Increased digitization of the labor market combined with the changing demand for skill has altered the job-search process.
A survey study finds that nearly 18 percent of all employed workers in the US were hired into their present company by the active recruiting effort of their employer. Especially small firms and firms relying on high-skilled labor, are increasingly developing capabilities to better hunt for talent. The study provides relevant implications for both firms and job-seekers.
Hiring in the Digital Age
A firm’s performance relies on finding, hiring, and retaining talented workers. In most theories, firms ‘search’ for workers in so far as they post job openings, choose among applicants, and sometimes rely on existing employees’ referrals.
Increasingly, however, digitization and the internet have enabled firms to take a more active role in finding talent — via access to large platforms like LinkedIn that serve as external databases of updated worker profiles. A Federal Reserve report, for example, indicated that nearly 1 in 3 workers who switched employers were not actively searching — a finding that indicates the growth of firm-driven search or “outbound” recruiting.
Evidence from Research
In their study "Hunting for talent: Firm-driven labor market search in America" Ines Black, Sharique Hasan and Rembrand Kroning analyze two new sources of data that provide insight into the prevalence and impact of outbound recruiting in the American labor market.
First, to better understand the effects on workers, the researchers conduct a nationally representative survey of over 13,000 working Americans to assess the prevalence of different recruiting modes — e.g. inbound, outbound, referrals — of finding a job.
Second, the researchers complement their survey by analyzing a large sample of job postings during the period between 2010 and 2018 to understand temporal and firm-level heterogeneity in investments in firm-led worker search.
Thus the researchers provide new facts on the prevalence of outbound recruiting practices, which firms are more likely to engage in it, and which occupations and demographics are more likely to be its target.
The analyses provide several new facts about the prevalence of outbound recruiting practices:
Over 18 percent of all employed workers in the US in January 2020 were hired into their present company by the outbound recruiting effort of their employer, either directly or through a headhunter.
Hiring through outbound recruiting is greatest among higher-income workers, at 20.3 percent as well as those with STEM and business degrees, at 22.5 percent.
Additionally, there is considerable regional, firm, and demographic variation. Over 25 percent of Silicon Valley workers are hired in this manner, but only 15 percent in Sacramento are.
Outbound recruiting appears primarily to substitute for worker-driven search (i.e., individuals applying to jobs without any contact with the firm).
While outbound recruiting varies across regions, referrals do not, sticking near 33% across all the labor markets in our sample.
Workers at smaller firms are more likely to be recruited by firm-driven search. For workers at firms with fewer than 100 employees 22% got their jobs through outbound recruiting; only about 15% at firms with more than 100 workers.
18.9% of men landed their current job by being recruited as against 16% of women.
Moreover, the study also investigate firms’ increasing investment in developing capabilities to better hunt for talent:
There is an overall increase in firms hiring recruiters as a share of total HR personnel.
There is growing demand for social media and digital skills among recruiters.
This demand is concentrated in firms that require high-skilled workers with both technical and social skills.
All in all the researchers theorize that the digitization of the labor market, combined with a preference for hiring high-skilled workers versus training them in-house, has increased outbound recruiting by firms.
The study has relevant implications for firms, workers and research:
Firms must invest in capabilities that allow them to hunt for talent and keep them from being hunted. Thereby a key challenge may be developing the capabilities to find hidden gems, not on the radar of other companies. Further, especially smaller firms and firms relying on high-skilled technical and managerial labor, may increasingly develop capabilities to better hunt for talent. Finally, while wages may be an useful lever in attracting talent, non-pecuniary incentives may increasingly play an essential role in retaining high-value workers who may be actively monitored and recruited by competitors.
For workers the job search may increasingly be less about finding and applying for jobs, but being an effective passive candidate. This change may require workers to develop findable, signal-laden profiles that firms can discover. It may also require the ability to discover and join the speciality hiring platforms and databases firms now rely on (e.g. LinkedIn, hired.com, online spreadsheets listing recently exited employees from major tech firms, etc).
From a research perspective, these new facts raise important considerations for how firm-driven search impacts gender, racial, and geographic inequality.
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Reference: Black, Ines, Sharique Hasan, and Rembrand Koning. "Hunting for talent: Firm-driven labor market search in America." (2020).