Ukrainian Recruitment Agencies Business Challenges 2023

So far, the early 2020s have been incredibly challenging for Ukrainian recruitment agencies. It all started with the COVID-19 pandemic and the massive readjustment of all business processes to the then-new normal. Then, in 2021, there was a significant growth in talent demand that increased competition for candidates. And then, in 2022, a full-scale invasion started and threw the literal wrench into proceedings. Quite a ride if you ask me. 

From late 2022 to early 2023, Talando conducts Ukrainian IT segment market research projects. We study the labor market, domain talent pools, salary levels, employee remuneration, etc. In addition, we study the recruitment agencies’ market and what is going on there. 

Drop us a line if you want to purchase Talando Market Research Salary Survey. 

This article discusses Ukrainian recruitment agencies’ business challenges as of early 2023. 

The State of the Ukrainian Recruitment Agencies in 2023

Ukrainian recruitment agencies had it rough throughout 2022. The full-scale invasion disrupted every business process and forced agencies to regroup and readjust to the new reality with mobilization, constant threats of rocket/drone strikes, and occasional blackouts. 

The COVID-19 experience came in handy when it came to adapting workflow to a new disruptive reality. Still, one cannot adapt to the unpredictability of living amidst a full-scale invasion. That’s a major contributing factor for all Ukrainian recruitment agencies going into 2023.

• The Ukrainian IT segment went through a massive disruption that swiftly changed the priorities of many tech companies. 
• Recruitment services became much less in demand than retaining employees up to mid-2022. Later in the year, many companies went through rounds of layoffs to optimize spending and stay afloat. This process will go on well into 2023 due to the devastating effects of the global recession.
• At the same time, the demand for high-profile specialists remains relatively high. However, these kinds of talent are harder to handle, and that’s a major challenge for most recruitment agencies.
• The demand for other services – like HR Consulting, Employer Branding, Recruitment Process Outsourcing, Market Research, Salary Survey, and Benefits Analysis also significantly decreased for a significant part of the year. 

This situation screams an “adapt or die” solution, and that’s where we’re at as of early 2023. 

• Recruitment agencies with diverse business models that include multiple services had it easier than agencies that focus solely on recruitment. 
• Similarly, agencies that work in Europe, the USA, or Asia markets have more opportunities to maintain their business operations.
• At the same time, it’s challenging to fully establish a recruitment agency in a foreign market in short time. Gathering a contact network, adapting to the new competition, and building a reputation takes time. 

Ukrainian Recruitment Agencies Business Challenges 2023

Market Volatility Due to External Factors

The single biggest business challenge the entire Ukrainian IT segment currently has is that the situation can change at any moment due to external circumstances, also known as russian invaders. 

• First, the threat of occupation turned the segment upside down. Then there were massive energy grid attacks with subsequent blackouts that became a major cause for concern.

The Ukrainian tech segment is in a weird situation. 

• On the one hand, the internal market is still relatively small, and the major revenue streams come from foreign markets. 
• On the other hand, the volatility caused by the invasion, rocket/drone attacks, and blackouts scares foreign clients and forces them to look for other options. This complicates long-term dealings with foreign partners. In turn, this situation impacts companies’ revenue which forces them to adapt quickly.

At the same time, the world economy isn’t doing great either. 

• The global recession, partially fueled by the consequences of the invasion, is wrecking worldwide tech. It is a big hit for Ukrainian product and outsourcing companies. The recession also severely limited opportunities for startups to attract major investments.
• As a result, business opportunities to provide recruitment services get even more limited because potential clients are more focused on getting through the rough patch than on hiring sprees.

Then there is the whole business relocation issue.

• Numerous Ukrainian IT companies had offices in foreign countries. Namely, Poland, the Czech Republic, Lithuania, Spain, the United Kingdom, etc. The impending invasion in late 2021 and the actual invasion in 2022 forced companies to establish themselves more firmly in foreign markets. 
• While some companies retain Ukrainian offices and keep on hiring Ukrainian tech talent, others fully transition to a new country with partial team relocation and local hiring. 
• Practically, it means hiring local talent and working with local vendors, including recruitment agencies. Consequently, Ukrainian recruitment agencies get out of the picture.

As it currently stands, it is clear that the Ukrainian tech segment is trying to find a new balance between relying on the homeland market and operating on foreign markets. 

The global recession effects show that business needs more diverse approaches to generating revenue. However, external threats can throw a wrench in any development at any given moment. 

Unfortunately, Ukrainian companies need to deal with this aspect on a day-to-day basis. 

Foreign Markets Is a Way to Go

The Ukrainian tech segment currently goes through rough times. All the layoffs, reorganizations, readjustments, and relocations put a strain on Ukrainian companies, and it will take years before the Ukrainian segment regains its momentum in late 2021.

This situation directly affects recruitment agencies and the recruitment workforce in general.

With that said, recruitment agencies don’t need to go quietly into the night. When the going gets tough, the tough get going. 

• One solution to work around the lower demand for recruitment services is to expand the business model with additional services (more on that below). 
• The other solution is to expand operations to other markets. 

It is easier said than done, but the gamble pays off if you commit to it. The challenging part is that setting foot in a foreign market is a slow and tedious process. 

According to 2022 EU market research, there are several key steps:

• Finding local partners to handle the peculiarities;
• Learning the market situation with thorough research to avoid confusing and misleading sources;
• Assessing the local competition;
• Establishing a new professional network with executive and tech talent of all levels; 
• Finding initial clients; 
• Building a reputation and a successful track record to maintain credibility in the market takes a lot of time. You can’t pull it out of the hat like a rabbit;
• Maintaining media presence via local and international outlets with case studies and market insights.

Helping businesses to establish in new markets is another option.

Business relocation is the new reality for the Ukrainian IT segment, and there are several business opportunities. 

• Businesses need market intelligence to act confidently in the new market. While tech companies cover most of their market intelligence needs on their own, there is one aspect where having a partner can be very beneficial – labor market insights.
• One solution is to work with local vendors, the other is to cooperate with Ukrainian recruitment agencies that work in the specific market. 

But there’s a catch. To become a viable partner for Ukrainian companies in the foreign market, one must have an established reputation in the said market, which not something most Ukrainian recruitment agencies can brag about.

Diverse Business Models are a Must

As 2020 and 2021 have shown – companies can’t focus on one specific service and retain durability during an unstable economic situation. As a result, many recruitment agencies expanded their operations with additional services – namely executive search, HR consulting, and market research. 

This move was in the right direction as it increased recruitment agencies’ value as business partners. 

Similarly, the expansion towards the EU, USA, and Asian markets opened up new opportunities for finding new clients and developing wider professional networks.

And then 2022 came and put to the test everything.

• While it is true that Ukrainian recruitment agencies provide more than just recruitment services, the recruitment services were the crux of their business operation, its biggest moneymaker. 
• It is easy to see why – recruitment is tried and tested service. Fully establishing an agency in new domains like market research, executive search, or HR consulting takes time and considerable marketing effort, not to mention building up a successful track record.
• So when the demand for recruitment started to slow down, agencies started to feel an impact immediately, which led to reorganization, layoffs, and eventual shutdowns. 

The current situation in the Ukrainian tech segment presents an opportunity for recruitment agencies to fully embrace their role as the middleman between companies and tech talent. 

• In essence, recruitment agencies are already in the thick of it. The very nature of the job requires knowing what’s going on and knowing who to ask and where to ask around.

Because of that, a combination of deep professional networks combined with diverse business models is a way to go for Ukrainian recruitment agencies if they are serious about staying in business long-term.

Managing Unrealistic Client Expectations Remains an Issue

Dealing with client expectations is a tough job under normal circumstances. When the economic situation is volatile, and a global economic crisis rages on, things get even more complicated. That’s the reality of Ukrainian recruitment agencies in early 2023. 

There are several reasons why clients develop unrealistic expectations toward recruitment agencies:

• Marketing tries way too hard to present the company as a top-tier vendor that can sort things out without breaking a sweat. This presentation creates a conundrum that leads to a dead end of frustration and disappointment. It’s an evergreen problem, and it still happens from time to time.
• Inconsistent communication can create a lot of frustration that can result in conflict. Because of that, keeping everyone on the page with regular reports and meet-ups is even more important than ever before.
• Lack of or limited market intelligence warps the client’s perception and can lead to questionable decisions and communication breakdowns. This aspect presents a good opportunity to provide market research service so that the client would be able to substantiate their decision-making. It is especially important when it comes to hiring high-profile talent or finding top managers.
• Talent-related unrealistic expectations in another challenge that persists in spite of everything. Maintaining an ideal candidate profile intact can help keep expectations at the appropriate level.

What’s Next for Ukrainian Recruitment Agencies in 2023?

Ukrainian Recruitment Agencies are currently in an “adapt or die” situation. The continuous transformation of the Ukrainian and worldwide tech market pushes agencies to figure out new and reliable ways of doing business and generating consistent revenue. 

• The current trend is to further expand the business model with additional services and try their luck in other markets. 
• How will this affect the Ukrainian recruitment market throughout the year? Hard to say, given the number of unpredictable external factors. But it is still worth a try. After all, you miss 100% of the shots you don’t take.

Our next article will be about recruitment’s candidate-related challenges. Stay tuned.