Are social networks a help or a threat to headhunters?

In a currently hot Youtube video which breathlessly evangelizes the revolutionary nature of social networks, I found this statement: "80% of companies are using LinkedIn as their primary tool to find employees". In the comments this is corrected to "80 percent of companies use or are planning to use social networking to find and attract candidates this year", which sounds rather more believable. Social media is where the young people (and, eventually, us in the middle ages as well) are, so that is where you should look.

At the same time, many of the most prolific users of LinkedIn (and, at least according to this guy, Twitter), both in terms of number of contacts and other activities, are headhunters. It is these people’s business to know many people and be able to find someone who matches a company’s demands.

image Headhunters are the proverbial networkers – they derive their value from knowing not just many people, but the right people. In particular, headhunters that know people in many places are valuable, because they would then be the only conduit between one group and another. Your network is more valuable the fewer of your contacts are also in contact with each other.

The American sociologist Ronald S. Burt, in his book Structural Holes: The Social Networks of Competition (1992), showed that social capital accrues to those who not only know many people, but have connections across groups. Or, in other words, if everyone had been directly linked, you would have a dense network structure. The fact that we aren’t, means that there are structural holes – hence the term. In the picture to the right, we see a social network of 9 individuals. Person A here derives social capital from being the link two groups that otherwise are only internally connected. A would be an excellent headhunter here. (Much as profits only can be generated if you can locate market imperfections).

LinkedIn is a social networks, indistinguishable from a regular one (i.e., one that is not digitally facilitated) except that you can search across the network, directly up to three levels away, indirectly a bit further. Headhunters like it for this reason, and use it extensively in the early phases of locating a candidate. The trouble is, LinkedIn (not to mention the tendency of more and more people having their CV online on regular websites) makes searching for candidates easy for everyone else as well. In other words – while initially helpful, is the long term result of this searchability that headhunters will no long be necessary.

Search technology – in social networks as well as in general – lowers the transaction cost of finding something. Lower transaction costs favors coordination by markets rather than hierarchy (or, in this case, network). Hence, the value of having a central position in that network should diminish. On the other hand, search technology (in networks in particular) allows you to extend your network, hence increase your social capital. Which effect is stronger remains to be seen.

Anyway, this should make for interesting research. Anyone out there in headhunterland interested in talking to me about their use of these tools?

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4 thoughts on “Are social networks a help or a threat to headhunters?

  1. Tony D

    Hi Espen,
    I agree with your view that social networks like LinkedIn pose a threat to Headhunters – specifically external for-hire Headhunters.
    I did a research project a couple years ago with in-house corporate recruiters and many were already using social networks like LinkedIn as a way to find and connect to candidates for executive and highly-skilled technical positions.
    They saw it as the best recruiting tool ever invented.
    So I would think this would endanger Headhunters for hire. However, one thing still in their favor ironically is the ethical question regarding companies directly recruiting talent from other firms – particularly their competitors.
    This is a sticky issue that one corporate recruiter recently raised with me.
    Recruiting candidates through a third-party who identifies and makes the initial contact with the candidate seems diffuse any ethical issues about poaching from competitors.

  2. Arne Myhren

    Hello,
    You are merely regarding headhunting as the research part of the process and that is wrong.
    The main competence a headhunter offers to clients is experience and ability to find, search, select, evaluate and attract the best candidates. (http://www.amysearch.no/index-filer/Page564.htm)
    To find the candidate, where LinkedIn may be a help, is the easy part.
    Therefore – LinkedIn is a threat only to those called “CV-pushers” in the business – not for a professional Headhunter.
    I myself use LinkedIn extensivebly, its probably the best research tool I have seen, but that covers just a part of the process.

  3. Anonymous

    Espen,
    I work in the executive search firm ISCO Group and read your comment on social networks (i.e. LinkedIn) and headhunters with great interest. Obviously, some of the points you make are valid. Nevertheless, I do feel like something is missing in your analysis.
    We are users of LinkedIn in my company, but what do we use it for? To explain, I want to give you a brief overview over the executive search process:
    1. Defining the case
    a. Description of the client company/organization
    b. Job requirements
    c. Candidate profile
    2. Search
    a. Mapping out hunting grounds for potential candidates
    b. Use of market intelligence, networks and data bases
    c. Confidential contact with external sources
    d. Identification of, and initial contact with, suitable candidates
    3. Selection
    a. Confidential discussions and interviews with selected candidates
    b. Initiation of meetings between selected candidates and client
    c. Support for client in selecting the final candidates
    4. Finalization and quality assurance
    a. Critical evaluation of final candidates and reference checks
    b. Support for final decision and negotiation of contract
    LinkedIn is used in phase 2b. It gives us a valuable supplement to the many networks, both social and functional, and to the databases we are using.
    However, a candidate found in any electronic database still needs to be motivated, assessed and cross-checked by references. Moreover; the initial market and value-chain analysis and the hypotheses on where candidates can be located still needs to be sound and methodical. Our clients often value being challenged in this part of the process; it makes them think through what they really need.
    Furthermore; it is our job as headhunters to be critical of “the mainstream”. LinkedIn is the self-appointed best place to get in touch with executives and specialists in today’s business world. The people that can be found in the network have chosen to make themselves visible, but this does not necessarily mean they are the best in the market. Headhunters must look beyond “the mainstream” and make sure that all channels are examined and inspected.
    In your comment you tend to make the assumption that the value headhunters provide to their clients exclusively stems from knowing the right people, i.e. to get in touch with suitable candidates for a certain position. If we draw further on this, we could make the assumption that a knowledge database/network like Wikipedia should be a threat to strategy consultants like McKinsey & Co.
    Headhunters are consultants who provide their customers with expertise in a field which is vital for them. The service we offer stretches beyond “having access to many candidate names”. Our clients choose to cooperate with us for many reasons; e.g. lacking resources within HR, a wish to get in contact with candidates that will not apply for a position (a company will often wish to use a third-party to contact potential candidates at a competitor for instance) or they seek advice in the selection process in order to make a more assured choice.
    To answer your initial question: Having access to a lot of candidate names is still just one part of the executive search process. Rather than posing a threat to our existence, LinkedIn and other social networks are as they appear today, in fact a helpful supplement to us.

  4. Espen

    Tony, Arne, Thomas:
    Thanks for great comments, so far. I think this is shaping up to be a very interesting subject because of these three comments: The talent expert (not involved in headhunting) describing how companies are using LinkedIn to recruit, and the headhunters saying that this is a technology that is useful to them, and does not threaten them. To me, this is a sign that there is a possibility (note that word) that LinkedIn and similar digitally facilitated social networks may be a disruptive threat to headhunters. Headhunters, of course, do a lot more than search for candidates.
    A disruptive technology does not initially come in a direct threat to an established companies’ business models. Instead, it comes in either as a low-end disruption (taking market share in the lower-profitability part of the market) by making customers who could not previously afford to use the services of the incumbent, or as a new-market disruption, where it gets established doing something entirely different, evolves the technology over time, and then steps in as a direct threat from an unrelated direction.
    I wonder if LinkedIn could be a possible low-end disruption by giving customers that could not previously use headhunters access to some of the knowledge that headhunters have. As Thomas very rightly points out, Wikipedia is not a threat to McKinsey, but it might be a threat to lower-end consulting companies and independent researchers – much of what they would spend time digging out is now available for all, for free.
    Similarly, could not Facebook have the potential to be a new market disruption: Starting out as a keeping-track-of-your-friends application, it has quickly become a platform for various kinds of applications – one of which could be some sort of market-clearing of candidates vs. positions. Fewer headhunters are on Facebook than LinkedIn, but they are coming there, too.
    From some of the emails I have gotten (not posted as open comments) it seems to me that headhunters are struggling a bit, at least in the United States. There are many reasons for this, chief among them the global financial downturn which has led to a movement of business from buy-side to sell-side. Other, smaller factors could be changes in purchasing policies for big companies and big government (with an increased focus on putting things out for tender or entering into long-term purchasing agreements or longer-term outsourcing of HR practices), the rise of searchable jobs databases a la monster.com or finn.no, and an increasing focus on formality in education as well as more standardized educational backgrounds, and the increasing use of internal education and internal executive development schemes.
    I think Tony’s comment on the need for headhunters to insulate the client from the candidate’s current employer is an excellent one (in other words, not having a searchable network is an asset rather than a liability, especially if you can show that it is not searchable.) Thomas viewpoint on the best candidates not being on LinkedIn but rather keeping mum is also very interesting, but, I suspect, as LinkedIn becomes something everyone is on, less valid.
    Another aspect here lies in perceived value: Measurable things have a tendency to crowd out less measurable attributes. While headhunters will underscore the value of their non-tangible services (knowledge, judgment of candidates, ability to articulate the needs of the client etc.), a movement to a more transparent marketplace will mean that network size and rapidity of search will become relatively more important. The presence of a lower-cost alternative tends to focus the mind of the customer: SAS may have better service than the low-cost airlines, but at the time of decision it is price that matters.
    Anyway – your comments so far has made me more secure in my hunch that there is something here, but that it may take other forms than originally thought. It seems to me that I need to better understand and define what a headhunter does, and perhaps categorize this industry in terms of a hierarchy of services offered – i.e., what are the sub-markets that headhunters address. Or, to use Clayton Christensen’s terms, what is the job that customers hire the headhunters for?

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