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.
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:

Current status
Andy Watt
July 2015
finishes December 2016
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 (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)

FY 2013
FY 2014
FY 2015
FY 2016
Gross Profit
Operating profit
Net Profit/loss
Calendar year- end share price
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.
related blogs
recent blogs


  1. Please don't out him Ross - he's a major source of entertainment for many in the industry!

    Take his recent Shortlist quote:

    "If we're [going to] realise search engine optimisation, [and] marketing and blog capability, we need to be centred on one name to get as many hits on that one name as possible," he said.

    Too funny. The CEO’s now a marketing guru who changes the entire company name to help with SEO and blogging capability!?!

    PS: Who still talks about attracting more 'hits' on websites? Clueless.

    1. you'd be surprised

  2. Investors should have been worried more than a year ago. He's scared off most of his top billing talent, and got rid of most of the experienced senior advice, replacing it with people who lack agency experience. Internal recruitment managers don't cut it.

    Then recycling an old Clarius brand as the new group name, killing off whatever capital the brands used to have. Sell your 10c shares and buy some tissues.

  3. It would be funny if he hadn't destroyed so much shareholder value while being paid a bonus to do so.

  4. One look at the names under the 'one brand' reveals the extent of the damage of the rebranding - Lloyd Morgan - respected accountancy / finance recruitment firm - disappeared. The One Umbrella, THE leading firm for Library / records - disappeared. Candle - one the benchmark for IT recruitment - gone!
    All that goodwill and brand recognition just vanished...and they think this rebranding will somehow reverse their failing fortunes?

    The place is run - from the team leaders to the CEO - by idiots.