Every year the UK’s leading blue chip recruiters hire ~50,000 graduates onto their graduate programmes, with almost a half of these roles being filled by students who have already done an internship at the firm. Invented in the 1950s, graduate programmes continue to flourish with a 13% predicted increased in demand for interns this year.
Typically these graduate roles are normally split between five dominant sectors – Commercial Law, Banking, Technology, Professional Services and Consulting. However, over the last five years, the high-growth sector is now starting to challenge the dominance of these older industries in the war for the very best graduate talent. This article looks at the rise of this sector, the impact the rise this is having on traditional graduate recruitment and what all graduate recruiters can learn if they want to fight back.
The Rise of the Start-up
From the office blocks rising over Old Street roundabout to the bright young things tapping on their macs in the coffee shops of Shoreditch, the rise of the tech sector in London has been one of the main growth stories of the UK economy over the last five years. New business formation is at a record level with ~600,000 start-ups founded last year, of which about 200,000 are in London. The capital has just been named the third most important global start-up ecosystem, and the same report estimated that the value of the London start-up ecosystem is now $44bn, a staggering 10 times bigger than the global average.
Start-ups in London also receive twice as much funding for their initial investment as elsewhere. This growth in business formation is having a significant positive impact on the UK economy - last year Tech Nation found that London’s digital tech industries are growing 32% faster than the wider economy, reaching over $200 billion. Several of these start-ups have already made their way to become unicorns (privately held businesses valued at $1Bn+) such as FinTech start-up Powa or media company Shazam. Last year ARM Holdings, one of the world’s most powerful technology companies (which has its IP in 95% of the world’s smartphones) was acquired by Softbank for $32 billion—this was the U.K.’s largest ever technology transaction deal. In the broader UK economy, the sale of Skyscanner for £1.4BN in November was another seminal moment.
This growth in high-growth ventures has been fuelled by a variety of factors including government tax schemes (EIS and SEIS) and the arrival of leading (often American) Venture Capital companies keen to find the next big thing, the private investor network is growing substantially with Angel investors now investing ~£1Bn+ a year in high-growth ventures. So lots of growth, and with this growth, naturally, comes demand for talent.
Why not every Start-up is Good News
However, there is a clear and distinct difference between start-ups and the real job generators – known as ‘Scale-Ups’ or ‘Growth-Orientated Businesses’. Fewer than four per cent of all UK start-ups have 10 or more employees 10 years later, which is why it’s the successful start-ups that really matter. The Department of Business Innovation and Skills found that at beginning of 2013, there were over 1.5 million small and medium enterprises (SMEs) in the UK that were not only not growing, but had no wish to grow. The same research also found that that almost 2.7 million SMEs in the UK wished to grow but were not doing so, and just 640,000 SMEs were growing based on this measure.
Scale-ups are the start-ups that typically have a product that works and are able to grow – it’s these companies that generate the jobs. Research by Nesta in 2014 found that just six per cent of UK businesses with the highest growth rates generated half of the new jobs created in the UK. Talent is a top priority for scale-ups - 74% of scale-up CEOs ranked access to talent as one of their top three issues compared to 22% who cited access to venture capital, these companies know that hiring is everything and are massively incentivised to give the traditional graduate recruiters a run for their money.
Don’t forget the Other Players…
It’s not just high-growth businesses that are now seeking to find and hire the very best graduate talent, there are two other players within this sector that are disrupting things. One is graduates choosing to start their own businesses, the other are incubator and development schemes that have been setup to help mentor and train the next generation of UK entrepreneurs. One highly successful example is New Entrepreneurs Foundation (NEF) – since being setup in 2010, the foundation has developed 155 entrepreneurs who have launched 62 ventures between them that have raised £10M. For many bright graduates who aspire to running their own business, doing a scheme such as NEF is a very real viable alternative to joining a graduate programme.
Other players also include the US tech giants – Amazon, Facebook and Google are all expanding their UK operations rapidly, and guess what, they all want to hire the very highest quality graduates.
So, what can you learn from the High-Growth Sector
If you’re looking to hire the very best graduates, these are the three things you can learn from the high-growth sector.
1. Talk about Growth
Graduates rate ‘Fast-growing & innovative’ as the number one factor when it comes to deciding which employer to join. This is one of the key reasons high-growth businesses are able to attract talent so easily – they’re growing quickly which brings a sense of excitement and challenge to the status quo, they are appealing to the things graduates value most.
Millennials are a generation that want to have an impact and be part of something successful – talking as much as possible about where your organisation is going, its recent wins and how it’s changing its market will help ensure you appeal to the best and brightest.
2. Deploy Your People
Overall ‘Inspiring Management’ is a top three factor that graduates talk about when deciding which employer to join - for female graduates it’s the second most important factor.
High-growth businesses are incredibly effective at using hiring managers rather than HR to engage future talent. On the flip side, hiring talent is the number one business priority when business leaders are asked what keeps them asleep at night - so get your hiring managers out in the field as much as possible to inspire and engage this talent pool, if you don’t, your competitors will.
3. Stay open and move fast
With the market for graduate talent more competitive than ever, traditional graduate recruiters are experiencing a rapid rise in graduates not only rejecting job offers, but also reneging on offers (I wrote about this phenomenon recently). One advantage that scale-up businesses typically have is that they lack graduate programmes and hire on demand, which means they aren’t tied-down by year-long recruiting cycles. This makes life easier for scale-ups as ~70% of Britain’s ~500,000 graduates a year will leave campus without a graduate job lined up, instead these graduates choose to focus on their studies in their final year and job hunting once they’ve graduated, making easier pickings for scale-ups.
The more nimble your hiring efforts can be the better as it will allow you to capture talent that has just left university, and when you do find it be ready to screen, offer and close it quickly. The average length from applying for a graduate role at a blue-chip to receiving an offer is approximately 12 weeks, so the faster you can take that talent out the market the better.
In a short period of time scale-up businesses have become a major acquirer of top-tier graduate talent in the UK – their fast moving nature and disruptive DNA makes them a natural destination for high quality millennial talent that wants to have an impact in the world of work. Much like the markets they’re disrupting, these businesses are bringing fresh ideas and innovation to the graduate recruitment world. The best graduate employers will learn from scale-up businesses and use their insights to take their game to the next level to make sure they stay ahead of the pack.