Online marketplaces for recruitment are platforms that bring employers and job seekers together. Recruiters can place their job offers on the platforms and job seekers can upload their resume, working as an electronic broker. It allows both parties to have a much larger reach compared to traditional methods, opening up a whole new world of additional opportunities and better matches. Over the last couple of years, there has been a growing number of these online marketplaces and even search engines, such as Indeed, bringing together the listings of all different platforms. There is one online marketplace, however, that has a different strategy: LinkedIn. LinkedIn is more than just an online marketplace for employers and job seekers. It functions as a professional social media platform. With over 300 million active users, LinkedIn has transformed into professional digital business cards, clearly outlining large parts of the working society. One of LinkedIn’s strong assets is their user database, which is very extensive. Network effects play a big role: the more employers and job seekers are on the platform, the better it works and the more value it creates. This is where LinkedIn has an advantage, compared to other online recruitment marketplaces, as LinkedIn also contains passive candidates. Research shows that twelve percent of the workforce is actively looking for jobs, yet almost 75% of the working population is not actively looking for a job but considers themselves as ‘approachable’ – meaning that they would be willing to negotiate when being approached for new positions. This is a massive disruption, as recruiters never had access to this group of people and never were able to find the perfect candidate so goal-oriented. Therefore, it is of high importance for this industry.
Recruitment has changed dramatically over the past decades due to the Internet. The traditional recruitment sources, such as newspaper advertising, job fairs, word-of-mouth or traditional recruitment agencies are considered outdated, out fashioned and not effective enough. The main task of the human resource department of a company is to keep their employees satisfied, attract new people and retain them within the company. Recruitment however, only focuses on attracting potential employees by actively searching for job-seekers, organizing events, doing interviews and working on their brand and company image.
The communication effect played a big role in the disruption of the recruitment industry. This effect implies that recruiters can access a much larger pool around the world in considerably less time. This allows HR departments to drastically cut in coordination costs. These include costs of gathering information from jobseekers and selecting from them.
However, electronic markets have their downside. They give rise to two types of information asymmetry: product uncertainty and seller uncertainty (Dimoka et al., 2012). Seller uncertainty arises because of the applicant’s unwillingness to truthfully disclose his or her true characteristics and capabilities. Product uncertainty however, refers to the applicant’s inability to describe his/her capabilities also due to unawareness of his/her true capabilities. Nonetheless, both forms of information asymmetry are no new phenomenon within the recruitment industry; it has always been one of the biggest challenges within recruitment.
The online recruitment industry set some revolutionary goals for the long term focused around one concept: transparency. These goals all point down to developing something called the economic graph. The economic graph is aiming to create total transparency of the global workforce. It wants to map out the world economy and all the connections that are in it. The firms’ view on the economy will improve as transparency increases. The increasing richness of data will contribute to the overall efficiency of economies given that high unemployment rates in Western countries are often explained by a mismatch of expertise and location. People can gain more insights of where pools of expertise are, and business can choose locations more precisely.
LinkedIn has a distinctive business model since it combines an electronic market place with a social media platform. With this combination, LinkedIn clearly distinguishes themselves from other online recruitment marketplaces. This is mainly because its users make up large part of the working force, opposed to recruiters and job seekers only. It is clear that the economic graph is quite a revolutionary goal, but we think that LinkedIn is going to be a huge contributor to the economical graph and thus the future of the recruitment industry.
Sources
Malone, T.W., Yates, J., and Benjamin, R.I. 1987. Electronic Markets and Electronic Hierarchies. Communications of the ACM 30(6) 484-497.
Dimoka, A., Hong, Y., and Pavlou, P.A. 2012. On Product Uncertainty in Online Markets: Theory and Evidence. MIS Quarterly 36(2) 395-426.
Lu, Y., Gupta, A., Ketter, W. and van Heck, E. 2016. Exploring Bidder Heterogeneity in Multi-channel Sequential B2B Auctions: Evidence from the Dutch Flower Auctions. MIS Quarterly, 40 (3), pp.645-662.
