What it means in practice
In recruitment specifically, this shows up as a widening gap between how fast the talent market itself moves and how fast the firm’s own systems for tracking, prioritising, and understanding that market can adapt. A firm’s early informal knowledge — held in a handful of experienced heads — was fast precisely because it required no formal system; a senior consultant simply knew, from constant immersion, where the market had shifted. As the firm grows and adds consultants who lack that accumulated immersion, the informal knowledge does not automatically scale with the headcount, and the gap between market pace and organisational awareness widens.
Why it happens
The underlying issue is that tacit market knowledge, built through years of direct exposure to a specific talent pool, is genuinely difficult to formalise into something a newer consultant can absorb quickly. A firm can document processes, but the pattern recognition — knowing which small market signal actually matters this quarter — resists being written into a manual. Growth adds people faster than it can transfer that specific form of expertise, and the result is a firm that looks larger and better resourced on paper while its actual responsiveness to market change, per consultant, has quietly declined.
Jay Galbraith’s research on organisation design frames this as a general consequence of rising information-processing demand. A small firm’s market knowledge travels informally, through constant proximity between a handful of experienced consultants — nobody needs a formal system, because the relevant people simply overhear and absorb each other’s current understanding continuously. As headcount grows, the volume of market information that needs to travel across the organisation rises roughly with it, but the informal, proximity-based channel that used to carry that information does not scale at the same rate. Galbraith’s work describes deliberate lateral relations and information systems as the structural response available to a growing organisation facing this gap — and most recruitment firms, in practice, do not build them until the erosion Greiner’s research predicts has already become costly.
Where this varies
The gap is most visible in specialist or niche markets, where the relevant knowledge is narrower and deeper, and less visible in broader, more commoditised recruitment segments, where market signals are more publicly available and less dependent on individual relationships. It also varies with how deliberately a firm has built structured knowledge-sharing between its most experienced and newest consultants; firms that pair juniors with seniors for extended periods transfer more of this tacit knowledge than firms relying on written training materials alone, though even the best transfer mechanisms take real time to close a gap that market movement does not wait for.
Market volatility itself is a further variable. In relatively stable talent markets, even a modestly diluted version of the firm’s original knowledge can remain broadly accurate for some time, because the underlying conditions it describes are not changing quickly. In genuinely fast-moving markets — where compensation expectations, in-demand skills, or candidate availability shift within a matter of months — the same dilution becomes costly much faster, because the accumulated informal knowledge a newer consultant absorbs may already be out of date by the time they have fully absorbed it.
There is a second layer to this, specific to recruitment: the firm is not only trying to keep pace with a changing talent market, but with candidates’ own shifting expectations of what a good recruitment experience looks like. Both move independently, and a firm’s informal knowledge can fall behind on one dimension while remaining current on the other, which makes the erosion harder to diagnose from the inside — a firm might reasonably believe it understands its market well because its technical knowledge has held up, while its sense of candidate experience has quietly drifted out of date.
A related, third dimension worth naming is competitor awareness. Experienced consultants typically hold an informal, continuously updated sense of which competing firms are active in a given niche, how they are positioning themselves, and where they are winning or losing mandates — knowledge built through repeated informal contact with the same market over years. This competitive picture is at least as difficult to formalise as candidate or client knowledge, and often more neglected, because it sits outside the firm’s own client and candidate relationships and therefore has no natural record anywhere in the firm’s systems.
Where this shows up
The pattern described here is most recognisable in recruitment businesses, part of the wider Professional and Knowledge-Based grouping. The same organisational questions appear, under different names, in other sectors.
Questions worth considering
- How much of this firm’s understanding of its own market currently lives in a small number of individual heads?
- If the firm’s most experienced consultants left tomorrow, how quickly would the rest of the organisation notice a market shift they would have caught?
- Is the firm’s growth in headcount keeping pace with its growth in actual market awareness, or have the two quietly diverged?
Your team is facing similar challenges?
Subscribe to The Riddle Ledger
Perspectives are sent as they are published, with no promotional email, and you can unsubscribe at any time.