“Hire smart, or manage tough”

Why isn’t the proper attention given to the hiring process? I think it has to do with the time value of time. I know most of you are familiar with the “time value of money” concept. For those of you who aren’t, the basic idea is that a dollar in the future has less value than a dollar today. This is due to the affect of inflation. So if inflation is 5%, the dollar you’ll be receiving next year will only have 95% of the purchasing power of a dollar you have today. That’s why you need interest on your money at least equal to the rate of inflation to stay even. High inflation worsens the situation. For most of us, future time is far less valuable than current time. If you’re working really hard, or behind on an important project, an hour or two today is more precious than gold. Squeezing an hour into a day already filled is impossible. But next week or next month or next year… well, that’s a different story. We all have plenty of future time. We’ll waste this without thinking twice. Remember that two-day offsite workshop you booked six months ago, the one that’s coming up next week? At the time, it seemed like a pretty good idea. But now, with two killer projects behind schedule and everything else that’s running late, delaying it or forfeiting the $2,000 doesn’t seem like such a bad idea. Making the money to time conversion, the “time value of time” concept says that an hour in the future has less value than an hour today.

So for hiring, how much is a future hour worth? Most managers complain that they don’t have enough time to devote to hiring. As a result, they resist spending 20-30 minutes talking to a recruiter to define the work, won’t go out of their way to meet a hot candidate, reluctantly conduct a series of superficial interviews, and hire the first candidate who is personable, communicates well, on time, well-prepared, and who makes a good first impression. How much time is spent every week managing people who shouldn’t have been hired in the first place? My guess is that every bad hire costs the hiring manager at least three or four hours per week in extra supervision and lost productivity. The negative impact on others in the department is probably another three or four hours per week. It could be worse, but let’s use this to make the present vs. future time value comparison. A bad hire costs the manager and the department at least 24 lost hours every month. To prevent this bad hire would have taken a one-time investment of four to six hours in total time, spread across a few weeks. This involves writing a better job description, working with the recruiter, and conducting more thorough interviews. Under these assumptions the cost of time is equivalent to a 400% inflation rate per month (24/6), or 4800% per year! In other words, managers consider future time essentially valueless when it comes to hiring. This is the real cost of bad hiring — the loss of invaluable time.

Past bad hiring decisions prevent current good hiring decisions because managers don’t have enough time to do it right. You might want to work this analysis through with a few of your hiring managers to get their attention. Breaking this cycle is the first step to making better hiring decisions. Many years ago I heard this quote. It does a great job of summarizing this time value tradeoff: “Hire smart, or manage tough.” It was attributed to Red Scott, a well-known speaker, trainer, and corporate executive. His contention was that most managers “hire dumb.” They take shortcuts, use too much gut feel, don’t know the job, over talk, and under listen. This is a recipe for disaster. You can never atone for a bad hire. There just isn’t enough time. The trade-off is pushing people who don’t want to be pushed, more time involved in solving problems that don’t need to exist, lost productivity, more coaching, more training, more negotiating, more aggravation, less team work, and so on. The consequences of bad hiring decisions are faced every day with lost efficiency and extra time devoted to getting it right. Ask your managers if they’d have more time if they had better people.

What can I do to get my SME financially fit? — a check list for smaller companies

By Nigel Harse & Rod Hore

As the recruitment industry emerges from the downturn of the past couple of years there has been a rapid rise in the number of recruitment company startups. There are also a large number of established companies that feel they are back in start-up mode as they rebuild their business from a series of cuts.

This month we have put our thoughts together to present a checklist that business owners can use to verify their financial health. You may be surprised that it’s not all about dollars! Being fi nancially fit is not limited to, but includes, great cash-flow management. It also involves actions that give your organisation the right to earn revenue into the future as well as decisions that make your use of cash and capital as efficient as is possible.

(1) Go where you can make a difference or make an impact.

You have limited financial resources and sales and delivery capability so you can’t afford to chase opportunities that don’t give you a high probability of a return. A good rule of thumb is to be wary of going where the larger companies are as they can offer a different solution at a different price-point.

(2) Hold your nerve and be tough on your terms and conditions.

Remember that your business terms and conditions are a large part of your brand in the marketplace. If you want to be known as a business that works exclusively with clients then you need to win that type of work.
Recruitment processes

(3) Measure your activities and your results from day one.

“You can’t manage what you can’t measure”– as a small company it is recommended that you constantly benchmark your results so that you have blinding clarity about your performance and effi ciency. Last decade created wealth for business owners that didn’t accept their current position and had an attitude of continuous improvement.

(4) Choose your technology platform wisely.

As soon as is possible, get onto a technology platform that will grow with you and not restrict you in the future. Your future may include perm & temp, remote offices, staff working from home, outsourcing, customer portals – and your technology needs to keep up with you. Today there is a genuine leap forward in available recruitment technology
that is web-based, integrated, flexible and offered as a software service.

(5) Cashflow.

All small businesses need to have absolute certainty and clarity about their fixed costs and their variable costs into the near-tomedium term future and have mechanisms in place to review this on a regular basis. Cash flow management is a basic and essential business requirement.

(6) Borrowing money.

If you do need to borrow money as an overdraft or a factoring arrangement or even off friends and family, make surey ou are getting the best terms and the maximum flexibility possible. You need to allow about eight weeks to arrange credit so plan ahead. Your negotiations with the financial institution (yes, you can negotiate) must include the flexibility to get out of the arrangements as your cash reserves improve or your situation changes.

(7) Beg, borrow and steal, as the saying goes.

One stark lesson from the downturn is the stories of companies that folded because of their high fixed cost overhead structure. Don’t invest in fixed overheads, like rent, until you really need them. If you are a good leader and have an exciting business then accommodation facilities will not be a detrimental factor to your business in the short to medium term.

(8) Establish employee conditions that will work when you are larger, or change the process.

Decide early if you are going to pay individual commissions, team bonuses and special privileges. Will your staff bonus structure work when there is a middle management team in place? Are the special deals you are offering to early employees sustainable in the longer term? Do you plan extra features in the recruitment process such as technology, or resources, or outsourcing that will change the cost structure?
Directors and shareholding

(9) Structure your business and your personal assets properly.

There are a number of basic structural arrangements that should be put in place by anyone who is a director of a company. If you haven’t received any professional advice in this area, you should.

(10) Reward yourself.

Don’t forget to look after yourself. Small business owners take incredible risks and need to ensure they gradually reward themselves for the risk and effort. At a minimum business owners should pay themselves the equivalent of a standard salary.

A summary of the above points is to:
(i) preserve cash;
(ii) delay spending, and
(iii) don’t give away the future.

The Spirit of Innovation

Selling your business? Follow these 10 key steps

By Richard Hayward, Principal, HHMC Australia

We have written about this before but it a very important topic and is worth re-visiting as we start a new financial year.

In so many of the discussions that we have with recruitment company owners we hear about their future plans and exit intentions. It is often the case that people are underprepared for what is required to complete a successful sale. With all the years of hard work and risk that has gone into building up a business it is a great shame to see owners getting into unnecessary difficulty.

There are no guarantees that you will sell your business. So getting the process right is in your interests as much as the buyer’s. What should be remembered is that the recruitment industry has relatively few barriers to entry and so it is always an option for any company considering an acquisition to, instead, add some more consultants and build up a sector organically. This option to compete rather than buy is harder to do in some other industries where the entry costs and barriers are higher and buying your way into a market is the only viable route.

A few years ago in recruitment extra we listed 10 key steps that help make deals conclude more effectively for all parties. Do they still hold up in 2010?

1. Place a realistic price on your business. Nothing has changed here. It is still the case that many sellers overvalue their business based on emotional factors such as the amount of time and effort they have put into the business over the years. Unfortunately, the “sweat equity” involved is not rewarded of itself by a higher price. Rely on external advice from experts with industry knowledge to help you determine a price that allows a “win-win” position. It’s important to take your ego and emotion out of this assessment.

2. Keep a “business as usual” mentality. Don’t become distracted from day-to-day demands. This can affect revenue, costs and profits. Since the selling process could take as long as a year, the buyer needs to keep seeing a healthy business.

3. Engage expert intermediaries to ensure confidentiality. A breach of confidentiality surrounding the sale of a business can change the course of the transaction. Expert intermediaries can keep the sales process discrete and on track.

4. Prepare for the sale well in advance. If possible, be sure your records are complete for at least three years and do all pertinent legal or accounting “housekeeping” beforehand.

5. Anticipate information the buyer may request. The buyer will need to understand the financial ins and outs of your business. All acquisitions involve risks and serious buyers need as much information as possible to mitigate those risks.

6. Don’t oversell. You are a salesperson or you wouldn’t have built up your business to where it is. But overselling could create a credibility gap which the buyer will notice.

7. Be flexible. Don’t be the kind of seller who wants too large a portion of the price upfront, or who won’t accept any contingent payments based on performance. Depend on the advice of your intermediaries. It is important to keep the “deal at the table” if there is genuinely a deal to be done.

8. Negotiate, don’t “dominate.” You are your own boss and have been for a while, but be prepared to learn that the buyer may be used to having his or her way too. With external advice, decide ahead of time when “to hold” and when “to fold”.

9. Keep time from dragging down the deal. To keep the momentum up, work with your intermediary to be sure that potential buyers stay on a schedule and that offers move in a timely fashion. It is easy for transaction timeframes to blow out with so many of the key discussions relying on as few as two people – a seller and a buyer – with the authority to progress things.

10. Be willing to stay involved. Even if you are feeling burnt-out, or planning to retire, realise that the buyer may want you to stay within arm’s reach for a while. Consult with intermediaries to determine how you can best effect a smooth transition.

We believe all these points are still very relevant and we have added a few extra that you may wish to consider. An attractive business should have the following:

* clear legal structure and shareholder agreements;
* depending on size have in place effective advisory board processes;
* clear and consistent management structure and reporting lines;
* a demonstrable business plan and operational plan;
* proper financial structure (financial reporting, debt management);
* clear and consistent management reporting against operational plans;
* efficient back office processes;
* enthusiasm for growth;
* separation of shareholder/personal activity from the company; and
* willingness for open and consistent information exchange.

Ultimately, any organisation needs to be efficient in its creation of bottom line profit to enable a fair price to be achieved. How you generate business, deliver your services and ensure future profitability is what reduces risk for the buyer and adds value to the seller. The buyer is interested in the ability to produce next year’s profits after they own it and will judge a business accordingly.


Australia and Asia, well positioned for 2011

By Nigel Harse & Rod Hore
Rod Hore:

Australia and Asia are well positioned for economic expansion in the recruitment industry in 2011. HHMC has been surprised, in a positive way, by the level of corporate activity in the latter part of 2010. Earlier in the year we predicted how the run into next year was going to evolve for our advisory and M&A business.

2010 predictions:

Firstly we assumed that the lessons of the GFC would stay close to the hearts of owners and managers of agencies for the remainder of 2010, leading to cautious business decisions and limited focus on non-organic growth. We predicted that the companies seeking to be sold would be those that had encountered financial and structural issues during the GFC and now that their business had stabilised would be seeking to divest in the latter part of 2010.
We predicted that most of the buyers in the market would be those seeking a “bargain” and looking for companies that had been impacted by the downturn.
As part of this picture we also assumed business owners would be keeping their cautious approach until the effects of this December/January holiday period were known and business had ramped up again in the New Year.

How wrong we were:

What has occurred this year has been much more positive and there has been a greater level of corporate activity.
Australia has returned to candidate short status in many sectors which is a return to good times in the industry. As the downturn proved, it is better to have a shortage of candidates rather than a shortage of job orders.
Many companies have rebounded to former levels of revenue and profitability. The speed of the rebound and the forecast sustainability of the rebound has given owners and managers the confidence to execute their strategies, whether being a sale strategy or a growth strategy that may include acquisition.
Asia, especially Singapore, appears to be absolutely booming and is very quickly getting back its position as the gateway to Asia (or at least the gateway to South East Asia). We are aware of many international companies that have relocated their Asia Pacific headquarters away from Hong Kong or Australia and into Singapore in recent times. This positive outlook has created renewed enthusiasm for Australian companies looking to expand their geographic coverage into Asia.
Europe, with the exception of Germany, has a poor economic outlook for the immediate future. At best it is stagnating and not providing the positive growth outcomes business owners and managers are seeking. In this environment there are an increasing number of companies seeking access to the Far East. Expansion to Australia or Singapore is seen as a sensible first option due to the ease of language and familiar legal environment. The number of enquiries we have received from Europe, especially the UK, is increasing monthly.
North America is a little harder to understand and predict. With the exception of the global companies, the economic circumstances of the US seems to have caused most recruitment companies to stay focussed within North America and HHMC is not seeing much Australian activity from these companies.

What does this mean?

We predict that 2011 is going to be a period of great corporate activity within the recruitment industry.
Medium to large privately owned companies will be auditing their capacity and capability before embarking on growth strategies across sectors and geographies. Some of this growth will be “built” and some will be “bought”. These companies will seek to compete with or acquire the smaller niche companies.
Smaller privately owned companies that have strength of clients, candidates and staff in their niche will again be targets for those seeking to expand into their sector or geography. For those owners seeking to exit, there will continue to be willing but demanding buyers available.
Australian listed companies will emerge into the market again using acquisitions to complete strategic objectives and provide accretive benefits to shareholders.
The impact of international transactions will be felt in 2011. In the past it has been the well known global companies that have acquired in Australia and New Zealand, but we expect smaller niche organisations to be leading the way as they establish global footprints to target scarce candidates. The way that these companies acquire, the benefits they bring, the prices they pay and the structure of the transactions will shake up the local buyers.
We expect a lot more local companies to expand their operations into Asia. This is a well known money-pit for organisations that do not approach this move carefully – the most successful tend to be on the back of great client relationships from another region. However a company gets to Asia, talent acquisition is problematic and can be a significant drain on resources.

And there is more:

All this proposed M&A activity sits alongside an increase in outsourcing, changes in technology, staff cost pressures, new methods of talent acquisition and the continued rise of social media. We’re in for a fun year.

2011 and it’s full steam ahead!

Nigel Harse:

Many business owners will look back at the 2010 calendar year and have good reason to be pretty happy with a much healthier bottom line performance. I believe it’s the year Australia returned to being “the lucky country” as we have been seen to stand out in the troubled crowd, as a nation and an economy!
The financial fiasco in Europe has yet to play out but we remain confident that the resources boom will again keep us out of trouble. There is no doubt that market conditions have improved in terms of volume, but margins and fees have been under pressure for 18 months and only in the tail end of the year have they shown signs of recovery. The data from the RIB Report suggests that temp and contractor sales are up 37% on average; however gross profit as a percentage of sales has fallen from 17% to 15% with PSAs having a growing impact on this erosion. Annual average charge and pay rates for temps and contractors are up 2%. Internal productivity when measured in terms of “hours processed/total internal headcount” has improved by 29% to an all-time high.
The good news continued with the perm sector bouncing back with an average 50% growth in placements and sales, the average fee remaining stable at $7,700. Perm contribution to total gross profit has returned to 40% and productivity when measured in terms of “perm placements/total headcount” has improved by 44%.
The average firm will have grown total gross profit by 28% along with a reasonable increase in operating expenditure of 10%. Profitability during the year continued to improve and closed with a staggering 300% improvement. Overall most indicators suggest we are back to the levels seen throughout 2007 (just nine months pre-GFC).
The national unemployment rate at 5% to 5.2% along with predictions that it may well fall to 4.6% in the near future suggests that the skills shortage issue will get worse and even more competitive as the resource sector strives to achieve its growth targets. The skills shortage will not go away and talented candidates will still be hard to find, yet the majority of recruitment firms will continue to place more value on a job order over the value of a candidate.
Immigration reform will have to be made to ensure that projected skill shortages and lack of qualified people do not slow down the projected $900 billion in infrastructure and construction investments planned for the next five to 10 years.
Advancements in technology, social media and the web will offer many more opportunities to reach a clearly defined audience, more creatively and quicker, and at a reduced cost. Some in the industry may be threatened by the advances being made by the job boards with competing service offerings springing up, and SEEK may achieve its stated aim “of owning (and capitalising on services driven by) the biggest and best resume database in Australia”, who knows?
LinkedIn will further capitalise on the power and reach of a fast, self-expanding professional network. The planned launch of its Referral Engine will prompt users (for financial gain) to make more referrals by identifying and alerting them to the most qualified employees from within their professional network. Next off will be Jobs For You which will allow users to select a target audience based on criteria like function, industry, past employer and seniority, and then channel their job ads to those people.
CareerOne’s launch of their behavioural targeting option will allow users to target local and international job hunters based on their known search behaviour. So overall an interesting array of new services will be available.
The demand for global recruitment assignments will continue to increase and the speed and cost of delivery will be the driver towards total technology dependency. Highly stylised web based registration, competency screening, reference checking and virtual interviews will enable greater access to and faster processing and placement of qualified candidates, from anywhere, to anywhere without moving away from the desk.
The general indicators and outlook for our industry in 2011 is good but caution is urged, don’t let the market draw you in to an over dependency on the perm market, it will drop away again by 50% to 60% the minute there is too much uncertainty around Europe or the global economy. Stay focused on achieving a sustainable business mix and if problems do occur you will be much better positioned to ride the storm. Happy recruiting!

Curtsy: http://sites.thomsonreuters.com.au/recruitment-extra/

RPO Market Drivers

The emergence of the KPO/RPO industry
A more recent trend, albeit similar to that in the overall IT and Business Process Outsourcing (BPO) industry, is the emergence of off- shoring high-value-added processes, namely business and financial research support services and intellectual property-related support services. This represents a new emerging area: Knowledge Process Outsourcing (KPO). Market research, competitive intelligence and data search, and integration will be the fastest-growing segments of all the various research activities.

Research Process Outsourcing (RPO) is a part of the overall KPO industry. In the recent few years, this market has witnessed tremendous transformation. From the administration of telephonic surveys and questionnaires using call centers in the early years of the 21st century, the industry has progressively moved to handling information search and compilation activities on various business, technology and economic aspects. At present, high-end tasks such as competitive intelligence, preparation of company profiles, and financial analysis and modeling, are being handled by companies in India.

In line with this evolution, the RPO market has also seen the emergence of a diverse range of players across a wide range of services. The financial research area for instance is dominated by captives set by large global players such as Goldman Sachs, Lehman Brothers and JP Morgan. In case of other areas, such as business research, data analytics, legal and IP services, there is a mix of captive and third-party providers such as Scope eKnowledge Center and Office Tiger.
Predominant growth drivers for the RPO industry.

Given below are the prominent growth drivers for the RPO industry:
• Technology and content related.
• Economic and market related.
• Organizational related.

Key benefits of RPO
Some of the major benefits of RPO include:
• Cost savings (about 30 per cent to 40 per cent, depending on the research deliverable being outsourced)
• Access to a large talented workforce
• Improved scale of operations (a typical investment banking analyst can increase the coverage of stocks several fold)
• Free up critical resources to focus on core competencies
• Leverage specialized knowledge and expertise
• Enhance innovation and productivity levels creating stronger intellectual property (this smoothes out fluctuations in resource demand and reduces time to market)
• 24×7 operations.

Off-shoring: the lessons learnt
Based on the experience of many companies working with global clients in the research space, some of the key points to bear in mind include:
• Benefits are linked to scale of the project: the bigger the project, the better the benefits
• Outsourcing involves time and effort from your side too, especially in the initial stages
• Be wary of outsourcing processes that you are not familiar with or that are not working internally
• Always carry out a pilot project first and start with low-risk projects
• Have realistic savings estimates: 70 per cent is not possible; 30 per cent to 40 per cent is possible
• Productivity gains will stem from a learning curve, albeit with time
• Be clear on the final deliverable, including its structure and nature
• Define quality parameters and delivery schedules
• Look at the offshore company as a long-term partner not a vendor
• Finally, communicate, communicate, and communicate!

The importance of co-ordination and team work

Co-ordination and team work are the two basic things that are useful in each and every step of life. Be it financial, social, family, business, etc. were working without co-ordination can prove a big loss to you.

Before starting anything you need to be a creative thinker. The next step is to represent the idea in front of the group of people, taking their questions and solving the queries of the questions they had about your ideas. Planning your work comes in the next steps. Planning is very important. Without planning your work, one cannot get the perfection in the work. So, it is very important part of your work.

The next step is to select proper people for the team, i.e. Team Selection. This step should be properly taken care. The work is depended on the team members who are working together. It is very necessary for you to praise the team member for his good work as well as to point on his mistakes. The last step is to work on the plan successfully.

The main work of the team leader is to co-ordinate. Co-ordination between the team members helps the team to work smoothly and effectively. For a successful team leader, communication skills are very important. The message you are giving to the team members should be proper, direct and should be communicated well. A good and a successful leader is a person who knows everything about his team members.

The feeling of working together, doing things for each other, helps the group to complete the task with a positive note. This leads to the success of the complete. We should always keep in mind that if we are working in a team, we have other people working with us and we have to understand every team member.

When co-ordination, proper planning and team work combines the success is sure yours.

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