16 March 2017

Optimism: Our industry's greatest attribute and greatest weakness

Things are rocking right now.

It’s clear from the conversations I’ve had with many people in the recruitment industry since the beginning of the year that the market is moving at Usain Bolt-like speed.

Agencies are reporting record levels of job registrations and the subsequent placements are leading to healthy bottom line results.

The other key indicator is the number of recruiters going out on their own. I can’t recall a period with so many LinkedIn updates indicating self-employment for many of those that were previously employees of a large(ish) agency.

Despite all those ‘recruitment industry disruptors’ who are forever threatening to make recruitment easier, cheaper and better, it appears that we are in the middle of another golden age of recruitment (as accurately predicted by Greg Savage exactly two years ago)

This is great news, mostly.

I add the note of caution having read Rod Hore’s excellent new and free eBook Business Valuation in the Recruitment Industry: A guide for recruitment agency owners.

Rod’s firm, HHMC, is the go-to firm in Australia for recruitment agency sales and purchase advice and associated consulting services. Over twenty plus years in the industry Rod has seen the good, the bad and the ugly in our industry’s M&A space.

The eBook has been the product of many conversations Rod has had with both potential vendors and buyers in the recruitment industry underpinned by research from HHMC’s activities and information gathered from Rod’s frequent attendance at industry conferences, both in Australia and internationally. The most common conversation topic with agency owners is, unsurprisingly, agency value.

Here’s what Rod has to say about agency value:

‘….if we are going to buy the business then we want to know how it is going to perform in the future.  What happened until now is the domain of the existing owner. They have pocketed the profits. We are interested in how future profits are going to be generated.

The equity value of a business can be described as the risk associated with earning future profits.’

The challenge for business owners is to demonstrate they have built a business that has a strong opportunity to operate profitably in the future.

Business Valuation in the Recruitment Industry: A guide for recruitment agency owners
by Rod Hore, page 26

This all sounds like relatively straight forward and common sense advice. Surely this is what almost all owners do?

Unfortunately, as Rod observes, and I strongly concur, the history of successful small recruitment agencies (20-25 staff) strongly supports the evidence that very few owners manage to build an agency with a sound foundation for growth to take it to the next critical growth indicator (around 50 staff). The history of massive write-downs across the ASX-listed recruitment sector since the boom of 2005-2007 demonstrates how little of the growth of those purchased agencies was sustainable growth.

As Rod explains:

‘Successful emerging recruitment agencies are like maxed-out lifestyle businesses. They are usually under the spell of a strong, charismatic owner that is able to gain maximum performance through force of personality. They build organisations that are top performers in the RIB report.

But the challenge is to turn that into something sustainable over time, that can thrive without the dedicated influence of the owner. Fail to make the transition and the business will fall back to being an average business, usually in the 10-15 person size.’ (Hore, page 75)

Rod articulates a number of reasons for this failure to successfully transition from small to medium-sized. I have also written about this topic previously.

Rod lists little experience in dealing with adversity and an underdeveloped management team, amongst other reasons.

I’m particularly interested in why this occurs. What’s common in the typical recruitment agency owner’s beliefs, traits or skills that have them make the same mistakes that thousands of other recruitment agency owners have also made?

I would speculate that one of the most common is optimism.

Successful recruiters are optimists and successful recruitment agency owners are optimists. This powerful streak of optimism creates the foundation of the initial success experienced by the agency owner; employees, clients and candidates buy into this optimism. The momentum of this optimism carries the agency from one employee to five, to ten, to fifteen, maybe to 20 employees. But somewhere along the way the wheels of growth start to wobble, and often fall off.

The optimistic owner, typically, continues to do what they have always done, and they keep getting the same result. In my experience this is caused by an optimist having a bias for action rather than thought.

The optimistic recruiter has built their success on taking consistent action; very little strategic thinking is required. As an owner this pattern continues. The ceiling of their business’ growth corresponds to a lack of effective strategic thinking and application of the sort necessary to grow a business sustainably.

The deep well of optimism that has, until now, been a fundamental strength of the agency recruiter-turned-agency owner, is now a fundamental weakness. This weakness, if unrecognised, becomes the core reason that the owner is unsuccessful at transitioning the business from a successful small agency to a successful medium-sized agency.

’Strategic thinking is the generation and application of business insights on a continual basis to achieve competitive advantage. Too often in the ‘action is everything’ world we live in, we are [like] hamsters running on a wheel. Day in and day out, we run faster and faster, doing the same things in the same ways we’ve always done them. Trouble is, we’re often doing the wrong things: things that drain critical resources from those few effective tasks that really will make us successful.’

Deep Dive: The Proven Method for Building Strategy, Focusing Your Resources, and Taking Smart Action by Rich Horwath pages. 5 & 6
 
Optimism; it’s our industry’s greatest attribute and its greatest weakness. And at ‘gold rush’ times, like right now, it’s a weakness that sows the seeds of today’s shining star becoming the next decade’s perennial underperformer.

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09 March 2017

Is recruitment in Australia still dominated by bias, racism and sexism?

In the run up to International Women’s Day this past Tuesday, I couldn’t help but notice a couple of news articles that were a sobering reminder that many people responsible for recruitment are still operating from a mindset that remains from last century.
 
The first was reported in industry news service, ShortList: Seek data reveals widespread bias (28 February 2017):
 
"What we found... [is] that Australians are biased, racist, and sexist. We found females were getting shortlisted less often than males," says Seek Employment's head of product Doug Blue.
 
The discoveries were made during Seek's work on a predictive algorithm, he told last week's ATC Sourcing Social Talent conference in Sydney. Seek doesn't capture gender in its applicant data, but is able to predict it by looking at jobseekers' first names, while surnames are similarly good predictors of race or ethnic background.
Given that this conclusion was reached after analysing the shortlisting behavior of over 200,000 of Seek’s clients we can reasonably confident that this publicly released conclusion from an ASX-listed company is not a click bait headline fired out from a marketing intern.
 
Following this was a Lawyers Weekly article: Elite have ‘overwhelming’ advantage in legal recruitment, data shows published two days later.
 
New recruitment data released by three major firms suggests that the majority of law graduates hired through the pool of summer clerks come from a concentrated selection of privileged schools and postcodes.
 
Data collated from Allens, King & Wood Mallesons and Henry Davis York shows that more than half of the latest summer clerkship applications received by the firms come from candidates hailing from privileged schools and postcodes.
 
According to a new report Contextual Recruiting in Australia, 13 per cent of the 1,650 candidate pool came from the top 1 per cent of Australian schools.
 
A further 52 per cent of all applicants to programs with Allens, KWM and HDY were noted as having graduated from schools among the top 10 per cent in the country.
 
I suspect any legal recruiter in the country would be unsurprised by these results.
 
Given these two recent examples it’s sobering to consider the progress that’s been made, or not been made, in the 28 years that I’ve been involved in recruitment as a recruiter and trainer of recruiters.
 
It’s a theme that I have often returned to, having first raised it in my fourth blog, originally published on 1 November 2007 inspired by the just-released, first Eagles album of new material in 28 years, Long Road Out of Eden.
 
Coincidentally, last night I went to Rod Laver Arena to hear Eagles co-founder, songwriter and vocalist Don Henley in concert. I, and the other 8,000 or so fans, had a memorable night as Henley wonderfully recreated the songs live that I’ve become so familiar with over the past 40 years. It’s relevant to note that Henley turns 70 later this year and he still packs the audiences in whenever he tours. It appears that age is no barrier to Henley’s continued popularity with fans of live music.
 
At the other end of the music scale Lorde (then 16), Justin Bieber (then 15) and Taylor Swift (then 16) all experienced massive success with their first commercial releases before they were of legal voting age.
 
It seems that consumers of recorded and live music disregard age when making judgements about where they will spend their entertainment dollar.
 
Yet ‘consumers’ of new employees appear to continue to regard age, and other many other non-competency factors such as school attended, ethnicity and gender as factors that drive performance of work tasks.
 
At a time when the conversation around skills shortages appears to be never-ending it’s critical that employers of all types and sizes focus on screening, interviewing and hiring applicants based on skills, competencies and motivation rather than age, gender, school attended and other non-competency criteria.
 
Let’s hope in my 20th year of blogging in 2027, I don’t have to return to this topic. At this point, I’m not optimistic.
 
Are Australians biased, racist and sexist?
 
I say, unfortunately, yes. Yes, they (mostly) are.
 
If we pay more attention to the competency-driven views of industry specialists like Sue Barrett we might have half a chance but, so far, change has been very, very slow in coming.
 
What’s your experience?
 
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02 March 2017

What I learned from Australia's most provocative recruitment blogger of 2016

If you are reading this blog I suspect you read other recruitment blogs on a reasonably regular basis, via a subscription service or your LinkedIn feed or some other method.
 
Given your knowledge of the recruitment blogosphere take a guess who in Australia published the most provocative recruitment blog of 2016, as measured by comments?
 
Greg Savage?
 
Craig Watson or Luke Collard?
 
In fact none of the above got even remotely close.
 
The winner by a country mile was Andrew McGregor.
 
Andrew who? You ask.

Those of you in the property and construction sector may recognise Andrew’s name because, as Associate Director, he runs the Sydney operation of Design & Build, having joined Neil Colquhoun’s business nearly seven years before.
 
Last September Andrew posted on LinkedIn his short blog Really – Always leave the office on time.
 
It was Andrew’s 7 point, 633 word articulation of his blog title’s proposition.
 
It would be an understatement to say that Andrew hit a nerve with his post.
 
As at the time of writing the post has racked up 241,720 likes, 9,485 comments and 65,292 shares.
 
To provide a comparison my most provocative blog posts of my nearly ten years of blogging, by comments at least, are the following:
 
August 2009, 40 comments

May, 2010, 38 comments

December 2013, 36 comments
 
My own contribution to the conversation around worker productivity Highly productive workers take more breaks (and other surprises) generated just over 1,000 views and produced no comments!
 
I note Greg Savage’s most popular post, over his eight years of blogging, also is a blog about ’timing’; How did it get to be ‘OK’ for people to be late for everything?
June 2010, 181 comments
 
Andrew’s post wasn’t just popular on LinkedIn; it crossed over to specialist websites, mainstream media and, just last week, it was even reproduced as an opinion piece in The Scotsman (how could they resist; he’s a McGregor after all!).
 
Here’s what I learned from Australia’s most read recruitment blogger of 2016:

Don’t worry about your lack of blogging experience before you put your fingers to the keyboard
At the time of writing his blog, Andrew had only published six blogs on LinkedIn.

Keep it short
633 words is about two third’s the length of one of my blog posts, which are often much longer.

Write from personal conviction
Design & Build’s culture is consistent with Andrew’s post.

Don’t be afraid to be controversial
A quick scroll down the comments will demonstrate that Andrew hit a raw nerve for some readers.

Andrew’ follow up blog post Is 'Always leaving the office on time’ really possible?  also proved popular although by the standard of his original post on the topic it was liked a ‘mere’ 1,301 times, garnering ‘only’ 124 comments and leading to ‘just’ 281 shares.
 
I don’t know what all this enhanced profile has done for Andrew’s business or the Design & Build brand generally, but I am sure it can’t have done any harm. Who doesn’t like positive free publicity?
 
I look forward to reading more from Australia’s most provocative recruitment blogger throughout 2017.
 
Well done, Andrew!

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22 February 2017

Facebook jobs: a massive win for genuine recruitment consultants

Last week we saw the official confirmation of what has been an open secret for some years: Job postings on Facebook.

LinkedIn's dominance in the corporate recruiting world has been unchallenged due its unmatched depth of high skill professionals available on its platform. The price of the not-free LinkedIn recruitment offerings has made it clear that large enterprises recruiting relatively highly paid professionals are LinkedIn's profitable market. In its announcement Facebook has staked out its claim for the low-to-semi skilled staffing market that the Small-to-Medium Enterprise's (SMEs) are overwhelmingly recruiting from.

Given the vast numbers of active Facebook users, the number of visits each user makes to the site each day and the amount of time each user spends on the site once they get there, you can see the immediate attraction of a jobs option for many employers.

What could this mean for the recruitment industry?

Not a great deal, I suspect.

I recall that Seek was touted by many as beginning of the end for the recruitment industry. The same was said, and continues to be said, of LinkedIn.

Every entrepreneur with an app or an algorithm was going to cause great pain to the '...outdated, needlessly expensive and ineffective...' recruitment industry leading to our inevitable demise.

I have written about these entrepreneurs a number of times in the past. Most recently here, here, and here.

Every prophecy of doom has proven, so far at least, to be wrong.

And I can't see jobs on Facebook being any different.

As has been said by me, and many others, there's no data to support the proposition that recruitment agencies are becoming redundant (Greg Savage's excellent blog from nearly two years ago Agency recruitment is not dying. It's growing contains substantial data that counters this myth).

Last month it was reported that 2016 saw the largest ever number of UK recruitment agencies (4,529) commence business in a calendar year.

The reason for this growth is simple - there isn't an app, algorithm, job board, networking site, video hosting site or anything else that has the capability to pick up the phone, speak to a person, engage them in a conversation and cause that person to put themselves onto the job market for a specific opportunity, most likely an opportunity that the person was not aware of and would never have sought out otherwise.

I believe that LinkedIn, and now Facebook, risk alienating the good customers they do have by continuing to encroach on the territory of the other. Why do these sites make their offering less distinct not more distinct? The answer is to be found in the expectations of the shareholders of each company - they want to see growth in sales, profit and stock price and once a company becomes as massive as they each are now (Microsoft, owner of LinkedIn: USD$495 billion market capitalisation, Facebook: USD$385 billion market cap.) they can't afford to be too choosy about where that growth comes from; it just has to come otherwise the stock price stops rising (the Microsoft stock price has risen by 30 per cent in the seven months since the announcement of the LinkedIn purchase in June 2016).

This pursuit of the same customers inevitably leads to plenty of unhappy users who prefer that their favourite site would stop messing with tried-and-true formula they have liked for so long.

All the plethora of ‘recruitment disruptors' prove, more so with each new entrant to this crowded field, is that the core job of a recruitment consultant remains one beyond the reach of technology alone.

This is not the case for generic resume-referring recruiters who, largely or entirely, find active candidates and send resumes that match job descriptions, competing for a discounted fee with many other recruiters doing exactly the same thing. These types of recruiters are continually under threat because they are not doing anything which is not able to be done faster and cheaper by an app, algorithm, job board or networking site.

These types of recruiters are working increasingly harder for increasingly smaller returns and there's only one way it's going to end: in tears.

Meanwhile the genuine recruitment consultant; the recruiter providing an offering that no technology can replicate, will welcome all the disruptors who care to enter the recruitment industry. They do so safe in the knowledge that the value of their service is even more sharply apparent to their clients, compared to the multitude of apps, algorithms, job boards and networking sites.

Jobs on Facebook?

Bring it on!

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15 February 2017

Reputation: hard won and easily lost

Many years ago in the infancy of my stint as a Sydney temp accounting recruiter, I was asked by a very good client of mine, Thomas Cook (a brand no longer operating in Australia), if I could supply them with a secretary (as they were mostly called in those days) for a two week assignment. At that stage I was doing very well with my numerous accounting temps at the company and, with more than a slight whiff of hubris, decided that even though I had never interviewed let alone placed a secretary before, I was going to fill the job.

I can’t recall how I sourced the candidate but I certainly remember that it was a disastrous placement; the candidate didn’t have the skills to do what was required and I had to tell her that her services were no longer required after day one.

It was a dent in my, up until that point, very good reputation with the client. It caused my client embarrassment internally and, unsurprisingly, he didn’t allow me to forget it for a long time. My glowing reputation with the client was brought down to earth with a loud thud.

It was a lesson hard learned and not easily forgotten. Although there were other mistakes I made with assignments outside of my competence, the pain of a damaged reputation was never more acute than that Thomas Cook stuff up.

The value of reputation is especially critical in a service business such as recruitment. This trust is a very profitable part of a recruiter’s relationship with an individual client. A deep level of trust enables a temp recruiter to confirm temps into a job without the client requiring a resume to review or a candidate to interview. A perm recruiter’s similarly high level of client trust is displayed when the client does not need to make a decision on which referred candidates to interview – all the recommended candidates are booked in.

That trust is hard won and easily lost as a result of complacency or overconfidence or both.

Last week we saw an example of this when the Australian Financial Review published a story under the headline Australia Post used executive recruitment agency that underpaid workers. The story opened:
  
Australia Post is facing legal action for using an executive recruitment agency to engage low-level workers at below the minimum wage.
The arrangement under the supervision of a senior executive member of Australia Post saw a group of four casual data entry workers paid $19.48 an hour when they should have been paid at least $32.16 an hour.
The workers, most in their twenties, were not paid overtime or penalty rates and one was allegedly underpaid $4300 in just four weeks.
The Communications Electrical and Plumbing Union has taken Australia Post to the Fair Work Commission, accusing it of breaching its enterprise agreement which required it to notify the union if it contracted out work and to pay contractors the same as Australia Post workers.
The union alleges that in January this year national credit manager David Gibkus interviewed the employees for a short-term project and then directed them to sign up with executive recruitment firm Alex Kaar.
The workers signed employment contracts with Alex Kaar, which promised them $160 a day including superannuation, and then worked at Australia Post head office under the direction of Mr Gibkus.
At 7.5 hours a day, the pay equated to $15.59 an hour plus a 25 per cent casual loading, well below the minimum hourly wage of $17.70.
When I read this story, my first response was “What the hell was the Alex Kaar consultant thinking?”

Consider what you find on the Alex Kaar website:

Notice the tag line under the brand name: 'Executive & Board Appointments'. Notice that nowhere under Our Services does it list temporary recruitment (used to identify hourly rate, mostly award-level semi-skilled workers) distinct from Contracting Services (contractors who are, commonly but not always, daily rate non-award highly skilled workers).

It’s very clear, in this instance at least, that Alex Kaar provided services to Australia Post well outside its self-identified areas of expertise and competence.

To compound his company’s mistake, Alex Kaar MD, Chris Karagounis was quoted in the AFR story:

“….Karagounis said his firm did not normally engage low-level employees but would occasionally provide "payroll functions" to clients.

"We make no money from this, we do it as a favour," he said.
"We don't set the rates, we get told what to do."
Mr Karagounis said the underpayments were likely a mistake in the amounts provided by Australia Post.
"We will fix it on behalf of Australia Post because it's the right thing to do," he said.
I am not sure about you, but blaming your client for something you failed to do (check your legal obligations as the employer of the temps) in an area you don’t identify as part of your service offerings (therefore it’s even more obvious that you should be treading carefully) is not an approach I would recommend to any recruitment agency owner.
It also appears to be at odds with what can be found under Our Values on the Alex Kaar website:

Outstanding customer experience?

Integrity?

Partnerships?

Legal obligations?

Hmm, I am sure Australia Post would have every right to feel that Alex Kaar have not acted consistent with their service promise and brand values.

The result has been that Australia Post’s name has been dragged into the mud at an especially inopportune time. On the same day as the Alex Kaar story was reported, Australia Post’s managing director, Ahmer Fahoud, had his annual remuneration ($4.4m salary, $1.2m bonus) publicly revealed for the first time, leading to much negative comment, with even the Prime Minister, Mr Turnbull, weighing in with his views.

Credibility: it’s hard won and easily lost, especially attempting to deliver services in an area outside your stated competence. Just ask Alex Kaar.
  
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10 February 2017

Can years of education predict work performance?

I received a lot of positive feedback in response to my last blog Why many CEOs fail: They talk smart but don't act smart.

Clearly many people in the recruitment sector have witnessed the same thing whether inside their own company or inside a client’s company.

Looking at the recent actions of President Trump, it’s obvious how his campaign rhetoric (I decline to label his talk ‘smart’) is proving very difficult to put into effective action (Tip for President Trump – effective work performance almost always relies on strong influencing and teamwork skills; it’s very hard to get things done unless you can gain consistent co-operation from others).

There are a couple of things you can do to ensure that you are not mistaking a smart talking candidate for a candidate who has delivered excellent results.

Three years ago I wrote about how to conduct an interview with such candidates in Is your candidate just very confident or really a charismatic narcissist? which I recommend you read.
Before an interview is even booked, I suggest you ensure that when reviewing any resume you do not make any assumptions about the candidate’s capability based on their total number of years of education.

As you all know there is a massive tertiary industry in Australia that relies very heavily on the fees of students who are encouraged to believe that additional years of study, to acquire a post-graduate diploma or post-graduate degree, will automatically lead to greater job opportunities and better remuneration.

The accuracy of this belief will depend very heavily on the industry that you want to work in and the type of job you want but in reality the most important thing is how effectively the acquired education can be converted into greater competence on-the-job, ultimately flowing through to a higher level of job performance.

Over the years I have met some very disappointed former students and graduates who discovered that all the time and money invested in gaining further education had not been sufficiently recouped via a better career or a higher paying job.

Research provides substantial evidence that total years of education is a very low predictor of job performance.

This is the result of the meta-analysis conducted by researchers Frank Schmidt and John Hunter, published in the Psychological Bulletin in 1998.
 
I read about this study on the blog of Bob Sutton (one of the co-authors of the book I quoted in my last blog; The Knowing-Doing Gap).
 
Sutton explains Schmidt and Hunter’s work as follows:
 
These two very skilled researchers analyzed the pattern of relationships observed in peer reviewed journals during the prior 85 years to identify which employee selection methods were best and worst as predictors of job performance. (A meta-analysis)… reveals the overall patterns revealed by the weight of evidence, rather than the particular quirks of any single study.
 
The authors examined 19 predictors and rank-ordered them by the validity coefficient, an indicator of how strongly the individual assessment method is linked to performance
 
The top 4 strongest predictors of work performance (and their respective coefficients) were: 
1. Work sample tests (.54)
2. General Mental Ability tests (also called Cognitive Ability tests) (.51)
3. Structured interviews (.51) 
4. Peer ratings (.49)
At the other end of the list of 19 predictors were the following 4 weakest predictors of work performance (and their respective coefficients):
16. Years of education (.10)
17. Interests (.10)
18. Graphology (.02) e.g., handwriting analysis.
19. Age (-.01)
Yes, equal third-last was years of education as a predictor of work performance.
Our industry provides a very high-profile example: Neither Geoff Morgan nor Andrew Banks completed an undergraduate degree yet, I suspect, their individual wealth would dwarf the combined wealth of 99 per cent of MBA graduates our business schools have produced since MBAs were introduced.

The other factor to consider when interviewing a candidate with a lot of education is that they are likely to have “…interesting information and ideas; and hav(e) a good vocabulary”  to quote the authors (Pfeffer and Sutton) I referenced in my last blog. This extensive education will enhance the likelihood that they talk smart and, according to the research, reduce the likelihood that they act smart.

Always assess a candidate against the competencies required to do the job at the level of performance required – make no assumptions about the candidate’s capabilities based on their years of education or how smart they sound.

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