Even after 32 years in the recruitment industry I am still slightly bewildered by the ignorance, or worse, lack of interest in educating themselves, which some very highly paid and senior people can demonstrate when it comes to understanding the realities of modern-day recruitment.
This week another disappointing (depressing?) example was brought to my attention.
As you may know, or guess, the Federal Government is a large user of external recruitment services.
Like all large users of any significant item of expenditure the Federal Government, after a tender process, appoints a range of vendors to fulfil their needs. Recruitment is no different.
Recently the Department of Finance, released the first tranche of the much-awaited whole of government people services panel focusing this time on permanent, non-ongoing, Executive Search and recruitment support services (e.g. scribing and campaign management) across Australia. They announced they would be going to market this year (early December) and that potential suppliers had four days after the information session to provide feedback on the voluminous documentation underpinning the proposed agreement and pricing arrangements.
I am certainly no procurement expert but the Government timeframe seems ridiculously short for such a significant change in the terms of business. In fact, the terms are somewhat revolutionary and if they become the new reality, many existing recruitment suppliers will need to significantly change the way they deliver recruitment for the Federal Government or simply stop doing it. No owner or executive will deliver services under terms that make it almost impossible to make a profit.
The 85-page contract is mind-numbingly full of jargon, as you might expect, so it’s challenging (for me at least) to ensure I am identifying the key points.
Here’s what annoys me off about this contract (and also generally applicable to other large recruitment supplier contracts):
- It’s an attempt to drive prices right down at a time when there is unprecedented competition for talent in Australia.
- There’s no guarantee of any volume to any panel supplier
- Any government agency can engage any non-panel recruiter, at any time, on any terms they choose.
- Panel suppliers can be removed and new panel suppliers can be added, at any time
- Even when a recruiter has been approved as a panel supplier they may be asked to quote for a specific vacancy and they “may offer fees lower than those provided (in the original tender response)”
- All pricing must be “GST inclusive”
Here are the four things that confuse or bewilder me off about this specific contract:
1. The recruiter receives 70% of the applicable fee at the time of placement. The remaining 30% is withheld until after the placed candidate has been employed for six months.
Recruiters are responsible for sourcing suitable candidates and managing the recruitment process. A recruiter is not responsible for the selection of the successful candidate nor for their induction, onboarding, or performance management.
Either the government pays 100% of the fee at the time of placement and receives a free replacement guarantee for three or six months, as is standard across the industry, or they need to pay a premium for the delayed payment eg 60% after six months (ie a 30% premium on the basic placement fee).
2. Recruiters are asked to quote “a maximum fee per (recruitment) process”. It’s nonsensical to request a price in such a format as there are many variables that impact the time and resources required to complete a recruitment process eg one recruitment “process” may generate 2000 applications for 40 vacancies (eg graduate roles) that may lead to 50 placements across a four-month timeframe.
Another recruitment “process” may involve 25 applications for one vacancy (and placement) across a three-week period. Quoting a “maximum fee” that would cover those two scenarios (and everything in between) in such is akin to plucking a number from thin air.
3. Creating arbitrary, and undefined, distinctions between “General Recruitment Services” and “Specialist Recruitment Services”. I can only assume this random distinction is an attempt by the Department of Finance to encourage agencies to offer a lower price for the filling of roles falling under the category of “general”.
The problem with this approach is (a) the Department offers no guidance in the contract as to what roles or positions fall into which category, general or specialist, and (b) this distinction is irrelevant with respect to the degree of difficulty faced by the recruiter in filling the role.
For example, an accounting or finance role may be regarded as “generalist” and a foreign policy analyst as “specialist” but it doesn’t automatically follow that an accounting role is less resource-intensive to fill compared to a policy analyst role.
As every recruiter knows the degree of difficulty inherent in filling any role is never determined by just one or two factors; it’s always a cocktail of many variables including (but not limited to) such things are remuneration, location, person and position the role reports to, flexible work options, the role responsibilities, hours of work, career opportunities, minimum education/qualification requirements, employer reputation, etc.
These variables can, and do, change over time, sometimes very short periods of time. Contract terms that ignore or dismiss such market realities will only undermine the outcomes delivered to the end-users of the recruitment services.
4. There appears to be no understanding of (or maybe care for) what distinguishes genuine search from other, basic/shallower/unbundled, ways to ‘go to market’ with a vacancy. It’s too involved to describe in detail here what the Department is attempting to do but rest assured that the cheaper option being sought is, in many cases, terrible value for money. This option will only reward a rudimentary recruitment process (requiring no placement to be made by the recruiter) that, although cheaper in the short run, than a full-service search option, will on many occasions lead to unsatisfactory result for the hiring manager.
A hiring manager may go through this basic recruitment process and find they are left with the choice of offering the role to the least-worst candidate or start the process all over again, which will necessitate the agency billing another recruitment process fee, again with the only requirement being to run a process rather than ensure a job is filled with an excellent candidate.
This type of cheaper recruitment option maximises the incentive for a short-term focused recruiter to run a process for a fee and exclude their best candidate who they know is quickly placeable elsewhere at full fee. I am sure this is not the type of behaviour the Department wants to encourage yet its current proposed contract does just that.
In summary, it appears that the public servants charged with constructing this new contract have invested zero time in understanding the broad range of recruitment and search activity performed on behalf of the Commonwealth by specialist recruitment providers. They are ignoring the market conditions and seeking to drive down prices contrary to normal way demand and supply works in an efficient market.
This can only lead to rapidly diminishing quality of recruitment outcomes and access to talent.
The Department has provided an inadequate amount of time to properly engage with our industry and understand how their proposed new terms will actually work in the real world.
Equally disastrously the Department has proposed a model that, if unchanged, will be almost impossible for hiring managers in the public sector to understand and administrate compared with the current system.
The ultimate losers of this completely avoidable disaster are we the Australian taxpayers.
The Federal Government has managed to drive a stick in their own spokes at the height of extreme talent shortages in the public sector. The outcome will be that public sector departments and bodies, already struggling to find resources to deliver the outcomes needed to innovate and drive our nation, will lose access to the most talented people in the market.
The likely winners are the consulting firms who each year benefit from hundreds of millions of dollars in contracts to deliver services that the public sector allegedly cannot.
Let’s hope the Department of Finance realises they are about to score an (entirely preventable) own goal before they proceed much further with this craziness.