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After the downturn - what next?

Recruitment Process OutsourcingThis time last year the majority of recruitment firms were still focused on containing costs and smothering their clients with service to win any new job brief that clients might be vaguely considering. Things have certainly improved both in anecdotal feedback and in measurable criteria through placements, revenue and profitability. While for many the downturn was not as protracted as has happened previously and is some cases not as severe it required the attention of management to address the most important issues that impacted the viability of their business. On top of the list of course was managing expenses.

It appears that many did this adeptly, reducing working hours rather than shedding jobs (with staff approval), reducing back office costs and where possible changing leasing arrangements to their advantage. The companies that had greater exposure to fixed costs found 2009 very hard indeed.

One of the most important aspects of going through an economic downturn is to learn from it and put in place that learning for the future. The adage about businesses being stronger for having come through a recession is true. Mostly we learn better from the tough times rather than "plain sailing". When there is a reasonably easy match between client demand for talent and a sufficient supply of the right talent then recruiters make money but it is easy for organisations to fall into what some call the "fat, lazy and happy" syndrome that takes a real shake up to get out of. This is what happened to some companies.

Some of the adaptive responses that we saw such as changing work hours, job sharing, sub leasing and the like are good tactical solutions that worked during the down turn and might be put back on the shelf now that times are getting better. But this need not be the case entirely. The emphasis on better management of costs and increasing productivity will remain.

Related: Recruitment around the world - Global Migration

As Recruitment companies of all sizes are returning to healthier results and profitability many industry leaders are reviewing strategic opportunities that allow them to gain competitive advantage through increased productivity and a lower cost base.

Productivity & Cost focus

One new trend to recruitment but not so new more widely is Recruitment Process Outsourcing (RPO) or to reflect it more accurately Off-shoring. I have referred to this trend previously in Recruitment Extra as it remains one of the potential major strategic trends along with the increasing use of Social Networking sites and Web 2 technologies.

Off-shoring in this context is the outsourcing of Recruitment processes to companies based overseas, typically in India, Sri Lanka, the Philippines or Malaysia.

Off-shoring has as its overriding purpose the use of technology, labour arbitrage and process standardisation to provide lower cost, scalable platforms to manage recruitment processes. RPO includes activities such as; candidate generation, reference checking, Headhunt research, lead generation, database regeneration, managing Ad responses, job posting and other customisable processes.

What does this mean to recruiters? Most Recruitment Consultants enjoy and focus on the interaction with clients and their "better" candidates. That is not surprising and given the right levels and types of activity, and a few other skills, they will make Placements. What Recruiters don't generally do as well are database maintenance, communicating with unsuccessful candidates and the other process oriented facets of their work. However, owners and managers need these activities to be done and done well. Most recruitment companies HHMC speak with have thousands of untapped potential candidates on their database that have not been updated. A candidate who wasn't right for a position in 2006 may be ideal for a different (higher paid) role you have today, but your consultants don't know that because his new qualifications and experience aren't shown on their system. No-one has contacted him since 2006.

Those things that Consultants typically don't focus as thoroughly on are important but they are not core activities. They aren't the activities that management wants its best internal talent to be weighed down with when their strengths lay in client relationships and business development.

Non-core but important organisational activities are the areas that provide the best and easiest returns for Recruitment companies in off-shoring. The RPO off-shoring trend is growing rapidly in North America, Europe, and the UK and emerging in Australia. Of course many sectors in Australia have already taken this direction for some years, as can be seen in Banking and Financial Services, Telecommunications and ICT.

Where a recruitment organisation chooses to draw the line on core versus non-core is a strategic and commercial decision. In our experience the majority of companies prefer to maintain all client contact and most of the key candidate (short listed?) contact. Some, with different models in areas such of healthcare or international placements draw the line in the manner that works best for them.

Strategic gain

For recruitment companies off-shoring their process oriented activity provides the opportunity to increase the effectiveness of their best performers and enables them to spend more time with clients and candidates. It shifts the ratio of locally employed staff toward revenue producers and substantially lowers the costs of non-core work. Continually investigating opportunities to do business differently, more effectively and at lower cost should be part of every business plan. Off-shore RPO services may provide part of this strategy. Companies with better cost structures and the capacity to fluidly ramp up for growth and scale back when needed are attractive propositions for acquirers.

Categories: Offshore

Tags: Staffing, M&A Valuation Series, Offshore Recruitment Services, Business Valuation, advisory services, Recruitment Process

Picture of Richard Hayward

Richard Hayward

Richard has 35 years of experience with outsourcing, recruitment and advisory firms. His record of achievement includes national recruitment management roles, and executive search and selection across the ICT, banking & finance and sales & market sectors. Since 2003 Richard has been a principal of HHMC, guiding recruitment agencies through acquisition and exit assignments. Located in Sydney, Richard works with private and public recruitment agencies globally. HHMC’s innovative business strategies and well-grounded guidance result in clients realising their personal and corporate goals.

P: +61 2 9221 8285 M: +61 411 488 544

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