Benchmarking: what you need to know, and why

At the RCSA International Conference last year, the theme was Targeting Innovation for Productivity and as I wrote about in InSight 197 it was an excellent conference. 

One of the aspects that was mentioned by more than one speaker was the importance of benchmarking. The point being that there is little benefit in going down the path of innovation if you do not know what success looks like, specifically. There are two different levels of success, firstly improving against your internal benchmarks and then measuring yourself against industry best practice benchmarks. 

Keynote speaker, Tom McKaskill said ‘metrics and benchmarking are essential (in effective innovation).'

Each agency can measure themselves against their own benchmarks but more relevant are industry benchmarks. 

Here are some industry-wide benchmarks for the 2010/2011 financial year.  

• The average total remuneration paid per income producer was $98,638 (an 11% improvement on 2009/10).
• The average percentage of gross profit spent on total staffing and management costs was 55%. Best practice benchmark is 42% (top 10% of agencies).
• The average gross profit returned for each $1 spent on Income Producing staff was $2.64 (5% lower than last year). Best practice benchmark is $3.60.
• The number of perm placements per person for 2010/2011 was 11. Best practice benchmark is 22.
• Average perm placement fee was $7,042 (down 2% on last year)
• The annual average temp/contract hours processed per person (FTE) was 15,200. Best practice benchmark is 29,000.
• Average temp/contractor hourly charge rate $48.20 (up 5% on previous year). Average pay rate was $36.20
• Average temp/contractor gross profit per hour was $6.80 (1% down on the previous year)
• Average temp/contractor gross profit as a % of sales was 14.4% (down from 17% the previous year). Best practice benchmark is 24%.
• Marketing expenditure as a % of gross profit was 5.3% (down from 5.9% the previous year).
• Total expenditure as % of gross profit was an average of 78%. Best practice benchmark is 56%.
• Average total expenditure per income producer was $201,855 (up from $196,352 in the previous year).
• Average total expenditure per person was $144,050 (up from $139,694 in the previous year).

This data is from the Recruitment Industry Benchmarking survey of 107 Member participants. The profile of these participants is as follows: 

Member participation by State:

Vic 39% - NSW 34% - QLD 7% - WA 6% - SA 2% - NZ 11% - TAS 1%  

Member participation by location:

44% in the CBD, 37% in the Suburbs & 19% Regional  

Member participation by GROSS PROFIT volume: (Gross profit is the sum of perm fee's + temp/contract gross profit + other gross profit)

• 13% of members achieved Gross Profit of $5m or more
• 68% of members achieved Gross Profit of $1.5m to $5m
• 19% of members achieved Gross Profit less than $1.5m 

Perm sales by sector:

• Executive is 10% of placements & 12% of the RIB perm sales volume
• White collar & Professional is 52% of placements & 54% of the RIB perm sales volume
• Blue collar is 38% of placements & 34% of the RIB perm sales volume 

Temp & contract sales by sector:

• Executive is 6% of the RIB sales volume
• White collar & Professional is 52% of the RIB sales volume
• Blue collar is 42% of the RIB sales volume  

All Annual RIB Averages are based on a team of 15.4 (11 income producers and 4.4 support staff - FTE's) 

It's critical to know whether your efforts at improving specific areas of your company's financial performance are paying off. 

If you don't know, I suggest you find out. Now.

Note: this is not a paid endorsement for the RIB Report. There is no commercial arrangement, financial or in-kind, between myself and the owners of the RIB Report.

More powerful lessons from The Rare Find: Think through the assignment

After writing last week’s article summarising the lessons from George Anders’s fabulous book The Rare Find: Spotting Exceptional Talent Before Everyone Else (Portfolio/Penguin, 2011), I re-read my favourite chapter of the book and I thought the lessons of that chapter were worthy of further analysis in these pages. 

I am referring to Chapter 2: The Talent Problem. This is such a great chapter because it addresses the fundamental problem (in my view) of how so many people turn out to be mis-matched to the demands of the job they are hired to do. 

Here’s how Anders puts it: 

Peter Drucker, the legendary business-strategy scholar, spent much of his career studying the ways that organizations hire. His advice always flowed from the same starting point. Before you do anything else, he wrote, ‘think through the assignment.’ That sounds painfully simple. It seems so obvious that many leaders dash past that step. They prefer to get started right away on the high-stakes drama of grilling candidates and slotting them into a scoring system. Yet Drucker was right.  

The chief blunder zone for the talent searches comes at the very beginning, when it is time to think broadly and clearly about context. Put simply: ‘What is this job all about?’ if that question isn’t properly resolved at the start, mission myopia ensues. And then the risk of trouble later on becomes catastrophically higher.    

Such errors happen in one of three ways. The talent hunting framework can become unduly narrow or superficial, with assessors mesmerized by a few showy traits that are exciting to evaluate but aren’t really at the heart of success.  

Other times, quests become so hazy that there’s no clear sense of priorities. That’s when hiring decisions are tinged by desperation, a dispiriting randomness and Oprah-sized paychecks for people who ultimately deliver YouTube quality performances. 

Finally, there’s the special circle in hell for quests that become frozen in time. Yesterday’s formula for success begin to splutter as jobs and society change. The people running selection cling to tactics and mental models from a now-gone era, unable to adjust to changing times.  

I was unfortunate to see this exact thing happen at close quarters in a previous life. 

Many years ago I was employed at a recruitment company that was searching for a new CEO after the founding CEO had announced his intention to retire.  

The incumbent CEO, although not a recruiter by training was smart enough to know what he didn’t know. He built a team of people around him that had strengths that he didn’t have. The company grew strongly and consistently. It developed and kept most of its key talent at both consultant and management level. It made very healthy profits. It had an outstanding reputation in the market. It looked set for a future of unlimited growth and prosperity.  

In my view, the person being sought as the new CEO, although not necessarily having to have a recruitment background, would need to be a person that possessed the following competencies:

• Pick, encourage and develop managerial talent
• Provide a compelling future vision and path for the company as the founding CEO departed
• Be a credible front person for the company to clients, candidates and other stakeholders
• Have high personal integrity
• Be prepared to acknowledge when he/she didn’t know the best answer and seek information from those who did

The decision was made. The new CEO was announced.

In his favour was that he was well connected, spoke confidently and was a Chartered Accountant (like the retiring CEO).    

However on the other side of the coin was that he had never been a CEO previously, he had never worked in recruitment company, he had never successfully lead and grown a team of predominantly sales people, in fact, most of his experience was of a consulting nature, not of an operational nature.

At the time I thought it a little odd that such a left-field background was considered suitable for such an important role at such a critical time in the company’s history.  

Anyway, what did I know? I was just a recruiter in my early thirties, not a company board member or someone with a long history of ‘broad business experience at an executive level’ who is supposed to know how to select an appropriate CEO. 

The appointment turned out to be a rolled gold disaster. 

Within twelve months, all the best managerial talent was either forced out or they jumped before they were pushed. Many of these people had been the heart and soul of the company since the company was formed. They were the guardians of the strong (and rare) culture of being highly professional yet very competitive and driven.    

The goose responsible for laying the golden eggs had been killed and it wasn’t long before the supply of golden eggs stopped. Sales stagnated, profit fell then collapsed. 

All because nobody at the board level had ‘thought through the assignment’. The factors critical for success were not identified and as a result, the new CEO was totally unsuited to the job he was offered.  

I don’t blame the new CEO. He was doing the best he could with the limited skills he had. He should never have been offered the job in the first place. The board was one hundred per cent at fault. 

The outcome was that in a few short years, a brilliant company was reduced to a mere shell of its former glory and was sold to competitor for a fire-sale price. 

All because nobody genuinely thought through the assignment to accurately identify the core competencies required to do the job successfully.  

Breast cancer awareness and fundraising: my commitments

My sister, Mary, died in London (UK) on 18^th of January 2012 at the age of 44.

 

Four years previously, she had been diagnosed with breast cancer. Despite the best medical advice and care and Mary’s optimism and fighting spirit, she lost the battle with this terrible disease that claimed her life.

 

Mary’s death has had a devastating impact on my family and I. That impact is also felt by many other people who have been a part of Mary’s life in both Australia and the UK, where she had lived for the past twenty-one years.

 

Mary’s husband of 17 years, Sam, is now left to raise their two children Ned (aged 5) and Lola (4) by himself. Ned and Lola will grow up without their mother’s love and guidance and at such tender ages, and as time moves on, they are likely to have little memory of their own experiences with their mother.

 

My parents, Betty and Tony have lost a wonderful, caring daughter and my sisters, Anne and Jill, and I, have lost a very dear, loving sister.

 

In memory of my sister, my family and I are committed to raising awareness of breast cancer and also to raising funds for breast cancer charities and breast cancer research.

 

I have set up a page on my website which provides details of my family’s current fundraising efforts. I have also listed a range of websites that provide further information about breast cancer, breast cancer research and breast cancer fundraising.

 

I encourage all of you to visit the page and do what you can to make a difference to the lives of many women and their families (maybe even your own) who are or have been impacted by breast cancer.

 

You can visit the page here.