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Wellington Recruiters play the Waiting Game

By May 24, 2012No Comments

I’m back in sunny Auckland this morning after a couple of days in Wellington where I went on a mission to cram in as many client visits as possible to get a feel for the mood of our capital’s recruitment community following the submissions of the tenders for the “All of Government” contract.  Before the trip I thought ahead to this time: back at work sitting in the coffee lounge and typing up the blog, imagining my mind wandering off into analogies of cold, gloomy, blustery Wellington matching the mood of the town’s recruiters as they awaited the fate to be sent down upon them by MED, AOG, CoE and other Government-type acronyms that basically spelled:  fee reduction or no business.

But it wasn’t actually like that at all.

Wellington was sunny with a refreshing chill in the air.  And the mood of the recruiters?  I can only imagine it has progressed from the sweaty  palmed terror of clicking the “Submit” button a couple of weeks ago.  Overall I would describe it now as a mix of resigned ambivalence and determination to face any future adversities head on and make things happen no matter what the outcome of the assessment process currently underway.

Of course, some are approaching this differently to others, but I was impressed at the overall stoicism.  Recruiting for Government is a major part of most Wellington recruiters’ balance sheets and failing to make “The Panel” could have a disastrous effect on their future ability to remain profitable (or, in some cases, get back to achieving profits again!)

But I suppose it is bred deep into the DNA of recruiters to remain positive and forthright even under extreme duress and opposition.  Some of the IT recruiters I met don’t rely that much on Government work anyway and shrugged at the prospect of not making the cut.  Others have a huge back catalogue of Government transactions and filled reams of Excel spreadsheets to reveal to MED what savings they could have made in the 2010/2011 financial year had those placements been made under the new proposed fee and margin percentages.

Some global firms remain bullish and continue to hire new staff regardless of the looming decision, planning to simply redeploy recruiters if they aren’t invited onto the panel.  Other globals fear the rumours that MED are favouring submissions from NZ-owned recruitment businesses.  Some boutiques have done great work in the past 18 months in Wellington, but weren’t able to demonstrate this within the parameters of the tender document which asked for details on placements made in the period of July 2010 to June 2011.

Chinese whispers abound, swirling around like the famous winds whipped into the harbour through the Cook Straight, but I was able to get the overall sense that there was general consensus about the following probable outcomes:

  • Perm fees are likely to eventually settle around the 10% – 11% mark.  Those of you who tendered otherwise, it won’t mean you pitched it wrong, as there is also a period for “commercial negotiation” likely to come up where you can choose to get in line or not.  Personally I would beseech Government to recognise that recruitment is a service where you get what you pay for and plumping for too low a figure will reduce access to the same amount of talent at the right levels, who will probably be encouraged towards the private sector instead.  But I don’t hold out much hope for this and believe Government will view this first and foremost as a pure cost-cutting process and plump for the lowest figure possible.  What concerns me here is that these rates will be public knowledge and I wouldn’t be surprised to hear of other big corporates starting to ask for the same figure too, eventually undercutting the value of the entire Wellington recruitment community.
  • Contract margins could be as low as 12% but perhaps as high as 16%, particularly on the IT side.  Temp margins will probably be slightly higher.  The same concerns apply.  Ultimately, if this is the way it goes, it will mean a radical change in the resourcing models of recruiting firms who will need to build up their Candidate Manager teams, change a focus from sales-driven commission-hungry recruitment consultants onto job-filler account manager types, earning less money, but applying less commercial acumen and drive to their role.
  • Many seem to believe there will be a panel of around 40 recruitment suppliers nationally.  This same exercise was recently carried out for the providers of legal services to Government.  50 suppliers were cut down to a panel of 20.  No-one knows how many recruitment firms have responded to this AOG tender but rumours vary from 80 up to 300!  All the MED have said so far is that “it will be a panel, and it won’t be just 5 or 6 providers…” Hardly illuminating.
  • The types of firms will be predominantly specialist recruitment firms who have expertise and strong networks in their chosen fields.  There will also be a preference for NZ-owned businesses.  However, there will certainly be a number of places for larger Generalist firms too, including some global brands, who can recruit across all 9 facets of the matrix (Perm, Contract and Temp;  IT, Corporate and Admin).
  • Some centralised Government departments are mandated to be on this contract.  However, there are a few of the larger “Eligible Agencies”, those who have the choice, deciding they will probably opt out.  It wouldn’t surprise me if some of those still go back to their suppliers once the new panel is in place and ask for the same rates anyway, which they’ll probably get (unless this goes criminally low below 10%!) but actually avoid the 1.5% admin fee the others will have to pay back to the MED.

I would stress that this is information gathered from a range of opinions, beliefs, experiences and educated guesswork.  But then the pure state of limbo all of the Wellington recruiters now find themselves in is a fertile breeding ground for such Chinese whispers.  The lack of information handed out to recruiters has been staggering.  No-one knows how many will be on the panel, or what volumes of roles a successful bid will create, so it is impossible for anyone to adequately prepare and position their business accordingly.

So the Wellington recruiters now play the waiting game.  A decision “around June/July time” has been proposed.  After that, the Government will get to see what level of talent they can get for squeezing recruitment into a lower-cost reactive model.  Sadly, the focus will be more on achieving the 30% cost savings rather than the level of talent provided to the public sector, and an entire shift of mindset will be required to continue running profitable operations in the capital.

Jonathan Rice

MD at New Zealand rec-to-rec firm Rice Consulting and co-founder of on-demand recruiter offering Joyn. Recruitment agitator and frustrated idealist, father of two, husband of one, and lover of all things Arsenal and crafty beer.