Trending: Why Automotive Companies are Embracing Retained Search Firms in 2024

The Automotive industry is currently undergoing a significant transformation marked by its slow response to digital technology changes, including Artificial Intelligence (AI), the cloud, and the Internet of Things (IoT). This transformation is especially pronounced in Manufacturing and Dealerships, where the rise of AI and automation in recruitment are reshaping standard recruitment processes. With the ongoing issues around available talent, the demand for specific skill sets such as Senior Sales & Marketing roles, Mechanical Engineering and Technician positions, data analytics, QA and Senior finance roles, are all on the rise, with average applications per job, down by more than 25% in the last few years.

Automotive companies face a substantial challenge in attracting and retaining top talent, as highlighted by studies conducted by PWC and Kelly Services. 60% of CEOs in the sector express serious concern about the availability and retention of talent, and fifty-seven percent find it challenging to engage and hire tech talent in particular. The competition for senior, specialist and leadership positions is more fierce than it has ever been.

As emphasised by Ray Dalio, founder of Bridgewater Associates, who emphasises that its not just about sourcing people for the vacant roles, but making the right hiring decisions is even more crucial than ever, as evidenced by the impact on business success or failure. Allegis Group's report indicates that 80% of Automotive businesses consider applicant quality and Cultural fit, to be the most significant challenges in their current talent strategy, with 40% reporting first year attrition, as a "significant" issue, that they cannot afford not to fix.

"Hire right, or suffer the huge penalties, of getting it wrong",

quote by Ray Dalio, speaking on this topic.

According to the Harvard Business Review, over 80% of employee turnover can be attributed to poor hiring choices. Stating categorically that making the wrong hire, especially at leadership-level, is a catastrophic waste of business resource (time, money, energy) and typically incurs a true business cost that on average, is in excess of 2 x the leavers annual salary. (Based on extensive research commissioned by the REC in partnership with KPMG, PWC and Deloitte)

To address these challenges, Automotive organisations are increasingly turning to executive search firms that operate exclusively within the sector and that operate on a retained basis.

This may sound surprising to companies accustomed to paying contingency recruiters the lowest rates across all industry sectors, so for those who are unclear on the difference between retained and contingency / executive search recruitment, a retained recruiter will be dedicated to working almost exclusively on their clients vacancy, providing access to their database of unique candidates, and performing deeper and more stringent levels of candidate assessment, that goes well beyond the applicants skills and experience. The contingency or executive search recruiter only gets paid if successful, which ultimately drives their behaviours and actions, limiting their time, and the quality of applicant assessment.

Here are several reasons why this transition is now happening:

Increased Cost of failure: Let’s first put this all into a commercial perspective. The average 1st year attrition of staff in Automotive is approaching 35%, of all new starters leaving within 12 months. Compare that to retained recruitment retention figures that are averaging close to just 7.5%.  This very real cost of hiring failures, pushes average recruitment costs when using contingency services to more than treble, the actual fees initially being paid.

Time Efficiency: The average executive search process typically lasts 8-12 weeks, diverting valuable resources from critical business tasks, especially as the majority of the screening and assessment work is performed in house. Retaining an executive search firm can be a cost-effective solution, ensuring a timely and thorough process and outsources the complex and timely assessment and evaluation process to the professional recruiter. Its worth noting that a retained recruiter will typically spend more than 5 times more time and resources than their contingency counterparts, who typically all just do the same thing, advertising on the same media channels and searching the same job board databases.

Limited Expertise: Internal teams may lack experience in hiring for senior executive roles, leading to long-list overloads and poor-quality shortlists. Retained consultants often excel in wider candidate qualification and shortlisting, ensuring a pool or shortlist of qualified candidates.

Limited or stretched internal Resources: Leadership-level searches demand significant effort, potentially overstretching HR and Talent Acquisition teams. Retained search firms provide expertise, industry knowledge, dedication, and efficiency, preventing the loss of the best candidates, sometimes on business-critical hires.

High Stakes: Senior management roles carry high stakes, and even with the help of an executive recruiter, providing potentially suitable CV’s, poor hiring decisions by the internal team can have lasting consequences. A retained recruiter can help mitigate risks by identifying candidates aligned with the organisation's cultural and behavioural values and mission in addition to their relevant experience.

Rare Skills Mix: Leadership-level roles with specialised skills are challenging to fill even when aided by a professional recruiter. However, retained search firms leverage their experience to attract and engage with high achievers better, and effectively communicate the value proposition of joining a company much more effectively. This is evidenced through industry wide retention figures by REC and the ONS, with contingency and executive firms in Automotive seeing more than 30% attrition in the first year of employment verses retained recruiters seeing less than 10% first year attrition.

New or Reborn Positions: Defining success for new or redefined leadership positions can be even more challenging. A dedicated retained recruiter can assist in determining the necessary skills and competencies based on their prior expertise in similar roles within the industry. Statistically, contingency and executive search firms work 15-20 different jobs a month, whereas a retained recruiter will never work more than 1 or 2 jobs at any one time. This also allows the retained recruiter to stay focussed on specific roles within their sphere of expertise. Naturally, the contingency recruiter will have a much wider remit of roles that they work on too, and are unlikely to possess the depth of knowledge and experience as their retained counterparts.

Confidentiality: Discretion is crucial when replacing underperforming executives. Retained search firms employ ethical practices to conduct searches discreetly, preserving operational integrity and maintaining candidate trust. A clumsy contingent recruiter rushing to get a CV issued in order to get paid, can create chaos within an organisation as the wrong people get wind of what is going on.

On a similar note, prospective candidates who are employed elsewhere will not want to be exposed, in what should be a discreet and confidential process. A company’s reputation can spread quickly if it is unable maintain confidentialities, when it comes to executive level recruitment activities.

In conclusion, the decision to hire a retained recruiter, reflects a commitment to finding and hiring the best talent in the industry. It expands the candidate pool, leverages tried and tested methodologies, and engages an expert who is experienced in making senior-level hires, ultimately reinforcing the organisation's mission and values.

It allows the company to offload the most challenging aspect of selection, to a recruiter that specialises in the assessment of talent and has all the necessary tools to do it properly.

What is most shocking, is the evidence, supported by major institutions such as PWC and Deloitte, who have disclosed the truth, that contingency recruitment failure rates are statistically more than double, to those hires that came via the retained recruitment model, making the longer term contingency recruitment cost, significantly higher than those in retained recruitment.  

For niche, senior or high-risk positions, there is a very strong argument for adopting a retained search approach, but for mainstream and easier to fill positions, it may simply come down to the size, the ability and sophistication of the internal tools and resources available to the client.

If you would like to arrange a free consultation, to discuss exactly how we approach the recruitment of talent within the Automotive sectors, please visit our contact page and get in touch.