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Reflections on 2011

Sourced Material
December 15th, 2011

This month Rod & Nigel had a chance to catch up to reflect on 2011 and consider the year ahead.

Rod: Hi Nigel.  Apart from England losing in the Rugby World Cup, what are your thoughts on 2011?

Nigel: I’ll ignore Rugby and just talk about the Recruitment Industry.  The short answer is that the numbers don’t lie and the good times are back for the industry.  2011 will see all temp and perm volume records beaten so recruitment businesses have had the opportunity to grow their revenue.  Profitability will also be at all-time high so most businesses have been able to translate that increased business into an improvement on the bottom line. 

Rod: Have you found the good times have been evenly across sectors and geographies?  I’ve never met as many individual million dollar billers but they’ve mostly been clustered around the mining and engineering sectors.

Nigel:  There is no doubt that some sectors just continue to grow and provide great opportunities for well run businesses.  Other sectors continue to go through structural changes in line with economy fluctuations and that creates winners and losers in the recruitment industry.  In some ways the 2-speed economy applies here as well.

What about you Rod, how has the year been from your perspective?

Rod: Well the mighty West Coast Eagles redeemed themselves to play AFL finals. 

In the recruitment industry we have seen a few trends this year.  The most notable to us has been that selling values have actually dropped in some sectors.  I haven’t said that ever – while profits have risen and fallen, the valuation multiples have tended to stay stable since the late 90’s.  Maybe buyers really did learn the lessons of the most recent downturn and are very carefully evaluating risk now.  Temp and Contract businesses continue to be sought after while Perm-oriented businesses are struggling to find a market.

Nigel: What are the lessons for business owners?

Rod: Many owners pin their hopes on a spectacular sale of their business.  The most prudent wealth creation process is to balance the use of profits – working capital retention, reinvestment in growth, and pay yourself some dividends.  Owners have to take advantage of profits when they are delivered.

Nigel: Do you think this erosion of value will continue?

Rod: No, I am really optimistic that the recruitment industry is rapidly maturing and that valuations will rise in the next few years.  One trend is the way larger corporates are buying – demanding greater sophistication from the service providers and ensuring better quality service provision. 

There is also the harmonization of workplace laws – ITCRA and RCSA are pushing hard to ensure the industry is up to the level of sophistication required to handle the legislative changes.  Maybe this is the beginning of a certification process that will raise the bar for entry into the industry and that will be a good thing. 

There are some good signs that the SME’s are rising to the challenges.

Nigel: That’s true, but there are some basic issues that don’t seem to get resolved.  So many recruitment firms are absolutely inefficient in the utilisation of candidates.  A lot of time and money is spent on attracting candidates yet still only 10 – 15% get placed.  That’s got to change.

Rod: Yep.  And sustainable growth is still an issue.

Nigel:  In 2011 calendar year the RIB Report will show industry average headcounts per firm hit an all-time high, yet the majority of business owners still shy away from training their own.  There have been some great examples this year of large and small companies that have profited from bold and positive internal training processes.

Rod: We are both seeing that SME owners are paying more attention to the principals of running a good business, not just being aggressive recruiters.  Many more companies are appreciating the benefit of leadership training, strategy planning, business coaching and advisory boards. 

There is also a wave of process development and technology implementations.  After what seemed like a decade with few advances in recruitment agency software there is finally a LOT of choice for agencies to gain real flexibility and productivity.

Nigel: It is good to see that we still get excited about the industry despite our occasional grumbles. 

2012 is full of potential for the industry.  Revenue should remain high, profits should remain very positive, and the best companies will find new growth opportunities. 

Rod: That’s true.  Rest well over the New Year break because it’s going to be a busy year.

Sourced from Recruitment Extra December 2011 “Head to Head” by Rod Hore and Nigel Harse

This article was posted on Thursday, December 15th, 2011 at 9:00 am.