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Source of Hire: With Referrals Down, Direct Sourcing and Agency Hires Rise

by Jul 25, 2014, 6:38 am ET

CareerXroads source of external 2014Employee referrals waned again in 2013 as a source of hire, as talent acquisition leaders increasingly leaned on other recruiting methods to fill their external hires.

The just released CareerXroads source of hire survey — its 13th — found  the 50 participating employers, some with more than 200,000 workers, relied more heavily on direct sourcing and help from third party recruiters in 2013 than at any time in the previous decade.

They also accelerated their temp conversions, which, at 4.4 percent of the full-time hires, was nearly three times the rate in 2012.

In fact, except for print, every sourcing method tracked by the recruiting  consultancy CareerXroads showed an increase in hiring activity.

This year’s report has little commentary — it’s coming, says co-author Gerry Crispin — so there’s no explanation for the shift in source of hire.

Referral Programs: Not Very Social

But Crispin speculated there may be more than one reason for the decline in employee referrals over the last two years. Some referrals may simply be classified as part of a social media effort.

A more substantive reason, he said, is that many referral programs have remained largely static over the years as recruiting groups have put more effort into other areas, specifically social recruiting and direct sourcing.

“I think what happened,” Crispin says, is that “formal employee referral programs where the employees are getting a bonus or an attaboy are seeing less value where they haven’t been enhanced with that social component.”

In other words, he says, employee referral programs have become like familiar wallpaper, there but not much noticed. Where social networks are two-way conversations, employee referral programs are more one-way. “HR (sends an email) asking employees if they know anyone (for a specific job),” Crispin explains. “That’s not a conversation.”

Nevertheless, what the source of hire report does show is that the participating companies are making more demands on their recruiting staffs. You can see that from the increases in hires due specifically to recruiter effort.

The direct sourcing category for instance, which went from 9.1 percent of the external hires in 2011 to 6.8 percent in 2012, jumped to 12.1 percent last year.

College hires, which usually means on campus recruiter visits, was up to 7.5 percent. And even job fairs those ‘show the flag’ events nudged up slightly.

Companies in the survey are also turning to outside agencies more than at any time since 2003 when CareerXroads began asking about third party placements. That year, employers attributed 1.2 percent of their external hires to agencies. In 2012, employers said 3.1 percent of their hires came from agency referrals. Last year that percentage nearly doubled to 5.9 percent.

Shrinking Pool of College Educated

The big jump in recruiter effort and the reliance on search firms, independents and RPOs may be at least somewhat explained by the shrinking pool of educated, skilled workers. In January 2012, the unemployment rate for workers over 24 with a college degree was 4.3 percent, a rate identical to January of the year before. By January of 2013, the unemployment rate for this group fell to 3.8 percent. Last month, the unemployment rate for the college educated was 3.3 percent.

One other factor may be helping up the number of jobs being filled by internal and external recruiters. A higher percentage — 58.1 percent in 2013 vs. 54 percent in 2012 — of the jobs at the companies in the CareerXroads study were filled by new hires rather than from within.

In addition to the source of hire data, CareerXroads found that about one in six workers were contingent – temp or contract. Last year, this pool of workers was tapped more heavily to fill full time openings than at any time since the question was first asked nine years ago. The survey found 4.4 percent of the hires were temp-to-perm conversions, a rate nearly three times that of 2012.

In addition, more than half the employers in the survey use an RPO for at least some of their recruiting. The report notes that, “RPO is rebounding in large firms.”

Careerxroads LI use 2014

LinkedIn Job Postings

An especially interesting section of the report about how recruiters are using LinkedIn turned up the finding that more hires are being made by posting jobs to LinkedIn than by recruiters proactively searching the profiles. What this means is that LinkedIn is increasingly resembling a job board, which is where, for the first time, CareerXroads categorized it.

According to the survey, LinkedIn accounted for about 3.1 percent of all external hires. The accompanying chart tells the story.

As a job board, LinkedIn ranked second to Indeed as a source of hire, accounting for 20.1 percent of all hires coming from job boards. Indeed was first with 31.2 percent of the job board sourced hires, or 4.8 percent of all external hires.

Careerxroads Job board data 2014Overall, job board postings and resume (or profile) searching, yielded 15.4 percent of all external hires.

For the past two reports, LinkedIn was included in the Social Media category. This year, the report scotched it, explaining, “We purposely avoided Social and Mobile as sources since they are foundational and ‘influence’ every category.”

Social media wasn’t entirely ignored. The survey asked the participants, “How much influence did social media have on your 2013 hires?” It turns out it didn’t play much of a role for hourly or entry-level professionals; its influence was greatest for experienced professionals and the “Management Executive” hires.

Mobile wasn’t much of a factor for any category of hire.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • Keith D. Halperin

    Very interesting and informative.

  • martinsnyder

    Excellent info. As usual, the death of third-party recruiting is greatly exaggerated, and yes, LinkedIn’s raison d’tre is recruiting….

  • http://www.EngineeringReferral.com Douglas Friedman

    John, thanks for the good info. You folks at ERE do a great job of getting this kind of data out to the talent acquisition community and shaping the debate around best practices in corporate recruiting. I think it’s interesting that LinkedIn was categorized as a job board this year. I don’t disagree with that but I wouldn’t disagree with putting it in the social media category either. Source of hire data is really useful for helping to identify trends both in specific organizations and broadly across the corporate world. But as vendors look to leverage their competitive advantages by expanding their functionality and attacking new markets, the clean categories break down and deciding where to put certain solutions becomes more of a judgement call. Innovation and new approaches only adds to this. My company could fit into a couple different categories as a candidate source depending on how one looked at what we do and we work with several other quickly growing candidate providers that could be labeled different ways. It’s a fun time to be involved in recruiting.

    Doug Friedman
    EngineeringReferral.com
    LinkedIn Profile

  • http://nl.linkedin.com/in/renebolier/ René Bolier

    Gerry, are the percentages of Indeed and Simply Hired only paid traffic or also organic traffic? And corporate website, does that mean direct traffic? Or also traffic from search engines like Google, Indeed, Simply Hired etc.?

  • http://www.EngineeringReferral.com Douglas Friedman

    Gerry, thanks for clarifying that for me. I’m assuming that when a hire is initially sourced from any non-recruiting specific information provider (IEEE Xplore, patent searches, Data.com Connect (Jigsaw), Google scholar, LexisNexis, Microsoft Academic Search, etc.) that it usually ends up in “Direct Sourcing” (and maybe sometimes “All Other” depending on how survey participants qualify it). Maybe another reason that direct sourcing number is spiking is because of improvements and additions to these kinds of alternative info providers, particularly more and more free options? Anyway, thanks for great information and thanks for the interview with John Zappe. It’s great that you are so willing to point to potential problems with your data. I think 500,000 hires is a very impressive number and gives your stats a lot more legitimacy than 99% of what I read elsewhere.

    Doug Friedman
    EngineeringReferral.com
    LinkedIn Profile

  • http://nl.linkedin.com/in/renebolier/ René Bolier

    Thanks Gerry. Great answer that really aligns with my experience in the market.