We brought together recruitment executives for our Dynamic Roundtable at Claridge’s to find out
The fight for talent is fierce in the capital. Every business knows that only with talented people will be able to grow, innovate and develop.
So why is it that there’s not more support for the work that recruitment firms do? They have traditionally had something of a negative reputation, yet this often-uncelebrated sector supplies business with the skilled and experienced people it needs to grow.
We decided it was high time someone shouted about the crucial work this industry does – and more importantly, find out what it needs to grow. So we brought together a group of executives and founders from leading mid-market recruitment and executive search firms to discuss the future growth of the recruitment industry at our Dynamic Roundtable at Claridge’s on Tuesday 28 January 2014.
Our thanks to all our contributors, and to Lloyds Banking Group Commercial Finance for their support. So what do they need to grow?
Obstacles to growth
“Pay when paid” and RPOs
Recruitment process outsourcing (RPOs) and the “pay when paid” model are a major issues for recruitment firms.
There was a feeling that RPOs are causing a decrease in the quality of service and candidates provided, and that often RPOs go for firms who are “fastest to the button” rather than those who can provide the highest-quality candidates. One guest said he felt that that “where agencies have been ultra-specialising, RPOs say: ‘Why bother?’ ”
Ultimately, the presence of RPOs in the market was causing a squeeze on margins, jeopardising the service recruitment firms were able to provide, and reducing the number of suppliers of candidates.
HR could get more involved in the procurement of recruitment services, suggested Roger Brown of Lloyds Banking Group, although he also wondered if they were sometimes part of the problem.
All that said, one or two attendees said they had created their own in-house RPOs and were seeing lucrative returns from that part of the business.
And Simon Dear of Tangent International said you can make money with RPOs. The margin has improved over the last seven or eight years: “It’s about adding value.”
RPOs have a much bigger opportunity for growth, as Lee McQueen of Raw Talent Academy pointed out. The basic salary structure is higher, and the commission structure is higher.
There are also issues with procurement getting in the way and making the recruitment process and relationship with recruitment firms less direct.
The “pay when paid” model was posing a serious threat to cashflow and business model, and many voiced deep concerns about it. It made planning difficult, and could leave firms in difficult financial positions.
Competition for good sales staff
There is still a fundamental shortage of good sales staff. Internal training can help overcome this, although there is “still a finite group of good recruiters out there,” said Toby Babb, founder of Harrington Starr.
The reputation of the industry
Recruitment and executive search firms still feel like they are largely distrusted by those outside the industry, and that their industry has a bit of an image problem – even though the general feeling was that its reputation has improved in recent years.
A culture of customer service excellence is key, as are manners and respect. “It’s not just about the KPI mentality,” said Babb. He recommended adding value to customers above and beyond the expected service, such as providing events, literature, and other ways of adding unexpected value to clients.
The internet is not a threat
Are the roles of LinkedIn and other social media in the job-finding process a threat? No, said Tony Goodwin, founder of Antal International. “We are not going to be disintermediated by the internet. If anything, social media has enhanced our visibility.”
Opportunities for growth
International opportunity & the UK market
London was still seen as a fantastic market, but also one that has a tendency to suction talent away from other UK regions.
Expanding overseas was seen as a key opportunity for growth for most around the table, although some were unsure about how best to explore new markets.
Goodwin’s advice was to “just go for it”. “You don’t have to be Coca-Cola to be an international company. What our industry is good at is being entrepreneurial. We just need to get out there. Get on the phone. Work things out.”
Lee Garland of Tangent International said that China can be difficult to break into, but there is still good potential for expansion in Europe, despite common concerns it is slowing down.
He believed that, in Europe, British recruitment firms can often provide better service than local firms. That gives UK companies the opportunity to win contracts there. “We can generate the talent here and ship it abroad,” he explained.
Other markets that got our guests excited included Africa, Asia, and the Middle East. Clive Hutchings of STR Group said he’s found the Middle East relatively easy to break into, with a huge number of vacancies available, – although it can often take a very long time to place candidates.
Nigel Peters of Alium Partners, who has operations in Buenos Aires, noted that the British brand is still respected overseas and that’s a key asset in international expansion.
Rob Walker did urge some caution though: “Don’t underestimate cultural differences.” He said Australia can be easier to break into than France simply on the basis of cultural understanding.
A key element of succeeding overseas was recruiting managers on the ground with an in-depth knowledge of the local market. And franchising your brand can reduce your financial risk.
The SME market
There is opportunity in winning clients in the start-up and SME market, as this size of business seems to be growing, especially in the tech industry.
Finance and exit
Walker warned his fellow guests about IPOs, saying you are very unlikely to “get money off the table” through one, yet they take a huge amount of resource. “People see an IPO as the gold at the end of the rainbow, but it’s not true,” he said. Stuart Hinds of Baker Tilly suggested that it’s not even worth considering an IPO unless your turnover is £100m+.
The private equity m
arket was a much more reliable source of finance, he added. The large volume of MBOs had now largely fallen away, and now private-equity-backed acquisitions were becoming the norm as the acquisitions market has picked up.
Kim Collins of Lloyds Banking Group agreed, and said she’d seen a significant rise in the number of private-equity-backed transactions in recent years. She noted, though, that neither the bank nor these firms were doing “silly sums” – more like 1x leverage, with a gross leverage of 3x or 4x.
Liam O’Connell of CK Associates noted that he’d spotted a rise in US firms looking to acquire UK recruitment firms.
Walker raised the point, though, that you shouldn’t underestimate the emotional drain of selling a business on staff morale.
But while M&A is attractive, should recruiters set up to sell? There was a universal agreement that natural growth should be their primary focus.
Our thanks to all contributors, and to Lloyds Banking Group Commercial Finance
Mr Anil Ahluwalia, Relationship Director, Lloyds Banking Group
Mr Toby Babb, Founder and MD, Harrington Starr
Mr Nick Bowles, Head of Client Engagement, APSCo
Mr Roger Brown, Regional Director, Lloyds Banking Group
Ms Sarah Clifford, Business Development Manager, Recruitment, FM and Consultancy Services, Lloyds Banking Group
Ms Kim Collins, Relationship Director, Lloyds Banking Group
Mr Ian Comben, Relationship Director, Lloyds Banking Group
Mr Simon Dear, Chief Executive, Tangent International
Mr Tony Goodwin, CEO, Antal International
Mr Lee Garland, Director of Permanent Recruitment, Tangent International
Mr Tom Hadley, Director of Policy & Professional Services, Recruitment and Employment Confederation
Mr Stuart Hinds, Partner, Baker Tilly
Ms Sophie Hobson, Editor, LondonlovesBusiness.com
Mr Clive Hutchings, International Business Director, STR Group
Mrs Jenny Knighting, Sales & Marketing Director, LondonlovesBusiness.com
Mr Lee McQueen, CEO, Raw Talent Academy
Mr Liam O’Connell, Director, CK Associates
Mr Mark Oldfield, Director, Phoenix Resourcing Services
Mr Nigel Peters, Managing Partner, Alium Partners
Mr Rob Walker, CEO, BIE Group
Catch up and join in on Twitter with #LondonRecruiters
Find out more about our Dynamic Roundtables