One thing about recruitment; it’s never boring. Nothing stays the same for very long.
The past month has seen the announcement of CareerOne (majority owned by Acquire Learning Ltd) moving from job board to recruitment agency (CareerOne Recruit) and Indeed (owned by Recruit Holdings, the fifth largest recruitment agency in the world, by revenue) on that same path in the US.
No doubt the executives of both CareerOne and Indeed have thought carefully about the change in their respective business models that both companies are undertaking and the impact that this change will have on their traditional core constituency, recruitment agencies.
I won’t make any comment on Indeed Hire until there is an announcement about its intentions for the Australian market. For the time being I’ll focus on CareerOne.
Recruit2Retail founder and director Stephen Moir has already made his opinion clearly known by sending CareerOne a terse email, after one of his referrals conflicted with a CareerOne referral of the same candidate to a mutual client:
This industry is already competitive enough, without having to compete with a job board, a job board that mind you, I pay a monthly fee to.
I am happy to be told I am wrong, but CareerOne needs to make a decision, are you a job board or are you a recruitment agency? The saying "Don't shit where you eat" comes to mind."
The CareerOne commercial model of a $3000 placement fee, payable as 12 monthly instalments of $250, minimum two placements, or one-off $4k placement fee, (you can view the CareerOne Recruit terms here) can only be sustainable on a low cost base and high volume.
The low cost aspect is the candidate sourcing and screening service to be run out of Manila. The volume will come from sectors with a large volume of roles (hospitality, retail, health care would be the obvious ones) identified and pursued by a locally based sales force; who are licensees of the CareeOne product (much like the traditional insurance sales model of independent business owners being exclusive sales representatives of a specific insurance company). Whether this means we will be seeing CareerOne Recruit ads on Seek or LinkedIn remains to be seen.
CareerOne will undertake all the invoicing, remitting the agreed commission back to the licensee.
When I met Dorian Van Zyl, CareerOne’s recently appointed Head of Recruitment Services, it was clear that the goals were lofty. Van Zyl is aiming for CareeOne Recruitment Services to reach 200 employees by the end of the next financial year, only 22 months away and to break even before then. A road show is currently underway along the Australian east coast to kick start the company’s recruitment drive. Achievement of the growth target would, to my knowledge, represent the fastest growth of a recruitment agency, from scratch, in the history of the Australian recruitment industry.
Van Zyl wants CareerOne to deliver a world class recruitment service for the CareerOne clients.
The challenge will be doing this without a wholesale departure of their recruitment agency clients, sufficiently annoyed by CareerOne’s play for ‘their clients’, to withdraw their custom (as Stephen Moir has done).
What does this all mean for the traditional recruitment agency?
I choose to look at it through the prism of Treacy and Wiersema’s three value disciplines (modifications of Michael Porter’s Generic Strategies, 1980) that create customer value and provide competitive advantage.
These three value disciplines are:
Operational excellence (eg McDonald’s)
Product leadership (eg Apple)
Customer intimacy (eg Market Life, my local fruit & veg retailer)
CareerOne have chosen Operational Excellence to be their competitive advantage. The agencies likely to be significantly impacted will be those agencies that compete in that same ‘Operational Excellence’ space (ie the transactional recruitment market).
Hays are clearly the current market leader in the recruitment ‘Operational Excellence’ category in Australia. Given the Hays dominance in the mid-market category (say $60k-$120k annual salary), you would think the obvious path for CareerOne to take would be to aggressively target the under $60k SME market where they would be bumping up against the likes of Adecco, Manpower, Workpac, DFP Recruitment, Programmed/Skilled and parts of the Randstad and Chandler Macleod businesses. There’s a much larger volume in this segment of the market, compared to the mid-market, but the competitors I have named are well-established and formidable , let alone the many locally-owned regional or suburban specialists also operating in this segment of the market.
It’s pretty easy to see where traditional agencies will be vulnerable to the CareerOne offering – the localised writing and posting of job ads followed by the manual assessing and screening of both ad responses and database/online search results. This process is currently high cost and, mostly, inefficient. Continual improvement in this area, using both technology and human skill will be critical as margins continue to be under strong downward pressure from clients and competitors.
Any agency who genuinely focuses on Customer Intimacy as their value driver (as loosely identified through having an agency having large majority of exclusive and retained work at above-market fees and margins) will have little to be concerned about by CareerOne Recruit, they simply aren’t competing for the same clients.
The Australian recruitment industry has grown in size and relevance over the past sixty years or so because of the entrepreneurial spirit of the many thousands of recruitment agency owners who have provided a service to their respective clients and candidates.
This has been the case, regardless of economic cycles, government regulation, overseas competitors and, now, recruitment vendors-turned-recruitment-agency.
The next year or so will be another fascinating period in the evolution of the Australian recruitment industry.
Competition; bring it on.
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