The Best Run Recruitment Companies in Australia: Part 1 (Hays)

In October this year James Packer hosted the exclusive annual SEEK major client weekend at his family's Ellerston Estate in the Hunter Valley, 2 hours north of Sydney. Given the sale of Packer's interest in SEEK recently it's a fair bet that it was the last such ‘knees up' for the heavy hitters of the recruitment sector, to be hosted by the Packer family.

The invited guests arrived on the Friday. The biggest spending clients were allocated the luxurious guest cottages and the rest had to make do with more modest motel-style lodgings, normally the base of visiting polo players.

James Packer was an active host, playing the renowned Ellerston golf course (rated #4 course in Australia by Golf Digest) with a couple of lucky guests on the Saturday. Unsurprisingly, Paul Barry's' recently released biography of James, Who Wants to Be a Billionaire, was not a topic of discussion.

What was a topic of discussion on the Friday afternoon at the only scheduled business session of the weekend, was Australia's best run recruitment companies. Discussion was full and frank but the two names that emerged clearly at the top were Hays and Talent2.

Hays Asia Pacific, lead by Nigel Heap since the mid 1990s, has proven itself to be an incredible profit-making machine. Even in the past 12 months when their Asia-Pacific net fees fell 20% to AU$290million, Hays still managed to generate an astonishing operating profit (AU$119million) to net fee ratio of 41%.

Even though I was not privy to the conversation taking place, it wouldn't be hard to work out why so many CEOs would regard these two companies as benchmark companies in their sector.

How does Hays manage to produce a profit performance so far ahead of their industry peers? Some reasons might be:  

1. Geographic coverage - 180 branches in 49 locations across South East Asia, Australia and New Zealand is well ahead of any competitor.
2. Recruiting cheap, inexperienced graduates and training them in the ‘Hays way' - Hays rarely buys business through hiring experienced recruiters. The focus is on selecting ambitious, coachable, smart, young people and then indoctrinating them in the Hays way of recruiting. Hays employs 4 full-time permanent in-house trainers who ensure that a new Hays recruit is well on their way to above-industry-average billings and being a profitable asset for the company, by the completion of probation.
3. Low total-remuneration-to-salary ratio - Consultant salary costs will always be the highest expense item in a recruitment company P&L. The Hays method of paying low base salaries and then a low (most recently 10%) commission on all billings (perms) means that the more fee income an individual recruiter generates, the greater the proportion of each dollar that goes to the corporate pocket. This structure is the core of Hays's profit making as most recruitment companies receive a smaller proportion of net income, the more an individual recruiter bills.
4. Home grown leaders who stay - CEO Nigel Heap and Marketing Director Jacky Carter are just two examples of Hays executives who have spent their whole recruitment career in the company. Only one of the eight Hays local senior leadership team started their career outside of Hays.
5. Growing organically - Buying rival recruitment companies for a premium has never been a Hays strategy. When Hays decides to enter a new market, it launches aggressively and sets its sights high. The Singapore Office, launched in late 2007, was producing over $1/2 million in fee income within 6 months and after 2 years in the Hong Kong market, Hays was already employing 40 staff.
6. Rigorous debtor control and management - Hays employ around 20 full-time credit control staff who are incentivised around the approximate $5 million in cash collection that they are individually responsible for. During the past 18 months, Hays has reduced average debtor days from 39 to below 30.
7. Legally aggressive in pursuing fees owing - In December last year, Hays took Queensland client, Motorline, to court for the disputed payment of a $6,500 temp-to-perm fee. Most other recruitment companies wouldn't have bothered for such a relatively small amount. Not Hays. Not only did they win their case, adjudicated by the Full Bench of the Queensland District Court, costs were also awarded in their favour.
8. Legally aggressive with departing staff -A very curt solicitor's letter is par for the course and further action will be pursued swiftly if Hays deems it necessary to protect its business interests. Early last year, Hays took two of its ex-consultants and their new employer, Charterhouse, to the Victorian Supreme Court and won the case seeking to have the restraint clauses in each consultant's contract upheld (preventing them from working in the banking and finance recruitment sector for four months and from soliciting any client of Hays for a period of six months). The Court again awarded costs in favour of Hays.
9. Use of metrics to drive performance - Like all high-performing recruitment companies, Hays knows the importance of measuring and driving high-pay off activities. During the past 12 months, as the market has been hard hit by a slow-down in hiring, Hays didn't reduce its expectations of individual activities. It just made small adjustments to the expectations it had of the outcomes to these activities.
10. Building niche markets serviced by specialist recruiters - Currently, Hays has 33 separate recruitment divisions, staffed by over 750 perm and temp recruiters. The Hays high growth philosophy is to keep individual recruiters clearly focused on their own specialisation. Once a recruiter builds their patch to a certain fee level, the desk is split in half for another recruiter to come in and create another profitable desk before it is split again, and so it goes. If you talk to almost any small niche recruiter, it's rare if Hays isn't mentioned as a major competitor.
11. Brand recognition - The first incarnation of Hays in Australia, Accountancy Placements, was established in 1976. They are like the IBM of recruitment - they may not be everyone's cup of tea, but if you asked five random people in the street to mention 3 recruitment companies they know, I bet four of those five people would name Hays.

Hays may not be considered a sexy brand or universally loved, but they certainly know how to make money and stay relevant in a challenging, profitable and ever-changing industry.

Disclosure: I was employed by Hays (UK) between January 1989 and September 1990.

Encouraging progress: AFR job ad review 2009

For those of you who have recently joined me, each year, on the last Friday in October, I review all the job ads appearing in the Australian Financial Review (AFR), This year, it was Friday 30 October. I do this with the purpose of categorising each ad into one of four quality ratings (see below). There is no science to this process, just my opinion of the effectiveness of each ad as I read it.

The results for 2009 are as follows:

Note: percentages used are with respect to each of the two broad categories (i.e. Recruitment Agency and Company), therefore each row adds up to 100%

Here’s the comparison data from both 2008 and 2007:

Here's my bullet point summary of the above tables:

• The total quantity of job ads has continued to fall (99 in 2007, 46 in 2008 and 38 this year)
• The most encouraging sign was that companies (as distinct from recruitment agencies) have really lifted their ad writing game over the past 3 years as the number of ads that I classified as ‘poor to awful’ has dropped from 53% in 2007 to only 15% this year
• The recruitment agency market share in AFR advertising continues to decline and has now fallen into the minority for the first time (64% in 2007, 54% in 2008 and 47% this year).
• Although there was certainly still some use of clichés again, the number of ‘fantastic’ or ‘exciting’ opportunities was much lower this year, but asking for a ‘proven track record’ was still popular (still waiting for an ad to request an ‘unproven track record’).
• Mangling of the English language was also far less prevalent than in previous years, although it would be stretching it to say that the ad copy I read was sparkling and original.

The major crimes committed this year by the various ad writers were as follows:

• lack of metrics or data to provide meaningful context (yet again)
• no location stated in the ad
• a specific amount of ‘years of experience’ requested (surely we are beyond this sort of thing by now)
• little or no attempt to describe the organisational culture
• lack of salaries and benefits

Due to the total number of ads in the ‘poor to awful’ category dropping from 30% in 20076 to only 10% this year I had a much harder job plucking out some quotable lines from the 38 ads (which can I only be a good thing, of course) but here are a few:

Most intriguing opening line

‘Our client is recognised for being a catalyst for economic development’

Dubai Director, Legal Services (page 7)

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Best use of clichés in a short sentence

‘We have an exciting, newly created opportunity for a highly commercial individual'
Industry Development Manager (page 4)

Best use of clichés in a long sentence

‘As our business embarks on this exciting period of change, fantastic opportunities exist for highly motivated and commercially focused professionals to become part of our success story'

A dynamic business with an exciting future (page 14)

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Embarrassing spelling mistake

‘Professional qualifications are a given and your working style compliments an open and progressive business'

Finance Manager – Asia Pacific (page 5)

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Most perplexing ad

This ad devoted 109 words to describing the organisation and its culture and then allocated 0 words to describing the job’s accountabilities, responsibilities and challenges (although it did list a salary range). Weird.

Financial Analyst (page 8)

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Perhaps gaining the budget allocation to run a recruitment ad in the AFR, is much tougher these days and as a result the people responsible for the ad are much more vigilant about the quality of ad being run.

Whatever the reasons are, I am gratified to see the quality of recruitment advertising is improving in Australia’s premium job ad real estate.

There was one very different ad format, used twice (on consecutive pages) that I pondered about as to its effectiveness. It is very different and I don’t think they quite pulled it off but full marks to Hill Industries (Adelaide Head Office) for their attempt to be different in advertising the roles General Manager Strategic Direction and Company Secretary.

Have a look here and leave a comment as to what you thought.

The Hidden Profit Available Inside Your Recruitment Company

I wasn't at the RCSA Conference last month on Hamilton Island, but from all accounts it was an excellent conference (well done Julie, Claudia etc, at the RCSA). As usual, Jo Knox from Recruiter Daily was pumping out newsworthy articles from the various presentations and one in particular caught my eye.


It was Top consultants bill five times more: Study.

The article reported on the BSRP Asia research that concluded that the financial difference between the elite recruiter and the average was huge.


Specifically the research found that ...

‘For permanent recruiters the elite performers average $590K NDR (gross profit) each year, while "average" consultants generate just $257K NDR. Elite temp recruiters average $900K NDR while average temp recruiters generate $357K.'


This research does not surprise me in the least and supports the data generated, from a much smaller sample size in the SME recruitment sector, by Nigel Harse's RIB Report.

The conclusions from the BSRP research about the attributes of an elite performer were also, unsurprising. eg demonstrate strong tactical focus, use their time more effectively but can also always make time to spend with clients and know their clients' businesses better than their own, to name three.

More instructive were the major traits of the ‘average' performers (note: not ‘bad performers'). These traits were observed to be:


1. good at strategic planning, but don't take a consistent approach


2. less focused on money


3. over- or under-worked


4. prone to over-servicing clients


5. quick to blame others


6. less skilled at relationship building


Why these observations are especially revealing is that because these average performers are, financially at least, more than justifying their existence, there is an enormous upside in the productivity and profitability of these employees.

These ‘average' performers require zero extra organisational money be spent on hiring, office infrastructure (eg desks, computers, phones etc), base salary, overheads etc, to generate more income and profit. Where does the money need to be spent? Of course, you guessed it - training and coaching!


Naturally I have a vested interest in saying that but when I look at the six ‘deficit' areas listed above, I know that apart from #2 (intrinsic motivation issue) and #3 (leadership issue) that the remaining four areas can be quickly addressed by an effective coaching and training program. How much would that cost?


Of course it depends upon the current skills and attitude of the respective ‘average' consultants but I could confidently say that a $20,000 investment in 6 recruiters across a 6 month period would (very conservatively) yield a 5 fold return on investment.

And the best bit? After the program costs and extra commission or bonus payments for the recruiters, about 50% would go straight to the bottom line!

This is no bandwagon I am jumping on. Last September ShortList quoted me, saying almost exactly the same thing on this topic at last year's RCSA Conference in Christchurch.

A simple example would be if each of those 6 perm recruiters (from my example, above) converted just one multi-listed contingent job into an exclusive job, and as a result filled, rather than lost, the job, an extra $204,000 in gross profit would be generated across a 6 month period (using the RIB report's average perm fee of $6,700).


Forget PSAs, hiring new recruiters, upgrading your database and rebranding - how much ‘easy' profit is hidden, and readily available, in each ‘average' performing recruiter in your team or business?