INNERGISE!

I was fascinated and extremely pleased to read a recent article where we were given an enlightening insight into some of the recent strategies utilised by Karen Colfer, CEO of Kelly Services Australia, to turn the fortunes of the business around after a challenging period that saw profits drop. 

Now, on track for their “best calendar-year results in more than a decade”, clearly something has worked at Kelly Services and that is more than just an improvement in the global economy.

The reason why I was so pleased to read this, is because Colfer’s approach to driving up profitability of business echoes exactly something I have been harping on about since a large project I was working on a number of years ago for a large, international recruitment business. 

To understand the context behind this, the relationship between recruiters and customers can frequently be very one-sided, often swaying in the commercial favour of the customer. This is not to say corporate customers are doing anything wrong at all, they are just adopting a tough commercial strategy to drive up their ROI whilst driving down costs, as any commercial entity focuses on doing.

If anything, the blame for these unbalanced relationships can often fall to the feet of some of the recruiters themselves that have created a price-driven industry by being happy to drop their rates in an attempt to win business from their competitors, all at the same time when customers’ service expectations are increasing. 

In this scenario, ultimately, we will get to a point when the total sum of the time, costs and resources used to deliver a recruitment service to a customer outweighs the actual revenue you are making from that customer, leaving your net position in the red and every placement you make actually loses you money as a business instead of adding to the profits.

This is exactly with what was going on with one division of another large recruitment business in Australia some 10 years ago. I was part of a team tasked to look at a number of underperforming branches of this business and help turn them back around to achieve corporate standard levels of profitability in just 90 days.

These were branches that needed quick, remedial action to prevent the haemorrhaging of profits and get them back on track.  

On the immediate agenda from the outset was to walk the branch managers through a very crude but informative tool I developed that in essence analysed how exactly profit is created in a recruitment business. This is not just looking at a P&L, but more the intrinsic relationship between all the different components of the business and profit.

The tool allowed us to immediately identify what the top 3 or 4 causes of diminishing profits were, often things that we would typically overlook and gave us a simple list of key areas to effect (and in many cases just tweak ever so slightly) that would impact overall branch profitability.

As Kelly Services in Australia have identified over the past few years, some of the actual customers they were working with were clearly part of the issue: "every time we touched our biggest client in terms of revenue, we were making a loss” explains Colfer.

It is very easy to get caught up in the bright lights of big brand names in recruitment, when actually bigger doesn’t always translate into most profitable or most valuable. This is why we developed the Customer Value Index concept for recruiters as a way to ensure that we focus on customer profitability, not just customer turnover or brand.

As we proved to that customer in Australia, and Kelly Services are proving with their results now, ensuring the customer/agency partnership is mutually beneficial and being strong enough to push back on customers that don’t want an equitable relationship can have a significant impact on an agency’s profitability …and I bet the customers are getting a much better service too!