Two weeks ago I wrote a summary of the 2011 RCSA Conference, held in Port Douglas. I compiled a list of what I regarded as useful and insightful quotes that were uttered by the various presenters.
Today I return to one of those quotes for a greater examination of it because as the days since the conference have elapsed, I’ve considered its truth and significance.
The quote came from one of the panel members in the RPO discussion. I am sure it was Talent2 CEO, John Rawlinson but apologies to John Healey or Robert Brimm if it was either of them.
This was the quote (well, my paraphrasing of it):
‘Each of the three stakeholders within your client has a different priority with respect to recruitment. These are cost (procurement), quality (hiring manager) and process (HR).’
This is not to say that procurement is unconcerned with quality and process or that the hiring manager is unconcerned with cost and process or that HR is unconcerned with quality and cost. But each of these stakeholders has their own highest priority by which they, respectively, make a judgement about the success of a new employee recruited into the organisation, whether that hire was made via internal or external means.
In the ‘good old days’ of recruitment (last century), before widespread PSAs, internal recruitment departments and RPOs, two of these three stakeholders (procurement and HR) were of negligible concern to agency recruiters because the hiring manager was king (or queen).
In this bygone era, agency recruiters overwhelmingly focused on the wants, needs and whims of the hiring managers. These hiring managers were pursued, lunched and indulged because, in almost all cases, they made the decision to, firstly, use a recruitment agency and subsequently, which recruiter(s) would be used.
This all started to change once CEOs woke to the fact that external recruiters were, collectively, contributing to a big expense line in their Profit & Loss Statement. Individual departments might not have regarded their own recruitment costs as a big deal but as an aggregated total, recruitment expenditure was significant and growing.
What happens when buying decisions need to be centralised? Procurement steps in. Procurement justifies its existence by driving efficiencies (management consulting-speak for reducing costs) throughout the business.
The Recruitment Process Outsource (RPO) business model was perfect for the procurement departments of this world. Lots of flow charts, business cases and Service Level Agreements (SLAs) caused the procurement departments to go all weak at the knees and rush into the warm embrace of the RPO providers. A match made in heaven.
Meanwhile back in the late twentieth century, the growing HR department was coming to grips with being something more than a glorified payroll and personnel processing and administrative centre.
Anti-discrimination laws, unfair dismissal laws and workplace safety laws were all either introduced, or beefed up. The impact of failing to have lawful and effective people processes was potentially much more costly and damaging, both financially and reputation-wise, due to the rapid growth of the internet.
Companies discovered that the consequences of mis-steps in people processes (accidental or deliberate) were multiplied many times due to the new level of transparency and awareness that the internet’s features of immediacy and mass communication provided (as United Airlines discovered after millions of people logged on to YouTube to watch aggrieved musician, Dave Carroll’s witty ditty of complaint United Breaks Guitars ).
At the same time, increased awareness of how important talent was (duh?) to a company’s success, shot up, exemplified by the re-birth of Apple after the return of Steve Jobs and the staggering increase in Google’s share market value over a few short years.
Consequently ‘talent’ and ‘people and culture’ became words and phrases beloved of boards, CEOs and market analysts. CEOs demanded people processes that delivered accountability, certainty, reduced risk and better results. HR got the job of seeing that it all happened.
Smart recruitment agencies realised there was an opportunity to provide broader HR services to meet a ‘process’ need beyond ‘filling a job’. HR consulting divisions were established by recruitment agencies or they bolted on existing HR consultancies to provide a broader offering to their clients.
Fifteen years later the hiring manager as (recruitment) king or queen is more the exception than the rule as the procurement department and HR have both succeeded in muscling in on the cosy relationship recruitment agencies had with the hiring managers.
Did agency recruiters fail to notice, or just fail to care?
Agency recruiters were distracted. An expanding economy and huge jobs growth meant they didn’t have to think too much about the long term as there were heaps of jobs to fill NOW. The pipeline was fat and hatching plenty of golden eggs so why look for the storm clouds on the horizon when all that can be seen is an endless blue sky?
The gradual change in the recruitment organisational balance of power was noticed by those not wedded to their old business model or seduced by their current financial results. It was noticed by those who had the courage and discipline to primarily work on their business, not in it.
So which Australian recruitment company was the first to understand the HR Consulting trend and make shed-loads of money from it?
So which Australian recruitment company was the first one to aggressively invest in and offer an RPO solution to their clients?
So which Australian listed recruitment company makes the most net profit (as a percentage of gross profit)?
And guess which two recruiters have been behind all these companies and continue to be Australia’s most financially successful recruitment entrepreneurs?
Geoff Morgan and Andrew Banks truly know who their stakeholders are and what’s important to them.