How LinkedIn is taking HR to the next level


The social network for professionals has already shaken up the way professionals are hired. Its ambitions go far beyond that. As the Economist published in the article Workers of the world, log in, they are limited only by the size of the world’s labour market. Its chief executive, Jeff Weiner, envisions what he calls a vast “economic graph”, connecting people seeking or starting work or wanting more from their careers. That implies an eventual membership of 3 billion—Mr Weiner’s estimate of the global labour force. In other words, LinkedIn wants to change not only the business of recruiting, but also the operation of labour markets and, with that, the efficiency of economies.

linkedinSince then LinkedIn has spread far beyond Silicon Valley. It is an online contact book, curriculum vitae and publishing platform for anyone wanting to make their way in the world of work. Its membership has almost trebled in the past three years, to 350m; two-thirds of them live outside America. Most are professionals, mainly graduates, neither at the apex of the corporate pyramid nor at its base. “It’s a presence in your life that wasn’t there a few years ago,” says a member who works for a firm of accountants. “You can’t walk into a room without everyone having looked everyone else up on LinkedIn.”

Recruitment

Recruiters are LinkedIn’s main source of revenue. They pay for licences to trawl for likely job candidates and to e-mail them about vacancies, as well as for placing advertisements on the site.

LinkedIn has made it easier for companies to identify such people themselves, rather than rely on recruitment agencies. In that sense, it represents a challenge to the agencies. Steven Baert, head of human resources at Novartis, a pharmaceuticals firm, says he hired “at least 250 people through LinkedIn last year when we might have used executive search in the past.”

The agencies have not been put out of business, but they have to do more than just compile a list of names, which in-house recruiters can now do for themselves. Agencies will still be used in the later stages of hiring—working out who is likely to fit in, for instance. Since LinkedIn greatly increases the number of potential candidates, there also is more sifting to be done. Some recruiters say they are spending as much on agencies as they used to.

For the top jobs, LinkedIn is still too public. Denizens of the executive suites often expect a discreet tap on the shoulder from a bespoke headhunting firm. That is why Korn/Ferry, one of the biggest headhunting firms, reported record revenues and profits last year.

Connecting professionals

It is true that LinkedIn makes it easier to lose people as well as to find them, because they are on permanent display to competitors and headhunters. But companies see this glass as half full, not half empty—and, anyway, their employees have joined in large numbers whether they like it or not. Mr Giraud says that when he ran Capgemini’s business-process outsourcing unit he encouraged all his 15,000 staff to join. “I thought it would be fantastic to have a nice profile…to make sure our business partners had a clear view of who we were.”

Connected colleaguesCompanies can also see how they measure up against others trying to hire the same people. They can do so using LinkedIn in combination with other sites such as Glassdoor, where people anonymously rate the places where they work or have been interviewed. We can this a “sales and marketing process”, in which companies treat their reputations as employers like brands. They can track how many staff have quit to join the competition, as well as how many are coming the other way. LinkedIn members can “follow” companies they do not work for, another loose indicator of potential interest in a job.

company followersAs LinkedIn attracts more members in more countries and industries, its data will become richer. Put another way, the lines in Mr Weiner’s graph will become more numerous—and more useful. He thinks that if you trace the connections between workers, companies and colleges, and if you map people’s jobs, qualifications and skills and plot these against employers’ demands, you will end up with a step-change improvement in information about labour markets: big data for the world of work.

The world’s labour exchange

And that, in principle, should help labour markets work more smoothly, potentially reducing Europe’s youth unemployment rate, for example; or matching some of America’s 20m underemployed with its 4.7m vacancies; or helping the millions of Chinese expected to migrate from the countryside to cities to find work.

Such hopes are remarkably ambitious. They amount to a gargantuan exercise in eradicating the mismatch between the skills people have and those employers want, or between the places jobs are on offer and those where people live.

It is hard to know what its eventual effect might be. Even if Mr Weiner’s grand vision were realised, it could not cure global unemployment on its own, though richer data ought to make a difference. In explaining high unemployment rates in Western economies, many economists would put more weight on weak aggregate demand than on a mismatch of location or skills.

It is even difficult to quantify the impact of LinkedIn on labour markets so far. In theory, making it easier for people to find better jobs could affect the rate of job turnover within firms: recruiters say they have noticed little impact, and that other factors (such as the economic cycle)—seem to matter more. But no one really knows.

Borja Burguillos

Author: Borja Burguillos

Global People Strategy

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