Politically, we are a divided business here at Rice HQ. We have three loony-lefties whose allegiances lie somewhere between Green/Labour/Te Pāti Māori. Someone who sits at the absolute centre of political moderation who won’t tell us who they’re voting for. And a David Seymour fan who has also said that Hitler “had one or two good ideas”. Although every political party claims to offer up something different, there is one political football that all parties seem to be kicking in the same direction; Government is currently spending too much money on contractors and consultants. Apparently, in 2021-22 spending on contractors and consultants by public service departments and ministries rose to $1.2 billion, an increase of $303.7m or 32 per cent over the previous year. Now Labour claim that this isn’t Labour’s addiction to big government, but instead a reflection of market trends in a post Covid world, whilst National, ACT, and NZ First say it’s indicative of left-wing politics and wouldn’t happen under their watch. Regardless, all parties are gunning to get this number down. Labour slightly. National a lot. ACT big time (although David Seymour is yet to explain who will be left to issue gun licenses to white supremacists). Regardless of outcome, Government is set to become smaller, with the majority of shrinkage coming from the Contracting and Consulting space. For the Wellington recruitment industry, and to quote another hero of the right, this is what Trump would describe as both “not good” and “sad”.
So firstly, who is spending all this money on us currently? According to this marginally interesting article, the top 10 spenders/offenders in order of spend are:
Ministry of Education ($237m); Ministry of Health (154m); Ministry of Social Development ($116m); Department of Internal Affairs ($112m); Ministry of Business, Innovation and Employment ($109m); Inland Revenue Department ($96.6m); Ministry for Primary Industries ($43.7m); Department of Corrections ($41.8m); Oranga Tamariki – Ministry for Children ($37.1m); Ministry for the Environment ($28.6m)
And who’s getting the money? Again, the top 10:
1) Robert Walters: $64.7m
2) H2R Consulting: $24.88m
3) Inside Executive Recruitment: $24.7m
4) Momentum Consulting Group: $23.6m
5) PwC: $21.8m
6) Beyond Recruitment: $21m
7) Accenture, $20.8m
8) EY (Ernst & Young): $20.3m
9) Deloitte: $17.33m
10) KPMG: $10.7m
First thing you’ll notice is the top 4 places all going to Recruitment agencies. Secondly, the discerning reader may notice that Robert Walters is receiving three-times the revenue over the highest placed Consulting firm. Also, the firm receiving the most of our hard earned tax dollars is, clutch my pearls, from overseas. When the man in the street reads articles like this, it is again “not good” for the perception of our industry. Once again, we are painted as champagne Charlies, raping the coffers of New Zealand, flicking out CVs, to spunk our ill-gotten gains on flashy suits which are in equal parts fantastic and ridiculous, as modelled by Shay Peters in the aforementioned article.
I’d say these figures don’t tell the full story.
Although spend is certainly higher with recruitment agencies versus consulting firms, margins most certainly aren’t. Robert Walters may be receiving $65m of revenue from the top 10 spending government departments, but with margins sitting at 11%, they’re keeping about $7m of it. And high-spend with a low margin means one thing: Robert Walters have shitloads of contractors working in government agencies. Contrary to what that awful David Seymour chap would claim, most of these contractors are working hard to keep the lights on. Without a large contingent workforce, Government departments wouldn’t function. Think of all those Contractors paying tax, buying beers after work, and actually working in critical roles. Now compare this to how Consulting firms work. Often with margins running closer to 100%, as some overworked graduate does the work of a Partner, AoG Consulting panel members like PwC may be seeing $10m of a $22m spend. And this means less people helping New Zealand, making more profit for an overseas business. That’s the real waste of money.
Anyway, congratulations to Robert Walters for building such a Government powerhouse, and best of luck to all you Wellington firms in what is likely to be a very different market come 14th October.