Will AI end headhunters?

How is AI changing the world of headhunting? Honest assessment, crystal ball prediction and practical advice.

… or are they just getting started?

As a small consulting company we are often dealing with headhunters or project agents that connect us and our services to a wider audience of mostly larger companies that are looking for ad-hoc support in a specific topic or to solve a specific problem. We do so mainly to fill gaps in the utilization of our time, to raise chargeability (quantitative KPIs) and to gather new experiences outside of our longer running client relationships and focus areas – basically to bring in new perspectives and ideas (qualitative KPI).

For solo / freelance consultants this is even more common or the norm and integral part of their value chain. Most IT freelancers I know work exclusively in projects that they got from a headhunter. In the past these middle men (in the sense middle humans – I’m including all genders here) worked in a very boutique, individualistic way, even when they were larger. Account managers established long running connections with the demand side while people researchers / headhunters in the narrower sense kept good individual relations with the supply side.

Cutting out the middle men?

Since the early dotcom era there was always a trend (growing stronger or weaker at times) to cut out the middle people and to take advantage of the enhanced possibilities to directly connect those who need a service with those who offer it.

First there were directories and contact lists. Later they developed into digital platforms with a business model of putting themselves – instead of traditional intermediaries – in the middle.

The rise and irony of platforms

Some prominent examples of digital platforms:

• In real estate there are now all-encompassing platforms where almost all available properties (excluding off-market, obviously) can be found and all the demand can can take a look, search and find what they need easily and within seconds.
• In job search there are the big job platforms where companies can put up their vacancies and job seekers can apply.
• In IT consulting there are platforms to search for consulting projects and for people to put into projects.

The transparency is amazing and the ease of use of these platforms allows both parties to connect directly – without middle men – with each other. Some of the are global and allow clients to hire remote workers all around the world for any given technical task within hours.

Still, if you look at these platforms specifically in the idea of IT consulting but also in other fields, the direct connection between supply and demand has not always worked out as intended.

Today, when you check who is on these platforms (at least the ones I am working with), you will find relatively few cases of direct connection between supply and demand – but many, many middle men. So again, both parties are dealing once again with intermediaries on top of the platform itself reducing the platform to a marketplace of middle men. Why is that?

The value of the intermediary

There are some clear benefits of involving middle men in transactions, even on top of digital platforms. Some of these are:

• Speed
  • The pooling effect and focus of the middle person with their databases of supply and demand and ideally streamlined processes allows quick responses and a shorter time to contract.
• Quality
  • Especially clients need sort of a firewall to protect them from non-adequate offers that would spam their service acquisition process. Intermediaries help in filtering out the irrelevant and obviously inadequate options.
• Legal, compliance, risk management
  • The intermediary can act as a protection against more or less abstract risks that are sometimes demanded to be covered especially in larger companies due to their internal governance – sometimes also to provide a cover or umbrella in case of actual project failure.

The downsides of the middle men

Where there are pro’s there are also con’s. Some examples:

• Disconnect of customer and supplier
  • As a supplier you don’t own the relationship to your client or customer when a middle man is in the middle. This may seem like a small issue but it can be actually harmful for suppliers who depend on predictable – and scaleable – long term relationships to their clients.
• Added dependencies
  • The customer has a contract not with the supplier but with the middle person, just like the supplier has a contract with the client. This may be beneficial for legal or compliance reasons – but it complicates the relationship and
• Cost overhead and margins
  • Of course the middle man will charge a fee for their services. This will be more or less generous. I can say I had everything in a range between 3% and 30% (see transparency!)
• Low transparency
  • There are examples of middle person following an “open book” policies – but they are rare. Mostly middle men take great care in hiding not only by which criteria they actually select the supply they offer and promote – but also the financial aspect of how much they take away from the deal in form of margins. This creates potential distortions of how services are priced (pushing down buying prices while overpricing their sales side). And it is sometimes bad for quality e.g. when an excellent supplier is too expensive only due to the middle man’s exorbitant margin.

But now comes AI!

With AI there is a new star rising in many arenas – also in the scene of middle men and intermediaries such as headhunters.

Even today’s early stage generative transformers such as ChatGPT 4 with the right large language models (LLMs) can take over a surprisingly large area of not only simple but at least complicated – maybe not yet complex – tasks.

When added to digital platforms they can act one the most simple level as a conversational counterpart for both the demand and the supply side taking over communication, gathering and consolidating data on both customer requirements and quality / specifics of the offered services. In the next step they can support or completely take over the match making. Last but not least they can be used to automate most or all of the contractual work.

This seems to leave not much to the middle people. Most of what they do can be replaced by a combination of:

Digital platform + AI

One can predict that this will make the platforms even more powerful. They are now kind of the new middle person (if you can call that a person) or the middle machines.

I will not go down the potential punch line that in the end maybe there will be only AI-driven platforms left that will connect AI-driven supply with AI-driven demand cutting out the humans completely – which may actually happen in the foreseeable future at least as a hypothetical outcome.

Until we have reached that point (if it will ever come) there is still the question: What of middle men, specifically headhunters, in this new situation?

What would the Pragmatic Agilist do (WWTPAD)?

Some predictions from the agile crystal ball:

• Platforms will finally become even stronger. AI was the missing lego piece to make them work as intended and cut out OTHER middle men – because now they ARE the middle machines.
• Many headhunters will simoly disappear. Until this happens there will be a bloody but short phase of fighting for shrinking market shares.This has already started.
• Some will come together to build their own platforms. Actually this is already happening.
• Individual, local, niche and boutique intermediaries will always survive.

If you are on supply side offering consulting services:

• Gradually lower your engagement with headhunters and middle people. Know your market and your numbers.
• Instead, focus on your direct connections first, and on platforms second.
• Be careful with your choice of platforms. Don’t sign any exclusive or binding contracts, stay independent.

If you are on the demand side looking for services:

• Be nice to your preferred headhunter. If they are good, maybe you can hire them into your HR department.
• Build your own network of well known / preferred suppliers – or focus on it more.
• Use AI and data analytics to get better insights into your collaboration with suppliers and build a contact and knowledge base that makes intermediaries more or less obsolete.

If you are a headhunter:

• Join the winning (platform) team.
• Join your former clients.
• Join the product or service providers i.e. stop headhunting, build and do real stuff instead.
• Or go niche and boutique with a razor sharp narrowly defined focus.

In any case, take care – and stay pragmatic!

PS: this opinion piece was written in 1 hour deliberately without any AI support (I swear – not even spell checking) – so all errors are mine :D