17 November 2017

The future of recruitment, according to Hays (and how to beat them)

This month is the ten year anniversary since Denis Waxman, the legendary Global CEO of Hays, left the building with his place having been taken by Alistair Cox, an experienced chief executive from outside the recruitment industry.

This was potentially a risky move but ten years on, the decision to appoint Cox can be viewed as a big success, although a glance at the raw numbers from Hays’s global results may not make that immediately obvious.


Net fees
Operating profit
Total consultants
Total offices
Total countries
FY 2017
£954 million
£211 million
6884
250
33
FY 2007
£633 million
£216 million
5022
376
25

In the past ten years net fees have risen by 50 per cent while operating profit has declined slightly. Compared to 2007, Hays now employs 37% more consultants who work in 33% fewer offices in 32% more countries.

Headline figures disguise much. In this case the 2007 figures were propelled by the pre-GFC golden period for recruitment agencies, especially those who recruited in financial markets and financial skill sets.

In 2007 Hays (UK & Ireland) made an operating profit of £141 million from 3134 consultants in 257 offices. Ten years later the equivalent figures tell a starkly different story: an operating profit of £41 million from 1948 consultants across 98 offices.

Cox has been able to navigate a very difficult post-GFC environment by dramatically shrinking the cost base of the UK & Ireland business, growing the Continental Europe market strongly (most successfully in Germany) and methodically commencing operations in new countries through acquisition (eg USA) or aggressive organic growth (eg Singapore).

With their financial platform now very strongly re-established Hays have just released a document that clearly articulates where Cox has been focusing resources in order to keep the Hays competitive advantage alive, and growing, for the decade ahead.

The document Recruitment Remodelled: The art and science of successful recruitment lays bare how Hays view the future of recruitment in a world increasingly impacted by digital technology, data science, artificial intelligence, rapid change and skills shortages.

The Hays response is highly candidate focused – it’s all about using the available technology and science and combining it with human relationships to create what they have called an Approachability Index. Clearly Hays see this as a big winner for them and if it works consistently across the many markets Hays operates in, then I have no doubt it will have a significantly positive impact.

So where does that leave other agencies?  

My view is that the opportunity for other agencies to remain competitive with, or beat,  Hays is found more in what is absent from Recruitment Remodelled rather than what it contains.

Nowhere in the document is an emerging problem discussed; that of hiring managers failing to understand the true drivers of high performance in a job.

The Hays models works beautifully as long as the key selection criteria articulated by the hiring manager is actually what’s required for success in the role, both in the short term and in the longer term. Unfortunately the skill required of a hiring manager to accurately identify the true selection criteria is often lacking. 

This was articulated in Kevin Chandler’s (qualified organisational psychologist and founder & former CEO of publicly listed Chandler Macleod Limited) presentation at the 2016 RCSA International Conference in Port Douglas.

Kevin shared the story of his light bulb moment when he compared the high performance competency sets developed by the managers (the supposed subject matter experts) with the high performance competency sets developed from a scientific and objective assessment of a group of that same company’s high performers – there was almost no correlation! The evidence proved that the hiring managers were largely clueless about what underpinned high performance in jobs they were responsible for!

The lesson being if you start recruiting with the wrong competencies, as the foundation of a job’s selection criteria, then hiring errors are inevitable, no matter how objectively good the candidates are and regardless of how competent the interviewer is.

The Hays approach to the future of recruitment is founded on their Approachability Index driving the success of niche candidate pools of skilled, ready-to-move candidates.

Hays is leaving hiring managers to figure out for themselves, for the time being at least,  the correct competency sets for high performance in the jobs that they are recruiting.

The opportunity for other recruitment agencies is to develop a methodology that can help the hiring manage make a better job analysis and match that with the creation of an accurate high performer profile. This level of capability is not easily attained because it’s a fundamentally different client service model requiring a significant investment of resources to build, deliver and improve.

The sophistication of this approach, compared to current recruitment agency business models, is unlikely to appeal to many agency owners, however the opportunity remains tantalisingly available. Consistently beating Hays requires plenty of resources and a steely resolve, and this approach is no different.

In the meantime you can be sure that Hays will continue down the path that has made countless fortunes since the beginning of exchange and trade a few millennia ago – give the people what they want, rather than what they need.

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10 November 2017

500th issue of InSight: How do I make Seek redundant?


Issue #500 of InSight
Ten years and six weeks ago I published the first issue of my newsletter, InSight.

In it I articulated my thoughts on the RCSA Conference that I had just attended. Seventeen subscribers received that first newsletter.

Today is the 500th issue of InSight and I am, as far as I can tell, the longest, continually published recruitment-specific blogger in Australia.

Thank you for reading my analyses, my rants, my opinions, my complaints and my views on all things recruitment for as long as you have been a reader. I greatly appreciate all the feedback I receive on a regular basis.

Also a special thank you and acknowledgement to Liana Duric, my invaluable foil (and only employee) since InSight's first issue. She is, undoubtedly, the unsung hero of these past ten years as she has provided the highly necessary voice of reason to my work providing the honest and constructive feedback that ensures what you receive is as readable as it is interesting and useful.

I still derive great enjoyment writing about a sector that continues to provide such a rich source of interesting material. Thank you, to you the reader, for your constant stream of tips, suggestions and sources of inspiration; please keep them coming. I intend to keep blogging for as long as there is an audience for my analysis and opinions.

This week’s blog is another look at the recent uproar about Seek’s activities and what we, as an industry, might take from where we find ourselves.

How do I make Seek redundant?

The first issue of Insight was published at the near-peak of the pre-GFC recruitment industry boom; nobody was predicting the fallout that was just over the horizon, precipitated by the collapse of Lehman Brothers in September 2008.

As the 500th issue of InSight is published, we now find ourselves in another boom market. 

As I wrote about last week, you can be confident that times are good and are likely to continue in the short-to-medium term, at least, when Hays are hiring new recruiters at a rate of one every day of the working week, for months in a row.

Although, as long term readers are fully aware, I am an optimist about the future of the industry there are signs that need to be heeded.

The recent investments and market behaviour of Seek Limited has been, or should have been, a wake-up call for all in our industry.

Two weeks ago I attended a meeting where Seek representatives, Managing Director Michael Ilczynski and Head of Sales (Recruiter Segment) Con Marcheson met with RCSA CEO, Charles Cameron and RCSA Vice President, Sinead Hourigan, along with other members of the RCSA Online Workforce Solutions working group (of which I am a member).

The ninety minute conversation covered a number of areas of mutual concern.

Seek is unapologetic about their focus on maximising the job-seeking experience for each visitor to their job board platform. This means that the job seeker, regardless of the job that they apply for, can select a privacy setting of their choosing, which may make their details available immediately to other advertisers and subscribers, including other Seek-funded companies.

Sidekicker (a Seek-funded company) are aggressively targeting direct-hire advertisers with an email campaign that holds nothing back and seems to contradict Seek’s assertion that Sidekicker see their offering as much more of a labour-management platform than a direct recruitment-agency substitute.

Although their activities are the current focus of the Australian recruitment industry, it would be short-sighted, and a mistake, to fixate solely on what Seek are doing.

Even if Seek disappeared tomorrow, there would still be plenty of recruitment technology entrepreneurs eyeing off their small slice of the multi-hundred billion dollar global recruitment industry.

Although many recruitment technology companies are, so far, failing to deliver in line with expectations, there are other companies, especially in the contingent recruitment space that are building some momentum. Weploy and Adepto are just two of such offerings that have dispatched very upbeat progress reports to their respective communities this week.

These two companies have a much easier sell compared to their recruitment technology peers because their products, although very different, are solving problems that are very easy for the end-user to identify, and articulate the cost of. For end-users, this makes comparing their current solution to the alternatives that Weploy and Adepto offer, far easier.

The question that every agency owner and executive should be asking is not “How do we stop, or beat, Seek?”; the more powerful question is “How do I make Seek redundant (to me)?”

Three years ago I wrote about an agency that had done exactly that – closed their Seek account because they decided that screening candidates who applied to job board ads was an unprofitable use of their consultants’ time. The way this agency sources and assesses high quality candidates is not a way that their clients can easily or cost-effectively replicate.

The agency owners most agitated about Seek’s current activities are, unsurprisingly those whose business models most heavily rely on sourcing candidates via Seek ads.

In no way does this invalidate these owners’ concerns, or even anger, at Seek’s activities (or at the very least Seek’s lack of proactive communication about their various recruitment technology investments; sentiments I share), but consider how different things would be if a large majority of their respective agencies’ candidates were generated from avenues outside the Seek job board.

When you rely on a dominant (near-monopoly) supplier for an important component of your service offering, without a well-resourced plan to reduce your future reliance on this supplier, you are backing yourself into a corner with few palatable escape options if your supplier ‘goes rogue’.

“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” 

R. Buckminster Fuller, American architect, systems theorist, author, designer, and inventor.

I am truly fascinated to find out how different, or similar, the recruitment landscape will be when/if I reach InSight issue #1000 sometime in late 2028 or early 2029.

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01 November 2017

Hays hiring surge: ANZ division grows by 65 consultants in past quarter

The confidence that Hays Australia/NZ has in the market conditions, continuing their strong run, is amply demonstrated in their September quarter recruiter hiring surge as detailed in the Hays Q1 Trading Update.

Hays reportedConsultant headcount in Australia & New Zealand was up 7% in the quarter”. According to my calculations (Hays do not release actual consultant or employee numbers in Australia, only regional headcount), Hays ended the most recent financial year with just over 900 consultants across Australia and New Zealand, hence a 7% rise in consultant numbers equates to a net gain of approximately 65 consultants, exactly one additional consultant for each working day of the quarter.

This is an impressive rate of growth and given how quickly Hays reign in hiring and cut underperforming consultants in a slowing market you can be very sure that whatever lead indicators Hays are using for 2018 the lights are showing green.

The continued strength of the Australian and New Zealand property and construction sector has been a core reason for the impressive rate of growth reported by the local operation of Hays plc, although Hays’ New Zealand division remains a drag on net fee and operating profit growth.

For the 2017 financial year, net fees in Australia were up 13% while net fees in New Zealand went backwards 4 per cent, even more concerning for the Hays New Zealand business was the 8% decline in Q1 2018 results.

Relative to local market competitors, Hays New Zealand is in a significantly inferior position, size-wise, to Hays Australia. By gross profit Hays Australia would be somewhere between two and three times larger than the second largest agency, whereas Hays New Zealand wouldn’t even be the biggest (by gross profit) agency in New Zealand (probably third or fourth). Ongoing high staff turnover in Hays New Zealand has also created a problem that the Hays Australia/NZ Managing Director, Nick Deligiannis, has yet to solve.

The Hays Australia/NZ growth was powered by temp recruitment (66% of total net fees) growing by 13%, while perm placements (34% of net fees) increased by 8%.

Key Indicator
2018 Q1*
2017
2016
2015
2014
Net fees^
AUD $million (i)
+13%
310
279
270
255
Operating profit AUD $million 
Not
reported
113
99
91
81
Consultant headcount #
+17%
912
814
775
705

* 1 July 2017 – 30 September 2017 is Q1 of the 2017/18 Hays financial year. The increases stated are based on the annualised growth from Q1 2017

^ net fees is the aggregation of permanent placement revenue and net temp/contractor margin

# calculated on consultant headcount data changes as listed in the Hays Annual Report using the reference point of the Aus & NZ combined headcount of 706, as at 30 June 2010 (ShortList, 3 September 2010).

On a state-by-state basis the net fees results were reported as follows:

State
2018 Q1*
2017
1. Victoria
+21%
+16%
2. Queensland
+23%
+15%
3. New South Wales
+10%
+14%
4. ACT
+14%
+13%
5. South Australia
Not reported
+8%
6. Western Australia
+17%
+7%

The third largest employing industry in Australia is Construction, and you would have to have been on Mars over the past year to not know how hot the property sector has been.

Hays have been able to take advantage of this market strength with the continued strong performance of their largest specialism: Property & Construction.

Hays Australia largest
five specialisms
2016/17 Net Fees
AUD$+
2018
Q1*
1.
Construction and property
$52 m
+16%
2.
Accountancy & finance
$33 m
+6%
3.
IT
$30 m
+11%
4.
Business support
$26 m
+12%
5.
Sales & marketing
$14 m
Not reported

+ estimates using Hays Asia Pacific net fees-by-specialism and Hays Australia specialism growth data reported in the Hays Annual Report 2017 (page 29). Hays do not provide net fees on a per-specialism basis for any single country.

* 1 July 2017 – 30 September 2017 is Q1 of the 2017/18 financial year. The increases stated are based on the annualised growth from Q1 2017   

Whichever way you cut the cake, Hays Australia/NZ Managing Director, Nick Deligiannis, continues to deliver outstanding results. The recent losses of senior executives Peter Noblet (15 years at Hays, now COO of Interpro) and Jim Roy (15 years at Hays, now Canberra Director of Michael Page) might be minor disappointments for Deligiannis but his local executive leadership team has plenty of depth and there is no shortage of ambitious high performers rising through the local ranks.

Hays may not be everyone’s cup of tea but a healthy and optimistic Hays Australia in an aggressive hiring mode signals that there should be good times aplenty for the local recruitment industry as we head into 2018.

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