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Yes, I am pleased to confirm that the Australian recruitment agency sector, after a near-death experience in late 2008 and early 2009, is alive and well. Reports of the industry’s irrelevance were proven to be well off the mark as growth and profitability rebounded strongly in 2010.


That doesn’t mean it was a year without challenges.


In fact, for the pessimists (realists?), there was plenty of news and events throughout the year to be circumspect about.


Looking back at the events of 2010, here are my conclusions:


1.          Its’ not easy being a public recruitment company    
Geoff Morgan and Andrew Banks made it look so easy. Initial investors in the 1994 Morgan & Banks IPO finished up making about 11 times their money by the time the company was sold to TMP five years later. Since then the share market performance of Australian listed recruitment companies has largely been less than stellar.  
The largest of these (by capitalisation), Skilled  , had a horror 2010. CEO Greg Hargrave  , son of founder Frank Hargrave, fell on his sword after presiding over disastrous 2009/10 results (year-on-year revenue fall of 24% and net profit decline of 55%).  
Chandler Macleod   humiliatingly exited their much-trumped, 5 year, $400 million ADF recruitment contract within 8 months, although by financial year’s end, had delivered a huge profit turnaround and made an unexpected, but successful play, to buy Ross Human Directions   from under the nose of peoplebank  .  
Peoplebank   was taken back into private ownership while private equity. HJB  ‘s results continued their downward spiral. Rubicor  ‘s net liabilities remained in nine figures and Clarius  ‘s share price plateaued 80% off its peak.  
The new Morgan and Banks vehicle, Talent2,   continued on its merry way, with managed services now responsible for 55% of total revenue and 64% of profit, proving that not only is diversification a smart strategy but the former sheep classer and former actor continue to prove their money-making smarts more than 20 years after they made their first fortune.  
2.          PSAs: the Promised Land or Sucker Punch?    
 As Chandler Macleod   proved to their detriment – a high-profile, multi-year, mega-million dollar exclusive recruitment contract, is not necessarily a good thing. This, of course, did not stop hundreds of agencies investing thousands of hours, collectively, in reading, submitting and negotiating Preferred Supplier Agreements.  
Recruitment panel slots were up for grabs this year all over the country; the South Australian Government  , Queensland Government, the National Broadband Network, Brisbane City Council, QANTAS, Caltex, ANZ Bank, Origin Energy, Powerlink,  numerous Federal Government departments and agencies  and a collective of 42 Victorian local councils   were just some of the organisations who put some, or all, of their recruitment requirements out to tender.  
‘Winning’ tenderers faced a range of issues including low fees and declining margins, demanding reporting requirements, volume rebates, no temp-to-perm fees and no guarantee of any minimum volume of work.  
By the end of 2010, many companies were reviewing their ‘wins’ and discovering that, like Chandler Macleod  , what very little book profit (if any) they were making, was eroded by the many hidden costs of winning and servicing these contracts.  
HJB   Chairman, Jeff Goss  , even went so far as to say, at the HJB AGM in November, the NSW State Government C100 Contract had ‘failed to deliver a meaningful profit for the company’ and that HJB were ‘no longer investing any time in it’.  
3.          Hays in Australia is a money making juggernaut  Asia Pacific CEO, Nigel Heap  , must be a very popular man in the Hays   corporate headquarters. In 2008 the APAC region was generating 30% of the Hays Group operating profit.  
Two years later it had ballooned to 63%. In the second six months of the 2009 calendar year, Hays in Australian and New Zealand generated an astonishing $37 million operating profit on $100 million of net fees.  
In a presentation to London stock market analysts in April, Hays estimated that they were generating net fees in Australia and New Zealand that exceeded the combined   net fees of their three nearest rivals (Hudson, Michael Page and Robert Walters  ).  
Hays may be a popular target for criticism in many quarters of the recruitment industry but they just shrug it off and keep doing what they do best – generating jobs, making placements and doing it all far more profitably than any of their rivals.  
4.          There are creative alternatives to endless tender writing and ‘lowest price wins’ PSA pitches    Australian software company, Atlassian  , turned the traditional PSA process on its head. Atlassian invited any recruitment company to submit candidates for their Sydney vacancies, as long as they were prepared to agree to Atlassian’s terms.  
The quid-pro-quo was that each recruitment company was restricted to submitting a maximum of 4 candidates, but the more candidates submitted, the lower the success fee.  
ie: 1 candidate submitted = 18%* fee, 2 = 17%, 3 = 16%, 4 = 15%. (* denotes including  GST).  
Some recruiters hated the resume-referral nature of Atlassian’s approach while other recruiters cheered because they were being judged solely on the quality of the candidates they submitted rather than their size, reputation, previous dealings, tender writing skills or low prices.  
5.          Outsourcing is here to stay    
In July 2009, Indian-based recruitment offshoring specialist, IMS,   opened for business in Australia. The IMS business model is to take on the non-core process aspects of the recruitment function, such as sourcing, CV formatting, talent-pooling and passive candidate searches. These processes are undertaken in India to assist recruitment clients focus on their core high value-add activities.  
By the end of 2010, IMS had contracts with nearly 30 Australian recruiters and was well on the way to replicating their success in the UK recruitment market.  
6.          Beware the determined and creative job seeker    
Young Melbourne HR professional, Ellison Bloomfield  , made the recruitment world sit up and take notice when, over a 4 month period this year, she publicly blogged and tweeted her way into her dream job (leadership development) with her dream employer (Deloitte Australia  ).  
Ellison’s campaign ‘Are You My Next Boss?’    was a bold step into the unknown for a job seeker frustrated with the traditional job board-recruitment agency path to a new job.  
The possibilities available through an intelligent and focused use of social media, struck a small but significant blow to the traditional recruitment process.  
7.          The workforce is ageing; we have to deal with it    
Late in the year, the ABS released a report:  Social Trends, September 2010: Older people and the labour market, which told us that people 55 years and older make up 16% (1.9 million people) of the labour force (up from 10%, 30 years ago).  
In 2008, 57% of Australians aged 55-64 were employed. This placed Australia 13th, close to the average across the OECD. This is not good enough.  
The ABS report identifies that increasing the labour force participation rate in the 55 years plus age group (currently 42% for men and 27% for women) is critical in taking our overall labour force participation rate from near 66% to 69% in the next five years.  
There is no way out; the population is aging, the workforce is aging, the economy continues to grow and the demand for labour continues to grow. Older workers are increasingly   going to be an important labour source.  
This year the recruitment sector had an opportunity to truly demonstrate its collective skill, relevance and courage – tackling the ageism of employers.  
8.          Business risks are increasing    In October, a candidate was awarded $306,000 compensation (against an employer, not a recruitment agency) when the court found that the representations made to the candidate by the employer about the ‘success’ of the business were untrue and caused the candidate subsequent loss (after redundancy) when they shut their own consulting business to accept the job offer.  
In New Zealand, during early November, the Defence Report of Inquiry reported its findings into the hiring process undertaken by The NZ Defence Department   and recruitment agency Momentum Consulting   for Stephen Wilce, the former Director of the NZ Defence Technology Agency  . Wilce was fired in September this year when media coverage exposed his claimed background to be riddled with exaggerations and lies.Momentum  ‘s client accepted responsibility for some parts of the recruitment process and then, along the way, varied the terms of engagement and subsequently blamed the recruiter when things went wrong.Increased size, increased profile, increased profits, increased opportunities and increased competition together with increased customer and regulatory scrutiny, have all lead to a much higher level of risk associated with owning and running a recruitment company and 2010 was the year in which this appeared to hit home.  
9.          LinkedIn is both a friend and a foe    
The benefits to agency recruiters of using LinkedIn   to source both candidates and clients has been obvious for years but the threat of LinkedIn to recruiters was starkly revealed in a number of ways this year.  
Firstly the focus on the Australian market was ramped up, when in January 2010, LinkedIn opened their first local office in Sydney. By June, sign-ups of 15,000 new profiles per week in Australia lead Steve Barham  , LinkedIn Director of Hiring Solutions (Aus & NZ), to predict that ‘LinkedIn would cover most of the Australian workforce within five years’.  
As the number of new heavyweight clients for the new LinkedIn Recruiter   product continued to mount (HP, Rio Tinto, IBM, Vodafone Hutchison  ), recruiters were quickly realising the significance of LinkedIn Global CEO, Jeff Weiner   stating that ‘the recruitment solutions division is the biggest and fastest growing division of the business’.  
10.    Resume fraud continues    
In September, it was reported by The Sydney Morning Herald   that in late 2009 an Australian ‘doctor’ had conned his way into a senior lecturer’s position at the London School of Medicine and Dentistry  .  
The ‘doctor’ in this case, Vitomir Zepinic  , had a long history of lying and fabrication behind him, much to the embarrassment of his British employer. As the SMH reported:  
‘For years Zepinic has falsely claimed his medical degrees had been lost due to the war in his homeland (Serbia). Using this excuse, he was able to work as a psychiatrist at Toowoomba Hospital for two years. In 2002 the Queensland Medical Board discovered he had no medical training.’  
‘Zepinic routinely lied, used forged documents, faked the signatures of other medical practitioners and made false declarations about his qualifications, investigators found.’
In the same month, background screening company First Advantage  , released their 2010 Background Screening Trends Australian Report  , which among many other startling results, noted that:

  • Misrepresentations relating to Employment History and Educational Qualifications   doubled in the last six years.
  • One in four professional membership checks   recorded a discrepancy relating to the membership/graduation dates.
  • One in every 25 reports recorded a disclosable criminal outcome  .
  • One in every 18 applicants inflated their previous salary   by more than $10,000.
The brazen nature of many employment fraudsters was highlighted in August when Clive Peeters   payroll officer, Sonya Causer  , convicted of stealing $19 million of her employer’s money, subsequently changed her name, ‘modified’ her CV and shortly after departing Clive Peeters in disgrace, easily found another job when she was recruited by publicly-listed medical products company, ITL  .  
11.    Recruitment agencies are far from dead    
ASX heavyweight, Amcor  , decided to revert back to a panel of 16 external recruitment agencies in October after a four year period of being serviced by an internal recruitment team.  
Industry news service ShortList  , quoted an Amcor spokesperson as saying that ‘Amcor would be better served by moving back to outsourcing a larger proportion of its recruitment requirements’.Nine recruitment and recruitment-related companies made it onto the BRW Fast 100 List  , announced in November 2010.  
12.    The recruitment sector is far from dead    
In further welcome news, Research house, IBISWorld  , released a summary of the Australian recruitment sector’s most recent financial performance as well as some predictions for the medium term.  
They expect 2010/11 revenue to top AUD$1.9 billion (up 2.2% on 2009/2010), with after-tax profit of AUD$60.7 million and predict 2011-2015 revenue growth of 3.2% p.a (compared to 0.6% p.a. growth in the past 5 years), outstripped by profit growth of 5.1% p.a. over the same period.  
13.    Watch this space (2011) – mobile    
With firewall restrictions at work and the phenomenal success of the iPhone, Blackberry  and Android  smartphones continuing unabated, astute recruiters were realising the benefits to be had in launching mobile applications.  
I expect 2011 will be a break-out year for recruitment agencies in offering ‘apps’ that will connect them more frequently and more deeply with their target client and candidate market.

And finally, in case you weren’t already convinced, it was confirmed that the Australian recruitment sector produces some of the smartest business people in the country.  
This was amply demonstrated this year when industry legend, Andrew Banks  , sold his five storey, 9 bathroom, Point Piper (NSW) mansion for a cool $52 million after originally purchasing the property for $14 million, nine years previously.  
Bring on 2011.

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Great blog Ross. 2010 proved recruitment agencies weren't dead but 2011 will show if they have any fight left in them. Technology and innovation can be harnessed by some recruiters but can confound others and competition will be fierce from all sides – social recruiting, RPOs, internal recruiters, as well as other recruitment agencies.

Bring on 2011 indeed, and may the strongest and smartest flourish once more.

Have a great Christmas break with your family Ross, and to everyone in recruitment.


great article Ross. Season's Greeting to, your family and other subscribers

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