04 September 2013

Recruitment business model crisis: RCSA and ATC conferences summary

Four days of conferencing is full on. It's not just the formal sessions, it's the networking and socialising that barely gives you a moment to stop and think about and process what you have heard.

The contrast between the two conferences was huge.

For the first two days I was mainly surrounded by corporate recruitment and procurement types, hearing about the ways in which companies are sourcing and managing their contingent workforce. The following two days were spent amongst Australian and NZ recruitment agency owners and managers as we heard from various experts on leadership.

If you wanted any evidence that the recruitment industry globally is struggling, you only needed to pay attention to the stats that ATC Conference Chairperson, Matthew Rodger (MD, Contingent Workforce Solutions, Alexander Mann Solutions) showed us on the first morning:

Company
2008 revenue USD$ billions
2012 revenue USD$ billions
% Change
Adecco
26.8
27.5
+ 2.6
Randstad
22.8
22.9
+ 0.4
Manpower
21.5
20.7
-3.7
Kelly Services
5.5
5.5
0

These figures are the result of three very significant changes to the recruitment environment:


Although all three of these changes have been apparent for at least the last five years, the recruitment industry as a whole has been very slow to react. The traditional recruitment agency business model of last century (non-exclusive jobs, success-only temp and perm income streams services by salaried employees) is still the predominant model some thirteen years into the new century.

Undoubtedly the clients of recruitment agencies want the following:

(a) Higher quality candidates
(b) Delivered faster
(c) At a low (or lower) price
(d) With minimal risk
(e) And evidence that each of (a) to (d) above is occurring

Clients have always wanted (a) and (b); nothing's changed there.

The focus on (c) has come about because of the perceived lower cost of DIY recruitment.

The focus on (d) has occurred due to increased legislative obligation on employers with respect to such workplace issues as OH&S, anti-discrimination, working visas and employment status.

The focus on (e) is the result of both human resource and recruitment departments becoming far more accountable as well as the involvement of both the finance and procurement departments in ensuring a company's recruitment activities are both accountable and cost-effective.

From all of this I offer you the following four conclusions from my four days of conferencing that I see will be very important in having the future of recruitment agencies being one of growth and prosperity rather than of struggle and contraction:

1)    Technology
If you still have piles of manual resumes on desks and you wade through these to find candidates for jobs then I would advise you to pack up now and find something else to do. The importance of being able to find assessed and available candidates within seconds is the competitive advantage for a vast majority of the recruitment industry and unless you have a full book of retained client work you need to get on top of this NOW.

As Merrill Skyring, Head of Strategic Sourcing at Deloitte said at the ATC conference when giving her views on the various suppliers in the contingent workforce space; ‘those with the best technology will win the most business'.
 
2)    Connectedness
Robert van Stokrom, CEO of DFP Recruitment spoke at the RCSA Conference about the importance of connecting with the people within his business and continually checking the ‘temperature' of company morale via technology and personal visits from company executives.

Robert saw it as critical that his employees saw their job as important and they were doing it within a company that cared about them as individuals. In a job as tough as agency recruitment, the culture created by the company's leaders is a core part of long term success.

DFP Recruitment's success in growing their business as well as being the most recent recipient of the RCSA's Corporate Social Responsibility Award demonstrates that commercial success need not be sacrificed in the pursuit of creating a caring place of work.
 
3)    Market niche/Business model/remuneration
Rob Davidson
, Co-founder and Director of Growth at Davidson Recruitment, gave a fascinating talk on the first day of the RCSA Conference, sharing his journey as a recruitment executive unshackled from operational responsibility and free to explore how his company might grow.

Rob shared how Davidson had expanded beyond recruitment services and how they are focused on increased specialisation of their recruiters to ensure they have deep and acknowledged expertise to position each person as a recruiter and a consultant. Rob also shared how Davidson are changing their remuneration model based on what Rob had learned from one of Europe's most successful recruitment entrepreneurs, Miles Hunt.

Simply put, it's about bringing smart, entrepreneurial recruiters and other professional consultants into an equity or profit model sooner rather than later (or never). This model of specialisation and reward is very similar to the one that is driving the growth plans of Kennedy Reid the brainchild of one of Australia's most successful recruitment entrepreneurs, Stuart Freeman. When two of our industry's very smart owners start doing something different, you would do well to pay attention and learn.
 
4)    Don't just be better, be different
Former Wallaby captain and entrepreneur, John Eales shared some excellent examples of what he has learned from his time in professional sport and business. The example that stuck most in my head was the one of the differing fortunes of Kodak and Fuji.

Last century Fuji invested heavily in R&D while Kodak focused on film. As John concluded ‘Kodak became better at what they did but it was at something that was ultimately less relevant'.

Kodak focused on the market as it was while Fuji focused on how the market might be in the future. Fuji's strategy of diversification enabled it to continue to be a relevant player in the digital photographic age while Kodak filed for Chapter 11 bankruptcy early in January, 2012.

As I shared earlier, Rob Davidson has freed his time to work on his business, not in his business. Smart recruitment agency owners were present at one or both conferences to do just that. The other owners who thought about attending, and ultimately didn't attend, are those stuck in the paradigm of getting better at what they do now, or worse, just doing more of what they do now.

In my mind, it's absolutely crystal clear that the recruitment industry in this country is now starting to split based on the tough decisions (or lack of them) made by owners. The winners haven't all seen all the benefits of their tough decisions, yet and all the losers haven't felt significant pain, yet.

Nobody rings a bell to signify the game has changed but the game has changed. The traditional recruitment industry business model is in crisis. The old model is no longer the clear pathway to growth and profitability like it has been for many decades.

Recently, the bell silently tolled.
Did you hear it?

Related articles:
22 signs you are slowly going the way of the dinosaurs

No comments:

Post a Comment