Publishing the eBook “Business Valuations in the Recruitment Industry - A Guide for Recruitment Agency Owners” has generated some great discussions.
I’m indebted to a few industry stalwarts for some great discussions on sustainability, which has such an impact on valuations.
They have correctly pointed out that staff turnover needs to be included in the conversation on sustainability. Across the industry, turnover is too high, with most reports suggesting it averages 40%pa.
However, that number needs to be analysed. If an organisation had no staff turnover would be an equally poor outcome as it is clear that some new entrants to the recruitment industry are not suited to the industry and should look for alternate careers. At the other end of the scale, we all know of recruitment consultants that have reached the end of their recruitment career and should move on to the next phase of their working life.
Managers need to be constantly assessing their staff, working diligently to train, coach and lead their staff, and making clear decisions when staff are not making the grade. “Fail quickly” is an attribute of the best recruitment organisations.
Related: Talent Pools and Sustainability
When looking at sustainability how should staff turnover be assessed? Some of the most successful companies I’ve worked with have high turnover. Deeper analysis shows that almost all the turnover comes in the first 6 months of a new, young consultant joining the organisation, and those that stay longer than 6 months tend to stay an average of 3-4 years which is “above average”. Does that company have a sustainability problem? Not if they have a solid staff attraction program, are working diligently to select the right consultants and provide them with every assistance during those first months.
But maybe the measure of staff turnover is the wrong measure. From a business sustainability perspective, other issues arise.
Does the client relationship disappear with a consultant moves? Looking at work structures and the “business-to-business” relationships give an insight into that issue. Reducing the instances of 360-degree consultant activity and ensuring multiple points of contact with every client will reduce the single-client to single-consultant issues.
The ultimate measure of sustainability relating to turnover could be the time taken to get the desk back up to productivity after a consultant departs. Can the organisation hire, onboard, train, support and assist the new consult in delivering results fast?
Stop and think about the organisational maturity required to make that happen. The recruitment agency would need to have a pool of “warm” consultants ready to hire, have a clear onboarding process, have the management and support to get the consultant productive, and have the embedded client relationships that can be seamlessly passed to the consultant.
That sounds like something a potential buyer of a recruitment agency would invest in.