Recruitment companies spend too much time on non-essential processes and should consider offshoring them to focus on what matters: finding people jobs, according to RIB Report director Nigel Harse.
One of the most crucial problems recruitment firms have is the "wastage" of good candidates, Harse told Shortlist.
Recruitment companies currently only place a fraction of the candidates they spend time interviewing and reference checking, which isn't a profitable way to run a business, he said.
"If a good recruitment company is placing 25-30% of the people they interview, then it's guaranteed you're also pissing off 70-75% of the people you interview. That's not a good efficiency, and the industry needs to get better at utilising the assets they've built up – which is good candidates that they've interviewed," said Harse.
"In an ideal world, you put three candidates forward, one gets the job and the other two are job ready, wanting to move, been reference checked. If a lot of the low-end processes are offshored, it would give the recruiter more time to find those other two jobs."
Search, database maintenance, and debt collection are all simple processes that most recruitment companies can offshore immediately with minimal risk, said Harse.
"Because recruitment is a sequence of elements, some of the elements can be done from absolutely anywhere," he said.
"Debt collection and database call maintenance are calls that can be done by script, and can be done for roughly 20% of what we pay people here.
"Searching for candidates via social media and technology – as long as the search has a strict selection criteria based on academic and work-related experience – certainly for passive candidates, it can be done from anywhere."
Recruitment companies can also offshore more advanced recruiting tasks, depending on the type of business and how much local knowledge is required, said Harse.
"High-volume recruitment, where it's repetitive and the same type of work with the same group of people, [can be offshored], but the minute it wanders too far into the realm of required local knowledge it becomes risky," he said.
"For example, if you need a driver and you're based in west Melbourne – if someone doesn't understand that it takes an hour and half to get from east to west, you could waste a lot of time chasing the wrong people, negating the benefits of offshoring."
Low productivity and high cost were two of the key reasons the proportion of recruitment companies trading at a loss doubled in 2013, according to RIB Report figures.
Australia lags UK and US in offshoring
"Australia has had a hard time over the last few quarters. The market over there isn't as bullish. Since 2010, on a macro level, we've experience 80-100% growth year-on-year across all sectors and verticals. For us, Australia is a shade lower in terms of growth compared to other markets," he said.
"The US market is booming for us, because that market has come back from the recession – where companies have been running quite dry and lean – and hiring demand is up. That market is much more open to the idea of offshoring.
"One of the reasons for the slower uptake in Australia could be because of the smaller size of the staffing market."
Generally, recruitment companies specialising in industries with strict processes and standards are more suited to offshoring, said Somaiya.
"We manage the end-to-end recruitment for clients in the IT and healthcare sectors, because those sectors know what they require, when they require it, and how to acquire it. Any sector with firm guidelines and rules become easier to offshore," he said.
The type of service recruitment companies require from an offshoring provider has also become dramatically more sophisticated over the past two years, added Somaiya.
"Client queries are much more around what your capabilities are, and what your expertise is or knowledge of the industry; so the conversations are much more intelligent compared to previously when it was a sale-orientated pitch. We've moved on, and clients are just trying to understand which of their offshore partners are more credible than others," he said.
New technology needs a champion
New technology or software is an alternative to offshoring that will also reduce back-office costs, but recruitment companies need a technology 'champion' to facilitate any major change, according to Rec Tech Solutions managing director, Col Levander.
"If your staff don't engage with it and it doesn't fit your business needs, then the whole thing falls over," he said.
"You need someone in the company – a cultural champion of the product – who can help staff connect and use the new technology, as well as reassure its purpose within the business. Without that, there's no point in changing systems."
Nigel Harse added that some recruitment companies find themselves in a "halfway house" with technology, which is harmful to productivity.
"If you're not prepared to fully commit to technology, then offshore it. That's where so much cost to a business is, in double handling – a disconnect between the system they're used to manually, and what the digital system demands of them," Harse said.
Originally Published in Shortlist July 2014. Click Here to read the full article (login required).