30% of Agencies report a decline in profit. Here is why.

2018 was a great year for the recruitment agency industry in Australia and New Zealand.

95% of recruitment agencies reporting to Staffing Industry Metrics made profits in 2018, leaving just 5% of firms trading at a loss, the lowest and best result in 7 years.

Of the 95% of recruitment agencies which made a profit in 2018, the majority (51%) improved their year-on-year profits, while 14% achieved similar results compared to 2017.

Importantly and worryingly, the remaining 30% reported a decline in profit compared to 2017. There are key lessons in this figure, especially as there are potential economic storm clouds on the horizon.

If 30% of recruitment companies went backwards in profit in what is universally considered a great year, what will happen when demand falters and conditions become more challenging?

The Staffing Industry Metrics data tells us that the 30% who fell short of their 2017 profit figures, were impacted by 3 main factors:

1. Staff churn was well above average. (And the average is appalling! How appalling? Try 47% appalling)
2. Failed to ride the perm growth wave (It’s hard to build a strong perm business with 60% plus staff turnover)
3. Staffing costs were far too high (Definitely linked to 1, above.)

Unsurprisingly, the firms with the best profit news are those who have already implemented sound hiring strategies and have invested in a plan to retain new people.

While all is not lost for firms falling behind (well, some of them), it’s critical that staff churn and the lack of productivity that inevitably follows it, is quickly addressed.

There is still a tendency to accept high staff turnover as ‘normal’. In Australia and NZ last year average staff turnover in recruitment agencies was 47%

This is tragic. On many levels.

We have to stop paying lip-service to improving recruitment, on boarding, training and retention in Agency Recruitment. The complacency and inertia on this issue bemuses me.

It’s time to take meaningful action and disrupt what you are doing now, because it’s not working.

The key to the puzzle is people development

Authentic, planned, well-resourced and consistent upskilling and personal development of all staff.

When people learn something new in their job, they feel more connected to the job, their customers, and their employer.

That is why people-development, more specifically ‘coaching’ is in fact, retention.

And so, if you want your people to stay long term, you have to keep developing them. Long term.

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