The recruitment market got more demanding in the last six months of 2023. For the most part, it has stayed that way.

All my clients reported a slowdown in job orders. How they dealt with this varies and has impacted their profit results accordingly.

The recent JobAdder ‘State of the Market Recruitment Report’ spells out the decline in Australia, NZ, and the UK, and you can access that report and the webinar where I contribute here.

But now some new data confirms what I have long believed and witnessed through my Board Advisory activities (Thanks to Staffing Industry Metrics for the data here)

Let me make it simple

Average recruitment companies are getting worse.

Good recruitment companies are getting better.

Yes, that is right. All ships do not rise and fall on the tide equally.

Some sink faster.

Others defy physics and soar in the face of a downturn.

And the reason is both simple (and complex)

This statement sums up the simple part.

The big difference between great recruitment companies and average ones is how they react to challenging times.

The complex part is knowing how to react and when.

Have a look at the data below from Staffing Industry Metrics. I have chosen just four metrics out of the many they measure. But they tell a compelling story.

The first chart shows the 2023 Average Performance on those metrics for all companies.

Then, it compares those numbers to the performance just in the second half of the 2023 calendar year.

On all measures, those who were ‘average‘, got worse.

Let’s dive in.

Gross Profit (billings) per staff member: Down. It is not a great deal – that is true. But it’s getting worse.

Gross Profit as multiple of all income producer remuneration. In simple language, this means consultants’ billings compared to consultant salaries. It dropped. Average-performing companies got less productive in the second half of 2023

EBIT as a percentage of Gross Profit. In simple language, what percentage of every dollar of temp net margin and permanent placement fees the company produces, goes to operating profit? That percentage was down for average performers in the second half of 2023

Ebit (profit) per staff member: This is a brutal measure because there is nowhere to hide from this number. It is pure, unadulterated productivity. It was down substantially.

Debtors days. The average days it takes to collect our invoices. It blew out. Got worse. So that will lead to cash flow issues just as our revenue is dropping. Not good

Now, let’s peruse the second chart. Here, we look at the ‘Best Practice’ performers (75 percentile and above, i.e. Top 25%) for the year 2023 and then compare their performance to the second half of the same year.

Those who are ‘good’ (best practice) got even better on all measures!

Gross Profit (billings) per staff member. Up. It is not a great deal; that is true. But getting better in the face of a declining market. Outstanding!

Gross Profit as a multiple of all income producer remuneration. In simple language, consultant’s billings compared to consultant salaries. It stayed the same. They were already good. As the market got tougher and demand dropped, they held it at ‘good’!

Ebit as a percentage of Gross profit. Simple language: What percentage goes to operating profit for every dollar of temp net margin and permanent placement fees the company produces? It was up. The market got tougher, but more of the net billings went to profit. Shows a tightly run business

Ebit (profit) per staff member:  This is a brutal measure because there is nowhere to hide from this number. Incredibly, the high-performing agencies increased profit per staff member in the second half of 2023. From $112,000 to $116,000 (annualised). I observed that swift and appropriate cost tightening, solid activity, and performance management made the difference.

Debtors days. The average days it takes to collect on invoices. This number stayed the same. That is outstanding because clients were strongly inclined to pay more slowly. As a result, there are no negative impacts on cash flow or bad debts.

In summary, ‘average‘ recruitment companies are declining while the best are still improving and adapting to a tougher economy.

I believe this is true of individual recruiters, too.

How do they do it? Well, that is a heady cocktail, and if you want the answers, subscribe to the Savage Recruitment Academy. Here are the headlines.

·      Less Perm dependent
·      Stronger historical temp/contract contribution to GP
·      Very few split desks
·      Low staff turnover
·      Better and more consistent staff training
·      Close control of activity management
·      Technology that works and which all staff use
·      Quicker to change tactics and prioritise fillable jobs
·      Tweaking their cost efficiencies
·      Recruiters with consultative influencing skills who have credibility.
·      Strong “Billing Managers’
·      Functioning back office and support

Action Points

Consider signing up to the Staffing Industry Metrics to benchmark your performance.

Subscribe to the Savage Recruitment Academy, which has a masterclasses library on building and scaling a sustainable recruitment company.

The new masterclass for March on the SRA will be on the 14 magic ratios you must know to manage your business.

Tiny cost. Huge returns.

The Savage Recruitment Academy

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