The Problem With Recruiting Firms
May 4, 2025
Ever wonder who cuts the barber’s hair?
There is a proliferation of recruiters, and I found out recently, a growing specialty of recruiters who recruit recruiters, which is a bit of an ouroboros.
In our view, the recruiting firm industry has tangled itself up a bit, fighting over what frequently is a thin number of searches, fee and margin pressure, e.g. They often define success based not on profitability, but the number of searches and the number of recruiters they can keep busy with those searches.
There are lots of recruiters and lots of talent acquisition resources out there – “single shingle” as well as large firms, especially those that support private equity and conduct corporate searches for a variety of different kinds of product and service businesses.
Over the years I have had the good fortune to work with dozens of excellent recruiters and recruitment organizations, as well as interim management firms where I/we have filled challenging interim or extended roles, or I have filled key roles in some capacities (CEO, COO, GM, advisor, board member) often, as a resource that has been redeployed under another firm’s brand or banner. Yes, they pimped me out.
One of the flaws in the recruitment model is the problem with cost – where the company hiring a resource through a third-party recruiter is paying often a significant premium over what that employee could be sourced for or that contractor could be sourced for independently. Or, the sheer cost that clients of recruitment firms are expected to pay – often a percentage of the compensation of the chosen candidate – for successfully landing said candidate.
Obviously, the way that the recruitment firm makes its money, is by doing the hard work of screening and qualifying placements. However many of the placements do not work – because the recruitment firm is focused on trying to generate revenue to pay for all of its recruiters and they define success not by the quality of the searches that they do, not by the “stickiness” of the candidates that they place, but rather the quantity of the searches that they conduct – as their focus is on churning revenue and trying to keep a feast or a famine model consistently fed.
We recently worked on a recruiting firm whose main problem was they simply had too many recruiters. The principals of the firm no longer wanted to work too hard, and they decided to enlist the help of a large number of other recruiters and none of them were that busy or could get close to the number of searches necessary (and the revenue margins necessary) to sustain their entire model.
As it turned out, their best course of action was to scale back the recruiting practice and make the principals work a little bit harder, and in the end, with our analysis, they reduced their overhead, their office size, and generated much more profit.
A classic case of how throwing people at problems or challenges seldom equates to rapid margin improvement or discernable growth in the near term.
If the organization is swallowing it’s own tail, it can’t properly serve its clients.
By ignoring the need to rightsize its own operation, it deploys its own “weapon of mass distraction” on itself and the practice suffers.
Paul Fioravanti, MBA, MPA, CTP, is the CEO & Managing Partner of QORVAL Partners, LLC, a FL-based advisory firm (founded 1996 by Jim Malone, six-time Fortune 100/500 CEO) Qorval is a US-based turnaround, restructuring, business optimization and interim management firm. Fioravanti is a proven turnaround CEO with experience in more than 90 situations in more than 40 industries. He earned his MBA and MPA from the University of Rhode Island and completed advanced post-master’s research in finance and marketing at Bryant University. He is a Certified Turnaround Professional and member of the Turnaround Management Association, the Private Directors Association, Association for Corporate Growth (ACG), Association of Merger & Acquisition Advisors (AM&MA), the American Bankruptcy Institute, and IMCUSA. Copyright 2024, Qorval Partners, LLC and/or Paul Fioravanti, MBA, MPA, CTP.
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