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World – Is LinkedIn a threat to recruitment agencies?

09 September 2013

With 238 million professional members worldwide, LinkedIn Corp. (NYSE:LNKD) is a powerful recruitment tool. And there is an obvious risk of substitution for a professional recruitment agency, according to istockanalyst.com.

William Vanderpump, an analyst at Swiss-based global financial services company UBS, wrote in a note to clients: "LinkedIn therefore has the potential to impact recruitment industry volumes if corporates in-source recruitment activity using LinkedIn as a tool."

LinkedIn's model allows it access to the broadest possible base of candidates, capturing both active (those actively looking for a job) and passive (those in employment but not looking to move) candidates. This differs from earlier online alternatives such as job boards, where candidates were implicitly all active, and not necessarily the best qualified or the right fit.

A recruitment agency database is mainly comprised of active candidates, although strong consultants have always built wider networks of passive candidates, allowing them to move quickly when opportunities arise. There is also some doubt about whether anyone on LinkedIn is genuinely a passive candidate as everyone is implicitly looking for opportunities.

"The general view from the people that we spoke to was that the community element of LinkedIn means the main data is trustworthy (member went to X university or worked at Y company)," Vanderpump said.

The age-old risk of people inflating skills, rank or experience remains and was seen to be higher than at a job board, given the public and peer-facing nature of the forum.

LinkedIn has indicated that its typical member is earning a salary in the range of USD 75,000 – USD 125,000 (GBP 48,000 – GBP 80,000) per year. This places it in more or less the same range as the professional staffing companies. SThree discloses an average permanent salary of GBP 56,000, and Hays typically operates in the GBP 30,000 – GBP 60,000 range, and Michael Page in the GBP 40,000 –GBP 70,000 range.

"The most powerful element of LinkedIn is that it facilitates interaction and access between recruiters and candidates," Vanderpump said.

In its most direct form, this can be the LinkedIn internal email system. More powerfully, it is also a platform for discussion, content and the formation of sub-groups allowing relationships to be formed in advance of a job mandate.

It also allows employers to build up their corporate brand. Perhaps most powerfully, interactions, connections and status updates are widely visible, and this information can be a powerful tool.

"We believe it is this element of interaction that differentiates LinkedIn from some other channels, especially job boards such as Monster, Indeed or Careerbuilder: all of these have huge databases of CVs and advanced search capabilities," Vanderpump added.

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