I was going to write this post a couple of weeks ago after attending an RCSA breakfast seminar in Auckland but some more pressing issues arose. The seminar was a presentation from Nigel Harse who runs the RIB Report comparing year on year key performance results for recruitment firms and it was a surprisingly insightful event that threw up some genuine pearls of wisdom for us in the New Zealand recruitment industry.
For the uninitiated (and judging by the desultory 33 people present I’m guessing there will be quite a few), RIB stands for Recruitment Industry Benchmarking and in their own words this Report:
“…is the only detailed monthly report on business practices and performance, specifically for independent Recruitment Agencies throughout Australia and New Zealand.”
I found Nigel’s lackadaisical, down beat, seen-it-all-before delivery quite refreshing from the usual Ra-Ra and fanfare accompanying similar presentations. You can tell he knows his numbers, and how recruitment businesses should be run, inside out. For a guy who was CEO of Ecco before their mid-90’s merger to form Adecco, you know he’s been around.
Some of the information and findings delivered were fascinating, and also incredibly useful, so I thought I would share my favourite take aways on the Whiteboard:
- The RIB average (from 117 privately-owned recruitment firms) of income producers to support staff was 2.7. But in New Zealand the average is 2.2 meaning here in New Zealand income producers need to produce 20%-25% more than their Aussie counterparts to pay for support staff. Something to think about when considering if your recruitment consultants really do need another Resourcer.
- The RIB Top Ten performers overall have low staff turnover at 10%-12%. Most people who join the top performing firms stay, and do well. The winning culture flourishes and grows. He then advocated regularly cutting out the lowest performing 5% of your staff. “If people can’t cut the mustard within 3-6 months then move them on. You’re doing them a disservice trying to force them to achieve something that is beyond their reach.” I kind of like that.
- The top ten have a healthy mix of perm and temp/contract revenues. An ideal mix is just 40% perm but in New Zealand we had a dangerous addiction to Perm, reaching 60%. This has since reduced to 50% but contracting and temps is certainly an area NZ firms need to concentrate on far more, to enable more regular revenue, easier forecasting, and greater ability to plan for the future.
- Only 2 of the top 10 firms had dual, or hybrid, recruitment desks (recruiters doing both temps and perms). There is an argument that in the smaller NZ market this is likely to occur more frequently but the natural instinct of a recruiter on hybrid desks is usually to push for a Perm fee over a Contractor placement. The allure of a bigger, quicker win is too much for many.
- Pay rates for temps in NZ have grown 18% over the past year, but charge rates to clients has only increased 14%. Who is covering the cost of that 4% gap? Us recruiters of course, dropping our pants further to work harder, for less money, while our own temps make more money from us. The top 10 firms stood firm on price and payment terms and were willing to walk away from profit-killing business.
- The average billings per income producer has long hovered around the $22k per month mark. How do your recruiters compare to that average?
- A whopping 71% of Gross Profit went towards management and staff expenses in New Zealand firms. This is dangerously high and the healthiest businesses are way lower around the 40% mark. Rewarding staff for poor performance? Paying huge base salaries to “big name” recruiters who have lost the fire? Taking out chunky drawings from the business to fund a pre-recession lifestyle? I have seen and heard it all in NZ recruitment in recent years.
Overall the biggest thing that stood out for me was a very low number, though. The number ten. Because out of the 117 members contributing to RIB across AU/NZ only ten are from New Zealand. I think this is a pretty useful tool for SME recruitment owners, hugely insightful, providing real metrics that matter, and enabling you to compare how you are trending against your peers and competitors. Only ten firms does make it harder to identify a genuine trend for NZ. Hopefully this post will encourage more of you to look into it and get involved. Information is king.
Right then. Have a good weekend everyone and to those of you attending RHUB next week I look forward to sharing some drinks and some stories with you all at the pre-conference party on Wednesday night. Cheers!