There will be some sore heads in Wellington this morning. Some perhaps from the collective palm-meets-forehead moments when recruitment managers and sales managers saw how low the bidding was going for the privilege of recruiting for All-of-Government. But mostly from the boozy wake that must surely have been held to send off and bid farewell to what was once known as the Wellington recruitment industry.
Whilst we recruit for recruitment agencies we also recruit internal recruiters and HR types so even we were involved in the e-tender processes of the past two days, for a shot at being able to recruit these types of roles for Government Departments and Agencies.
I hate to discount my fees and cheapen my offering, but of course recognised this would be necessary to recruit for large public sector entities offering volume business. But going into the e-tender and seeing that my already-heavily-discounted Perm fees and Contractor margins still had me placed way, way, way towards the back of the pack lead me to utter despair. And I don’t even rely purely on the Wellington market, unlike some firms who gain 80% of their revenue from the public sector.
This is purely speculative but based on my involvement in the e-tender process I feel I can confidently state the following:
- The online auction software employed by MED was a triumph. For them. Clear, simple, easy to use and creating a transparent and fair real-time bidding process. It made it terribly easy to keep lowering your fees. I fancied I could picture a gaggle of Government big wigs gathered on a kind of trading floor, looking up at a big screen that ranked all the potential recruitment suppliers, and every time another one shaved yet another 0.1% off their fees cheering and popping corks, heartily patting Mark Ansell on the back and toasting the MED’s Procurement team.
- Recruiters would make awful gamblers. They would also make casino owners very rich. Every recruiter I spoke to who was involved ended up dropping their pants significantly lower than they had originally agreed would be their absolute ground floor rate. Like punch drunk blackjack players slumped dead-eyed at a gaming table, they were unable to walk away when all the chips were gone, and had to have just one more go. And then another. And another. Some even sold their broken gold for more chips.
- Contractor Margins would have gone as low as 9%, possibly lower.
- Temp margins would have gone as low as 8%, possibly lower.
- Perm fees will have gone as low as 7%, possibly lower.
- Recruiters have forgotten about the value of running a contractor and how damaging it is to your company revenue and company value to lose that contractor by allowing a client to take them on a Permanent basis. Of course this will happen, but recruiters should be charging as high a fee as possible to allow a client to remove a contractor from their books, a contractor they would have worked hard to source, register, place, timesheet, payroll, manage and then chase up obstructive accounts payable systems. The discounts being offered to allow Government to convert a temp or contractor into a Perm employee were ludicrous and there seemed to be some kind of race on to be the first firm to offer a 100% discount for contractors who have worked 9 months or longer.
- Some recruiters don’t understand the strategy involved in saving a bit in reserve for the sealed bids stage. Why 15 minute auctions had to go on as long as an hour, or longer, because someone had to make just one more bid and try and stay out in front, rather than use it as an ace up the sleeve, is beyond me. I resorted to alcohol on the Wednesday night. It was the only way to cope.
- There will be top quality recruiters no longer willing to recruit for companies involved in AoG. It will be simply impossible to earn the same money, and maintain the same lifestyle, at the billings attainable under the new rates. Whilst successful firms will have to change their models and delivery process entirely, including bringing in “internal recruiter” type account managers on low-to-medium base salaries with no commission, the more intuitive, creative, dynamic and ambitious recruiters will seek new homes to recruit into the private sector, or leave recruitment altogether.
There are some glum people out there in New Zealand recruitment today. A new day will bring the ghastly realisation that we haven’t simply reduced the cost of our service to record lows and cheapened our value to the employment sector, it will become apparent, for some, that they have sold their industry down the river and, at the rates bid, can never be the same again.
At the rates I suspect we reached, I can foresee a large amount of leakage from this new contract. Core Government Departments for who participation in the contract is mandatory will surely realise that the relationships they had with agencies before will not be the same again. If their favourite recruiter is not on the panel, what will they do if they have no faith in the ability of the ones who are there (with their reduced-quality recruitment personnel), to deliver on their important vacancies? What is to stop them declaring their hard-to-fill role an “Executive Search” assignment rather than a recruitment assignment, meaning it can bypass the AoG recruitment and they can use their old recruitment buddies once again.
Or what of the Eligible Agencies weighing up whether or not to get involved in using the panel recruiters? It might sound awesome to learn they can get recruitment services at 7% or 8% but what might happen when they realise the quality of delivery they will get at those rates? Will they be so eager to sacrifice quality for price, when it is not compulsory for them? Especially when the chances are they can persuade their current recruitment suppliers who didn’t make the panel to at least reduce their fees closer to the 11% – 12% mark with no noticeable decrease in service.
If the Government are smart about this they will not plump for the lowest common denominator, but instead recognise the gung ho lack of commercialism of some bidding recruiters and actually settle on a rate more around the median of the lower half of the table. No doubt they will request uniformity of fees and so be it, then let the chosen panel decide whether or not to engage at those rates.
Recruitment companies can still make this work though. I still hope that my overall tender gives me a Value For Money score that gets me on the panel. I still want to recruit HR and internal recruitment roles for the Public Sector. But trust me, I’ve already started putting plans in place to set up a new division devoted entirely to a different kind of service delivery that, whilst effective, will be cheaper to run and enable me to retain at least some small profits.
Learn from the botch job done by Chandler McLeod in Australia when they won the Defence Force recruitment contract from Manpower. You can win anything on price, if you go low enough, but it doesn’t mean you can deliver to the client and make it work for your business unless you radically shift the way you structure your firm. Manpower were back in after a matter of months.
Oh, and if you don’t make it on? Well that means you can retain your best and brightest recruiters, charge higher fees, keep an eye out for leakages, and plunder the public sector workforce for your private sector clients.
Every cloud…and all that. What do you wish for? We will find out in a couple of weeks’ time.