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My father, who died in 2015, was a cautious and conservative man (although not politically).

His job, for 36 years was a tax auditor with the Australian Tax Office – he investigated companies to assess their compliance with tax law.

It wasn’t a glamourous job and my father didn’t seem to enjoy it much but in 1970s and 1980s Hobart alternative career choices for middle-aged tax auditors were thin on the ground.

Like the stereotypical auditor, my father didn’t like risk and whatever career options he may have considered I suspect he didn’t pursue them because he assessed them as riskier than the stability of a federal government job and the retirement security his defined benefit superannuation afforded him.

Although my personality is substantially different from my father’s I inherited some of his aversion to risk.

As a recruitment consultant in temp accounting, I implemented various tactics to minimise the risk that a temp would fail to start a job, not meet the client’s expectations, or leave before the assignment was completed.

These tactics included (but were not limited to):

  • Thorough reference checking
  • Checking of candidates’ work rights
  • Asking for the candidate’s commitment to the assignment duration and making it clear that once the commitment was given I expected compliance
  • Providing all the potential downsides of the assignment (eg boring work, difficult to get to, old fashioned offices, demanding boss etc) before the candidate accepted so their expectations were appropriately aligned to the reality of the assignment
  • Calling the candidate the day before starting to ensure they had the right location, person to ask for, and starting time
  • Checking with the candidate on their first day and continuing to call them every week of their assignment to ensure things were going well (and doing the same with the client)
  • Going onsite approximately every four weeks to talk to the client and candidate to deepen the respective client and candidate relationships
  • Regular checking about the expected finish date to ensure client and candidate expectations were aligned
  • Calling the candidate on the final day of their assignment to thank them for the good work they did and completing the assignment as agreed

One of the features of my time as a temp recruiter was the regular extension of temp assignments. An extended temp assignment is even more valuable than a new assignment because it has the same margin, no additional work, and zero risk. Beautiful stuff.

Generating and filling a temp job is the high profile part of building a temp desk however the profit comes from understanding the risk inherent in every assignment and assiduously minimising the risk of the assignment falling over before its economic lifespan has been exhausted.

Similarly, the owners and leaders of profitable recruitment agencies know that identifying, assessing, and mitigating risk is a critical aspect of ensuring the long-term profitability of their business.

The most significant risk to any company is having a lack of cash to fulfill financial obligations.

If you can’t, at the very least, meet your payroll obligations when they fall due, then you won’t have a viable enterprise for very long. Unpaid employees are unlikely to remain focused, motivated, and in attendance if they are not paid on time.

Unpaid creditors will likely be more tolerant of delayed payments, but not for very long.

In addition to cashflow, many other risks are inherent in a recruitment agency’s day-to-day operations.

These risks include (but are not limited to):

  • Discriminatory screening and hiring practises (your own and on behalf of an employer)
  • Data breaches and theft of intellectual property (by both employees and nefarious external parties)
  • Old, outdated and vulnerable IT systems
  • Inappropriate use of confidential information by employees or vendors
  • Collusion, price-fixing and other forms of anti-competitive behaviour by employees
  • Occupational health, safety, and environment for both employees and on-hire workers
  • Heavy reliance on a small number of clients, contracts and/or one or two key vendors
  • Substantial and unexpected price rise for a critical input
  • A large proportion of the business’s net fee income is attributable to a small number of employees
  • Loss of key employees
  • Employee fraud
  • Changes to the law that undermine, substantially increase the cost to, destroy, or threaten to destroy, a once-profitable service offering or income stream
  • Changes to the industry’s barriers to entry (due to legislative changes and/or technological advancements)
  • Competitor offerings increasing in quality and/or declining in price

Need I go on?

The unpacking and dissection of Collar Group’s recent slide into voluntary administration will reveal where the company’s many risks were not recognised or recognised but ignored or dealt with inadequately or too late.

Undoubtedly there will be lessons for other agency owners and leaders – if they care to look and learn.

I’m not optimistic enough of them will.

Related blogs

Cash is king: how to generate and keep more cash

Construction labour hire compliance scores an F from ABCC audit

Compliance ignorance in recruitment: do you know what you’re really risking?

Deaths and big fines leave agency owners on notice about workplace risk

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