professional permanent processes to justify a fully dedicated internalised function and specialist technology.
Internalising a recruitment function is not a new idea, but success can be varied. There are many high-profile examples of in-sourced solutions in other industries that have failed, but a blueprint does exist for successful integration.
This commentary is not intended to be a criticism of agencies, which are a viable sourcing channel, especially if they have a specialist capability. But they should be used judiciously and with an understanding of their limitations.
Petra Nelson is with Perth-based firm, Carbon 6 - a fully integrated consultancy charged with delivering significant cost savings and improved "people-resourcing" outcomes for its clients.
