Protect your Profit - Top 5 legal pitfalls to avoid for recruitment

From Shortlist reporting on Captain’s Table – 5 Legal Pitfalls

Inadequate and inarticulate terms of business are the chief source of disputes and disagreements with clients, according to a legal advisor.

It may “seem pretty basic”, but the actual terms of business – what recruiters do and get paid for – are not articulated very well to employers, says Corvus Group director and former Adecco general counsel Martin Richardson.

Part of the problem is that organisations outsource not only the writing of their business terms, but also the understanding, he told a recent Navigator Consulting Captains Table

“Where did your terms of business come from, did you borrow them? That’s OK, but do you actually understand them?”

Instead of being “overawed by a legal document”, Richardson suggests creating Q&A-style documents for recruiters and clients, to ensure all parties understand the terms.

Terms of business should include robust clauses around the following:
*         What services are being provided – and how well is this articulated to clients about “what it is you get paid to do, and what it is your contractor is delivering onsite”?
*         Introductions and fees – How long is an introduction period? Is there a period of exclusivity? What is an introduction? What is an engagement? What are the client obligations?
*         Replacement policies – Are timeframes clear? What events give rise to a replacement, eg is it just termination? Are exemption terms and credit notes clear?
*         What costs are passed on to the client? And how are these passed on?
*         Supervising and managing contractors – when it comes to contractor performance and management, is it clear who controls the relationship?
*         Replacing contractors – What do terms say about passing through notice periods?
*         Safety – Are the obligations of both recruiter and client clear?
*         Who is liable for the acts and omissions of contractors? Richardson asks, “if you are not supervising and controlling your contractors, then should you be accepting liability, just because they’re your employee – does your margin cover that?”.
*         Non-poaching clauses – Is there an inclusion in the terms excluding poaching of client employees? He doesn’t recommend including these clauses: “I wouldn’t do it; your business is recruitment.”
*         Payment terms, including passing on interest and debt recovery costs – “More often than not, I see permanent invoices on commencement of employment. I don’t know why you do that… Why would you wait that long?” Instead, Richardson recommends payment terms that start when the candidate is supplied, and if they don’t work out, it is covered by the replacement policy.

He also suggests developing clear strategies around recovering bad debts, including a process with timeframes, scripts and templates, training staff on how to act on overdues, and knowing the “walkaway position”.

Importantly, contract terms cannot be introduced after commencing the transaction, Richards advises, recalling the case of a recruiter who sent a candidate’s details to a law firm, unsolicited, with the terms of business attached in a separate email.

“The law firm gladly took the candidate, on a six-figure salary, and in turn said ‘we’re not paying the fee because we didn’t agree to the terms’.”

That recruitment company took the dispute to court, where it was ruled in the client’s favour.

Technology hype blinds leaders to marketing ROI

Recruitment leaders are wasting too much money and effort on marketing that doesn’t align with their business fundamentals, often blindly following trends that deliver little or no return on investment, according to an industry advisor.

“Technology is a really easy way to get caught up in a [marketing] hype cycle,” Navigator Consulting director of marketing and research Matt Fink told a recent Captain’s Table event.

“Marketers use the same tactics used to help your business on you,” he says. “It means that we tend to do things that we don’t necessarily apply the same level of due diligence to.”

By way of example, Fink draws on his own experience as head of marketing for a multinational office supplies business, where he took three-to-four months to define and accurately work out the return on investment of a marketing automation platform – during which time he was fielding daily sales calls from providers trying to sell him the latest and greatest platform.

“Blindly falling into those decisions does a number of things. One, we fall for it every time, and two, it distracts us away from the fundamentals,” he says. “You need to have strong fundamentals in your business, and marketing is no different.”

And while marketers are very good at finding the next opportunity, they don’t necessarily look at the things that haven’t worked as well, Fink adds. So when looking into the ‘next big thing’ in marketing tools and technology, he suggests leaders spend as much time looking for what doesn’t work with the technology as what does.

Another mistake agencies make is failing to differentiate their service offering from the rest of the market, particularly through company websites.

“This is the biggest mistake I’ve seen in my time,” Fink says. “There’s a disparity between what you say when you go out and sell and what appears on the website.”

Going further, he says there is often inconsistency between how leaders or owners describe their service offering compared to other people in the business.

“Leads can come from anywhere,” Fink says. “And if somebody in your organisation can’t communicate even the elevator pitch, there’s a missed opportunity.”

Marketing and sales need to be in concert with all parts of the organisation, he adds.

Same same, but different

Fink also sees too many organisations using “cookie cutter” approaches to marketing, which just do not work. “If you want your business to grow, you don’t want to be following exactly what everyone else is doing.”

If organisations take the same approach with marketing for every client and candidate, without taking into account variables around who they are and what makes them unique, this leads to another key marketing faux pas: misalignment.

“This is not just misalignment between marketing and sales,” he says. “It’s also a misalignment in the way in which we execute [work]… from sales through to marketing through to management and leadership through to the support functions of the business.”

When alignment between business functions breaks down, Fink says organisations end up producing marketing material that doesn’t support the sales effort and drive value within a business. It also makes them more susceptible to marketing phases and fads. Instead, he reminds leaders to keep marketing strategies simple, and keep them aligned to the business.

Looking back over his 20-year career, Fink says marketing basics haven’t changed. “Technology’s changed, the way we take it to market has changed and the platforms have changed, but there are still the same fundamentals.”

He says the key marketing fundamentals to consider are:

  • Define what makes an offering unique;
  • Clearly demonstrate value;
  • Share the wins;
  • Be where the audience is – look at alternative channels to reach candidates and clients;
  • Choose smart and invest wisely in technology and tools;
  • Don’t automate relationships – people buy from people;
  • Act now, prepare for tomorrow.

Matt presented at Navigator Consulting’s recruitment industry leaders forum – Captain’s Table, kindly supported by Job Adder and A Positive.

From Shortlist: Thursday 04 October 2018 2:47pm

Recruitment’s shift away from employing ‘outdated’ 360-degree consultants is potentially the most important transformation the industry will face, according to an advisor.

The 360 model is broken, and has been for some time, says Navigator Consulting MD Tony Hall. “It’s really time to start looking at different options.”

Good 360 recruiters are as rare as hen’s teeth, he says, and he suggests the pressure on recruiters to fit the model is one of the biggest contributors to high staff turnover. “It’s so rare for someone to have all the different skills required to be a high-performing 360 recruitment consultant.”

Agencies are increasingly deconstructing the 360 model, breaking the process into admin, resourcing, recruitment and sales roles, though with varying degrees of success to date, he notes.

Many labour hire companies have been operating in this way for years – “they have business development managers that understand the industry really well… and they might even be from the industry they are selling into, so they’ve got a lot of credibility” – while larger agencies are more likely to succeed with dedicated business development managers, following the US blueprint.

For smaller firms, Hall recommends the most senior people spend their time out in front of clients, and avoid putting junior consultants into “difficult sales situations that are way over their head”.

Small companies should be hiring people into resourcing or account management roles, to start, while senior leaders outsource their resourcing so they are freed up to do the sales part of the 360 process.

(Hall is a big advocate of offshoring, particularly for “very administrative and repetitive tasks”, such as market mapping, database building, database maintenance, and even sourcing. “I think offshoring is one of the success secrets of reducing staff turnover in the recruitment industry,” he says.)

Building the right commission structure

“If there’s no sales responsibility for a recruitment consultant, then their commission structure should be at a lower level than a recruitment consultant that’s required to bring in the business and fill the role as well,” Hall says.

He suggests recruiters on “relatively high wages” are already incentivised to fill jobs. “So you might have more of a bonus structure than a commission structure for people that are not actually selling.”

That said, Hall agrees the 50/50 commission structure adopted by some agencies including Aquent will promote team work – provided leaders monitor placement ratios. “Managing efficiency is really important, because a great salesperson might bring in multiple roles, but if they’re not filled by the recruiter, then the company is paying wages for both… and not getting any return on investment.”

Hall also advises hiring biller leaders with a track record of success (a minimum six years’ experience), rather than looking for potential high performers to train up into sales-focused roles. “Young stars are hard to find,” he says. “[Graduate programs] are so hit and miss.”

It’s certainly unlikely the one graduate will have the 20 or so attributes required of a 360 recruiter, Hall says. “It’s relatively easy to find people that start off their career resourcing, and the good ones can be promoted into… senior recruitment or senior sales streams, or leadership, depending on their attributes.”

Breaking out the recruitment process also provides career progression, which Hall says is sadly lacking in the industry. Then focusing on supporting high performers, rather than underachievers, will keep them performing and encourage them to stay.

Part of this includes regular training, both formal and informal. “Short and regular training can make a massive difference, in terms of business profitability and reduced staff turnover.”

He suggests regular weekly sessions, even for 30 minutes, will bring the team together, foster communication, and upskill even the most seasoned recruiter. “It’s an absolute critical success factor.”

Hall is facilitating discussions on the “obsolete” 360 model, and its alternatives, at upcoming Captain’s Table events in Melbourne (30 October) and Sydney (31 October) for agency owners and leaders.

From Shortlist 30 August 2018

Recruitment agency leaders are meticulous around developing budgets and financial plans, as well as measuring consultant activity, but more work is needed to improve performance across all areas of the business, new research shows.

The Recruitment Industry Business Confidence Index survey (RIBCIX), run by Navigator Consulting MD Tony Hall, reveals many leaders are falling short in implementing marketing, quality assurance, exit strategy and operations plans.

Source: Navigator Consulting

The RIBCIX survey is still collecting data for the current half-year, and recruitment companies are invited to participate here to receive the full report.

By Tony Hall, Managing Director, Navigator Consulting

Great recruiters who bill well and stay for many years are now rare as hen’s teeth. They are unlikely to move from a profitable and happy desk which they probably built themselves over considerable time. Next step for them is promotion into a director role or starting their own business so they can enjoy a higher percentage of the fruits of their labour.

Industry demand for recruitment consultants is huge, with over 1958 jobs currently advertised on Seek. Every agency is after the perfect recruiter who is good at selling, admin, resourcing and recruiting. Furthermore, they must be resilient, persistent, communicate well and bring a network with them and of course fit your current team culture.

It seems absurd that any one person has all these attributes – yet that is what many recruitment firms are still looking for – hen’s teeth. Firms insist the people they hire have all of the above and bill 3-4 times their salary in the first year. Again – impossible. The only source of experienced consultant supply is from industry staff turnover which continues to push 50% due to a suspected combination of poor hiring, training and development. It is time to think differently about business growth and look at alternative strategies for bringing on new talent.

Solution #1Break up the highly complex recruitment process into admin, resourcing, recruitment and sales as it is much easier to find people good at one (not all) of these activities. They can be sourced from within or outside the recruitment industry. A quality recruitment process will have around 50 steps which requires specialist expertise at each stage. It is unique to the recruitment industry in Europe/Australasia that we persist with the 360 model of trying to find consultants who can sell, resource and perform accurate admin despite the proven benefits of the US model which separates sales, recruitment and admin processes.

Solution #2Offshore low-level admin and sourcing tasks to save money and free up your senior staff to spend more time in front of clients and candidates where the real action (and revenue) happens. Our clients who have taken on experienced offshore resourcers have benefited from considerable improvements in client, candidate and staff satisfaction with the added bonus of significant cost reductions and revenue increases.

Solution #3Free up your senior managers to spend much more time in front of clients and candidates. They are much more credible and will find the sales process easier and faster. Forcing inexperienced, junior recruiters to cold call or visit clients can actually damage brand and industry reputation if they are not well trained, knowledgably or have specialist networks. Senior decision makers will always buy more from other senior decision makers and often find it insulting if a poorly trained junior is sent in their place. Also, your senior managers are paid way too much to be stuck in the office running unproductive meetings or administration tasks. Get them out generating revenue and building your brand instead – the return on investment will be so much higher.

Solution #4Appoint your managing director as chief sales officer. He or she will find it easier to secure meetings, easier to close complex sales and will be revered by the team for bringing in large pieces of new business. Great recruiters who are not suited to sales will be happy to fill these new roles and are more likely to stay longer and enjoy higher job satisfaction if they are not forced to do activities they are not good at. It makes no sense for a MD or CEO earning big money to be stuck in the office day in day out performing low level admin tasks and pointless meetings. The real money (and fun) happens out in the market in front of senior prospects, clients and candidates. This additional sales activity will translate to pure profit small, medium or large companies alike.

Solution #5 Hire biller leaders instead of unproven consultants – I believe you will receive a much bigger return on investment with lower risk by hiring proven leaders who can quickly attract clients and staff rather than unproven recruiters with a limited network and track record of success. Leaders with 6 years or more experience are much more likely to grow the business and cover their costs faster.

Solution #6 Develop a graduate program. Here is your chance to shape your own high performing recruiters before they develop bad habits and dangerous short-cuts. It does take time to break-even on a graduate, but time flies and before you know it your best graduates are building and running their own teams. Graduates will require a strong training program and well mapped-out career plan. With such a shortage of recruiters this is an important strategy to mentor and grow your own talent.

Solution #7 – Regularly train the skills you require of great recruiters. Even the most experienced consultants will fall into bad habits and need refresher training. Inclusive training brings your team together, sharpens their skills and allows senior people to help pass on knowledge to rising stars. One of the biggest recruitment company turnarounds I worked on was hugely successful almost solely due to the implementation of a well-run weekly interactive team training session.

Solution #8 Attend a big conference in the US. You will pick up so many new ideas and techniques from recruiters in the highly competitive US market. They are famous for owning their specialties, building very close relationships with their local communities and using a sales driven account management approach to secure new business and grow existing customer bases. For over 10 years the Americans have also perfected offshore resourcing in India and particularly the Philippines. There is a massive well educated and trained recruitment resourcing market in Manilla keen to move out of the US night shift to work for Australian companies in a similar time zone.

Solution #9 Stop micro managing and start quarterly goal setting and planning. Sit with your people, determine their strengths and weaknesses and make sure you are not forcing them to perform tasks they hate and/or are not good at. Instead of confronting old-school performance appraisals, consider individual quarterly business plans that clearly define goals, targets and activities required for success. Staff will own this plan if they feel involved in mutually setting goals and will work harder to achieve results if they feel supported and listened to. Set simple activity targets that will eventually lead to a placement every week – for example 4 unique client/candidate interviews. Nobody likes micro-management (MM), yet many firms still persist in this activity as a misguided form of risk management which counter-actively results in staff dissatisfaction, turnover and poor employee attraction when MM word gets around.

Solution #10 Support the great people you already have. Most managers end up spending all their time trying to turn around under-performers then are shocked when one of their best people resigns. Contrary to instinct, managers must spend most of their time supporting their best performers who are a big loss if they leave and are much more likely to increase performance year on year than the marginal low performers who typically shout out for more attention and cause everyone the most grief.

Solution #11 Establish a commission/bonus plan that is simple, regularly celebrate and reward people who make an additional effort to do more than the job they are paid a salary for. Pay incentives for new business, innovation, efficiencies, cost savings or activities that are over and above what is required by an average performer – even for junior support staff. Avoid over or double paying incentives for work brought in by senior managers or sales people and then filled by non-client facing staff. Incentives should be paid for extra effort and contributions to the over-all business.

Solution #12 Consider part-time and work from home options for proven performers. Experienced high billing recruiters are so hard to find that it is worth providing flexible work alternatives so long as they are productive, have agreed goals and don’t disproportionately draw on company resources. Several recruitment firms have built highly profitable businesses around experienced part-time working mothers job sharing.

For more ideas on business growth advisory, recruitment industry staffing solutions, remuneration structures, offshore resourcing or business and performance planning please make contact anytime.

Tony Hall, Managing Director, Navigator Consulting, E:

From Shortlist, Wednesday 22 August 2018
Agency leadership, Research, analysis & reports

Recruitment leaders across the board are reporting record financial results, with staffing challenges the primary obstacle to realising further growth predictions, new research shows.

Some 76% of agencies expect to grow net revenue (after temp and contractor costs) by at least 10–20% in the December half, compared to June, according to the Recruitment Industry Business Confidence Index survey (RIBCIX), run by Navigator Consulting MD Tony Hall.

Participate in the RIBCIX Survey Here

The RIBCIX survey, based on responses from more than 100 recruitment businesses around Australia so far, shows 66% of companies are forecasting net profit (before tax) growth of 10–20% or more for the quarter.

“Many managing directors I’ve been speaking to have said they’ve had one of the best financial years on record, and therefore it’s no surprise their forecast for the next quarter is going to be quite strong,” says Hall.

About 58% of companies will grow their consulting headcount by 10–20% or more, and 42% intend to increase the size of their resourcing teams by the same amount.

The key challenge these businesses will have is finding and adding staff to manage growing workloads, as a marked shortage of quality recruitment talent persists and, Hall says, “the good people simply won’t move”.

As a result, more recruitment leaders are looking at alternative strategies to hiring from within the industry, such as offshore resourcing and hiring graduates, and an increasing number are hiring professionals from the industries in which they recruit, says Hall.

These latter professionals tend to have deeper knowledge of the industries they’re recruiting for and can communicate “at a much higher level with their clients and candidates, with more credibility”, he adds.

Staff training spend is also increasing, although not quite in line with revenue and staff growth forecasts, with 42% of business leaders saying they will increase their investment in that area by 10–20% or more.

And more than half predict spending more on technology, yet 50% of companies expect no change in operating costs, “which is a little unusual because you would think you’ve got to increase costs and [add] staff, and it takes some time for those new staff to become productive”, Hall says.

Temp and perm forecasts on an even keel
The RIBCIX shows a similar proportion of companies expecting to grow their temp/contracting (58%) and permanent (57%) revenue.

Hall says this is unusual – the market usually favours one or the other – and the main conclusion to draw is simply indicates “very positive market conditions”.

The RIBCIX survey is still collecting data for the current half-year, and recruitment companies are invited to participate here in order to receive the full report.

Participate in the RIBCIX Survey Here