02 December 2016

Decent research shows talent is very far from a company's #1 priority

In a recent blog, I tackled the ludicrous claim made by LinkedIn in their fancifully named 'Australia Recruiting Trends 2017: What you need to know about the state of talent acquisition' that Australian and talent leaders say that Talent is #1 priority at their company (79%).

I suggested that you would be hard pressed to find one agency recruiter who would agree with that statement and that there was little evidence, if any, to suggest that even a large minority of Australian companies prioritised talent ahead of everything else, let alone a large majority of Australian companies who do so.

It seems I may have been right.

The Wall Street Journal mid-last month reported:

"When asked to rank their businesses' most valuable asset, leaders said technology matters above all, according to a new report from Korn Ferry. Employees didn't make the top five."

The WSJ goes on to say:

"The Korn Ferry Institute, the research arm of the executive search and consulting firm, asked 800 chief executives and other top leaders at global firms about what they believe can generate profit for their companies and how workers fit into that vision. Two-thirds said they believe technology will create greater value in the future than their workforce will, and 44% believe that automation, artificial intelligence and robotics will make people "largely irrelevant" in the years to come."

"Nearly two-thirds of respondents said they "see people as a bottom-line cost, not a top-line value generator," according to the report, while 40% said shareholders have pressured them to direct investment toward physical assets like technology."

(my bold)

So, that's a survey of opinions about the present. What about the future? Surely CEOs are more positive about people's importance in the future? I hear you ask.

Nope.

The concluding line of the WSJ's sobering article is:

"Looking ahead, leaders said the five most prized assets in five years will be customer-facing technology and products, innovation/R&D, product/service, brand and real estate, according to the report."

Specifically the Korn Ferry research notes "67 per cent (of CEOs) believed that in the future technology would represent greater value than people to a business, while 44 per cent said that the growing use of robots, automation and artificial intelligence would make people "largely irrelevant" in the workplace of the future."

Yep, people don't get a look in.

Can we trust the research? Well the Study Methodology notes:

"In August and September, 2016, Korn Ferry interviewed 800 business leaders in multimillion-dollar global organizations on their views on the value of people in the future of work. These leaders were in: the United Kingdom, China, the United States, Brazil, France, Australia, India, and South Africa."

Sounds like it's a bit more substantial than LinkedIn's "150 corporate talent acquisition leaders" doesn't it?

I think it's pretty clear that the people who actually make the key decisions inside a company take a vastly more pessimistic view about the value of employees going forward, compared to those people whose very job depends on new employees being hired.

CEOs might utter positive and soothing words to an employee's face in the office, shop or factory but when answering the questions of dispassionate researchers it's clear these same CEOs want technology to take much, or all, of the same employee's job as soon as possible.

Although this is a global study you would be naive to think this doesn't apply to Australia, a relatively high-wage economy.

In fact you only have to return to last week's blog in which I dissect new CEO, Peter Wilson's first two years at Clarius, for a compelling local example of what the Korn Ferry research reveals about the reality of human capital's importance in the minds of CEOs globally.

As I pointed out in the blog:

"... technology initiatives (the focus of, or contained within, four of the seven initiatives) in the Key Strategic Highlights section of the 2016 Clarius Group Annual Report ..."

"... not a single word can be found in the Key Strategic Highlights about the Clarius employees. You can read about branding, technology, back office systems, the operating structure, new products and services, China, clients and candidates but you won't find anything to enlighten you about how the consultants, and their leaders ..."

There you have it; evidence in our own country and from our own industry (supposedly ‘people-centric') that the relevance of intelligent and hard-working flesh and blood is quickly waning in the minds of many CEOs.

PS: Last week I was remiss in failing to acknowledge Jonathan Rice's, excellent blog on the demise of the Clarius/Candle brand in New Zealand, which he wrote six months before my own blog. I highly recommend you read it.

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24 November 2016

Clarius becomes Ignite but turnaround yet to be seen

In June last year I wrote about the public pronouncements of recently-appointed Clarius CEO, Peter Wilson. Wilson had chosen to make public his views on the 'old' Clarius leadership and culture he had inherited when he joined the company in October 2014.
 
As Wilson's two year anniversary in the top job at Clarius has just passed, I thought it might be useful to run a ruler over his first two years and see whether he has been able to achieve and analyse Clarius's current strategic direction.
 
Executives:
Given Wilson was so publicly critical of the previous executive team let's start by looking how he is going with the major appointments announced on his watch:

Role
Person
Started
Current status
CFO
Andy Watt
July 2015
finishes December 2016
CTO
Lee Bustin
May 2015
left July 2016
MD Greater China
Vera Tang
June 2015
left October 2016
Regional Director
Barbara Price
Dec 2014
left November 2015
Regional Director
Alex Hunter
Oct 2015
employed in the same role
Director – On Demand Talent Services
Stafia Giannakis
April 2015
employed in the same role
Head Candidate Management
Leah Thode
Unknown
Unknown (Thode's LinkedIn profile makes no mention of this role)

Comment: Turnover in key executive roles is always a worrying sign for any company. Of extra concern is the departure of the CEO's hand-picked lieutenants after a relatively short period of time. On this score the casualty rate of Clarius executives under Wilson's leadership is unlikely to help shareholder morale.
 
Given how much Clarius have made of the improvement in the China results year-on-year (14.7% sales growth for $10.2 million sales in FY 2016), it seems odd that Clarius China MD Vera Tang's departure was not deemed worthy of an ASX announcement, or any other announcement for that matter. From Ms Tang's LinkedIn profile, it appears she has set up her own executive recruitment business in Shanghai.
 
Another area of concern for shareholders is that it appears no replacement has been found for the most recent CTO, Bustin, who left Clarius four months ago. The prominence of technology initiatives (the focus of, or contained within, four of the seven initiatives) in the Key Strategic Highlights section of the 2016 Clarius Group Annual Report would only heighten shareholder concerns if a new CTO is not hired in the near future. It's curious to note that the CTO role is not mentioned anywhere in the Annual Report.
 
A glance of the Clarius 2011 Annual Report reveals a Clarius executive team with a combined 90 years' experience with the company. None of those eight people remain employed at Clarius.
 
Financial results:
(Wilson commenced as CEO in October 2014)

Area
FY 2013
FY 2014
FY 2015
FY 2016
Sales
225
179.4
179
184.6
Gross Profit
37.5
37.1
38.3
38.7
Operating profit
-0.9
-2.5
-9.6
-2.0
Net Profit/loss
-42.2
-1.7
-11.0
-3.9
Calendar year- end share price
0.29
0.21
0.26
0.10 (23 Nov)

Comment: Although Wilson has managed to get sales on the uptick Gross Profit is flat and break-even on Operating Profit is yet to be reached. Interesting to note that on 1 September 2015 industry news service ShortList reported Wilson as saying the significant restructuring ….undertaken since…joining Clarius in November (2014) has turned the company from a "loss making vehicle" to a profitable one”.
 
Hmm, I am not sure Wilson's definition of 'profitable' fits the normally accepted definition of the word. Whatever exuberance he had about the profitability trend has not been matched by the subsequent results. Shareholders have shown their displeasure by dumping the stock, leading to a halving of the company's value (to AUD$8.5 million) in the past twelve months.
 
My biggest concerns about Clarius right now: 
  1. Sales culture change appears to be all talk, no action:
    Clarius is a traditional recruitment company providing contract and temporary employees (92% of revenue) and permanent placement services (8% of revenue). These services are driven by the effectiveness of the company's sales and service delivery model.

    In a ShortList report, published eighteen months ago, CEO Wilson was quoted as saying;
    'Clarius was "old world" and lacked sales capability prior to its leadership change...and....the company he inherited focused too much on "farming" accounts”. If this was true and Wilson was serious about doing something significant about it then why is there not a single mention of any sales capability initiatives in the Key Strategic Highlights section that covers two pages in the 2016 Annual Report?.

    As sales, gross margin and gross profit for this year were basically the same as for last year, it can only be assumed that whatever initiatives, if any, were undertaken either failed or have yet to bear fruit. Given the absence of any comment in the Annual report you can only assume it's the former.
     
  2. What about the Clarius people?
    As any recruitment agency owner or leader knows, the key to improving team or company results is the collective skill and motivation of the consultants at the coal face. What has Wilson done in this area or what are his plans?

    Well you wouldn't know because not a single word can be found in the Key Strategic Highlights about the Clarius employees. You can read about branding, technology, back office systems, the operating structure, new products and services, China, clients and candidates but you won't find anything to enlighten you about how the consultants, and their leaders, are being developed to deliver better results for themselves and the Clarius shareholders.
     
  3. Is China worth it?:
    Sure China has massive potential but Clarius (then known as Candle) originally entered the Asian market nearly ten years ago when it purchased the EL Consult business with 75 staff cross offices in China
    (Beijing, Shanghai and Shenzhen), Hong Kong, Singapore and Malaysia. China currently represents about 6 per cent of total Clarius revenue; profitability is unknown and in ten years Clarius has been unable to build on the ELC revenue it purchased.

    Given the recent departure of the China MD and the termination of her predecessor for
    "a range of serious issues and dereliction of duty" it appears that China is an ongoing massive distraction that Wilson could do without.
     
  4. Branding to the rescue?:
    In the aforementioned ShortList report, Wilson was also quoted as saying that the 'old' Clarius “….relied too heavily on branding to win new work.” Yet what do we see as the first item mentioned in the aforementioned Key Strategic Highlights? Yes, it's the Company Rebrand.

    As the Annual Report breathlessly tells us “
    Moving to one brand will significantly simplify many elements of the 'go to market' strategy and internal operations. One brand will declutter our market identity. We will be able to create a single winning culture unified by common values and behaviour, reflecting more energy, excitement and innovative thinking. We will invest and build a single brand identity that will attract talent, and deliver a consistent, premium candidate and client experience.”

    Hmm, the boys and girls at the PR agency sure dipped deeply into the cliché book for that one. And why you would choose a new name http://www.igniteservices.com/ for which another company has the .au domain name http://www.igniteservices.com.au/? Inexplicable.
     
  5. Expanded offerings with no clear or distinct competence or advantage:
    Wilson clearly sees opportunities in the HR and technology space. A Shortlist article earlier this month reported;
    Wilson says Ignite (which recently rebranded from Clarius), has identified the HR and recruitment technology space as one it wants to play in, with a series of tools already in the works.”

    I can't understand why a company would want to 'play in' a new space in which it has no
    clear or distinct competence, advantage or brand presence. Nor is it likely they can successfully leverage their existing client-facing recruiters to cross-sell the new offering(s).

    My experience informs me that people trained to sell a relatively transactional offering like recruitment services are, generally, resistant to and ineffective at, selling a technology-based offering or selling a more technically complex HR service.

    Again, I just see this area as a massive distraction for Wilson when he has lower-hanging fruit available in the form of Clarius's core recruitment business.
     
  6. Directors' relevant expertise: The current Clarius Board comprises of four very experienced and well-qualified people. My main concern is that most of that experience has come from traditional areas such as law, finance, education, not-for-profit, food, consulting, manufacturing and publishing.

    None of the Directors have any recruitment company experience, nor do they have any technical or operational expertise in the technology sector. I couldn't see any obvious operational expertise in sales either.

    If I was a Clarius shareholder I would see these significant gaps in expertise as slightly worrying given what the Annual Report is telling me about where the CEO is taking the business.
     
Clarius is one of the few publicly-listed recruitment agencies on the ASX. Founded as Candle by Geoff Moles in 1984 the company will celebrate its twenty year anniversary as a public company in 2017.
 
Clarius have been a client of mine and I know, and highly respect, a number of current and ex-Clarius employees. I want the company to grow and prosper. However, as I have articulated, I have significant reservations about the way the incumbent CEO, Peter Wilson, is going about identifying and addressing the company's current challenges.
 
As Richard Rumelt says (pages, 20, 51 & 53) in his outstanding book, Good Strategy Bad Strategy: The Difference and Why it Matters (Profile, 2012):
 
"To obtain higher performance, leaders must identify the critical obstacles to forward progress and then develop a coherent approach to overcoming them.
 
Good strategy works by focusing energy and resources on one, or a very few, pivotal objectives whose accomplishment will lead to a cascade of favourable outcomes.  One form of bad strategic objectives occurs when there is a scrambled mess of things to accomplish – a “dog's dinner” of strategic objectives.
 
Good strategy requires leaders who are willing and able to say no to a wide variety of actions and interests.  Strategy is at least as much about what an organisation does not do as it is about what it does."
 
Currently Wilson appears to be saying 'yes' to many things and, as a result, has a very long list of things to do; and I am far from convinced that any of them will make the difference that Clarius needs right now.
 
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17 November 2016

Does Donald Trump have the necessary character to be a successful President?

In the past week a number of people asked me when I was going to blog about the President-elect of America. I wasn’t sure what I would say; whether it would be relevant for readers of this weekly missive or whether I even wanted to say anything.
 
I was shocked as (almost) everybody else when the results rolled in last Wednesday (Australian time). I had arranged to meet up with two friends at a Fitzroy pub, fully anticipating we would be cracking a bottle of champagne, in honour of the first woman President of America being elected. Instead we watched the television, not quite knowing what to say, as the map of America was swamped with red states. I learned later that my 15 year old daughter was crying at home as the result from the other side of the Pacific became clear.
 
As one tweet succinctly put it:
 
The American people elected Hillary Clinton. The American Electoral College system elected Donald Trump.
 
What can recruiters take from what has happened?
 
I am no political or economic expert, despite being very interested in both, so I’ll stick to what I know most about: hiring practices.
 
President-elect Trump has now been hired. He will take up his position on 20 January 2017.
 
Given Mr Trump’s complete lack of public service experience, the voting public clearly didn’t think that lack of experience was a bad thing. In fact, the “I’ll drain the swamp” line seems to have been a key line from his campaign speeches that resonated with millions of voters.
 
As recruiters well know, a lack of experience doesn’t necessarily discount a person from a job; as long as they have the character necessary to build the skills upon.
 
So what character traits are required of the American President?
 
Not being an American or a student of American Presidents, I read about a dozen articles that came up in my online search for 'what makes a great President’. Some articles had a long list, others had a short list. I then selected the traits that were mentioned most frequently; it’s completely unscientific but in keeping with the principles I learned from the book The Wisdom of Crowds.
 
These five most-frequently mentioned traits were:
 
1. Integrity
2. Influencing/connectedness/persuasiveness
3. Calmness
4. Intelligence
5. Judgement and decision making
 
How does Mr Trump rate on each of these traits on a scale of 1 to 5, with 1 being low, 5 being high)?
 
Integrity (1/5): Mr Trump has a seemingly endless list of 'integrity' issues, to put it politely. He seems to take pleasure in treating women as objects to do with as he pleases. His attitude towards underage girls is especially vile, from any person, let alone a President.
 
Influencing/connectedness/persuasiveness (4/5): Mr Trump convinced nearly 61 million Americans to vote for him despite his many, many campaign hiccups. Whether he can be just as persuasive with his fellow Republicans on Capitol Hill remains to be seen.
 
Calmness (2/5): The first couple of Presidential debates showed Mr Trump was not naturally a calm man. It didn’t take much to get him worked up, unlike Hillary Clinton who showed herself to be a much calmer person under the spotlight of a Presidential debate. A man who believes that tearing up the NATO alliance and leaving allies to fend for themselves is a good thing for the USA, could not easily be mistaken for a calm person.
 
Intelligence (3/5): Mr Trump’s IQ or academic results have never been released publicly but as this article estimates, it’s reasonable to say Mr Trump is of above-average intelligence but a long way short of the 156 IQ score of Bill Clinton. If I was an American, I would hope my President had substantially above average intelligence as it’s, to state the obvious, an above average job.
 
Judgement and decision making (1/5): For a man whose transition team includes his daughter, a proposed Secretary of Education and Vice-President-elect who both believe the Earth is less than 6,000 years old as well as his own pronouncements such as 'Putin is a stronger leader than Barack Obama” or “China is a currency manipulator” or “Climate change is a hoax”, it appears Mr Trump does not value, or use, facts or objective information in a way most world leaders do.
 
Despite the many question marks surrounding Mr Trump’s suitability to be leader of the free world, he will assume that role in nine weeks’ time.
 
His success is critical for both the United States and the rest of the world. I certainly hope he rises above his obvious character flaws and surprises me and a vast majority of still-shocked people around the globe.

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