How to cut agency costs and regain profitability

How to cut agency costs and regain profitability

+ James OsborneJobAdder

eBook

How to cut agency costs and regain profitability

Table of

Contents

Introduction .............................................................................................................................. 03

Start from the bottom up .............................................................................................. 04

Cut costs and focus on yield and contribution .......................................... 05

The biggest inefficiencies in any recruitment agency ....................... 06

How remote working can address these inefficiencies ...................... 08

How we measure success and our efforts ...................................................... 09

How technology can help ............................................................................................. 10

Conclusion ....................................................................................................................................11

About JobAdder ...................................................................................................................... 12

3How to cut agency costs and regain profitability

IntroductionThe COVID-19 crisis has had substantial ripple effects across the globe and we know that any economic downturn is going to have a negative impact on many organisations.

However, if we look at the other side of the coin, it also creates a huge opportunity. For recruitment companies, leaders and recruiters, it gives them the chance to learn a huge number of lessons about themselves, their business, their markets and how we work with customers and enable them to put in place new ways of working.

With this perspective, we can be far more profitable, effective and scalable as organisations. There’s huge amounts of inefficiencies that you don’t really think about when the markets are good. When the markets are buoyant, we’ve become more casual about what we’re spending and how we’re doing things.

Now, we’re all forced to try and work out the best way of cutting costs and navigating through crisis. And I think that’s a really useful time to pivot.

I collaborated with JobAdder to create this eBook and I hope it helps recruitment agencies across the globe to cut costs, identify inefficiencies and boost their profitability during these uncertain times.

- James Osborne, Founder of The Recruitment Network

4How to cut agency costs and regain profitability

Revenue dips don’t have to be profit hits if you’ve got a firm strategic foundation.

At the beginning of the crisis, we advised recruitment agencies to stop their direct debits and cut any costs they could.

While a lot of markets saw revenue drop off a cliff during the coronavirus crisis, the agencies who cut a lot of outgoing costs saw that their net profitability hadn’t been too badly affected.

Coming out of the crisis, we need to examine what we learned from it. We’ve learned to examine whether we actually need half the things in our business, and what kind of ROI we’re getting from these different elements. We should be conducting this analysis regularly and making it part of our thinking and strategies.

When you’re working out your business strategies, you start with profitability and then work your way backwards, re-engineering what your business, structure, revenue, workflow and customer base needs to look like to create that profitability.

A lot of agencies focus on headcount growth and their revenue growth, but the agencies that are truly scalable and profitable are faring better during the crisis because they utilise this bottom-up strategy.

Start from the bottom up

5How to cut agency costs and regain profitability

Firstly, look at what costs are coming out of your business and examine whether you’re getting the right ROI for those costs. This doesn’t mean that you get rid of these costs necessarily, it just means that you leverage it better to warrant investing in it.

The next step is to start thinking more about contribution and yield, focusing on the net output on everything you do, rather than the top-level factors. Managers should be incentivised on profit share rather than their revenue, it should be based on their net contribution. How many recruitment agencies are actually measuring the contribution and yield per job or the net contribution and yield per client for that matter? Take a look at your clients and see where you’re actually seeing the biggest contribution and yield, it might surprise you.

You need your whole business and your strategies and tactics to focus on what contribution, bottom line and net yield comes from everything that you’re doing, and then re-engineer from there rather than the opposite, which is what we tend to do. Rather than thinking, “I’ve got 30 staff so I should be making X,” you should be thinking “what profitability do I want to see from 30 staff and what do I need to re-engineer to make that happen.”

Cut costs and focus on yield and contribution

6How to cut agency costs and regain profitability

Structure

How are you structured as a business and how often do you re-examine it? Do you still have the same structure from five years ago when your business was a lot smaller? If that’s the case, then you need a change.

360 model

Lots of recruitment agencies use the 360 model, which is fine, but I prefer the 180 model where people can focus on what they enjoy. When you’re doing something you enjoy, you’ll do more of it and you’ll get a better ROI out of it. I like separating sales from delivery, I think a great salesperson might not be a great delivery person and vice versa.

Contingent recruitment

If you’re a permanent recruiter working on a contingent basis, 90% of the work you do you might not get paid for. That’s hugely inefficient. If a permanent recruiter is not implementing strategies to allow them to have more retained services, to reduce the sales cycle and to improve conversion ratios then it’s a big missed opportunity.

The biggest inefficiencies in any recruitment agency

7How to cut agency costs and regain profitability

Bad clients

When you examine your client list and how you work with your clients, you might find that a significant portion of clients could be inefficient, time sappers and drains on your business. You should be focusing on the really good clients that value you more and who want to have a partnership relationship with your agency. When you have a partnership relationship with clients, you can challenge them, get close with them, assess their business and get better business from them.

Investing in the wrong leads

Your time and energy are a valuable resource. Don’t waste time pursuing leads that could become the aforementioned bad clients. See how they respond and communicate with you now and determine whether you can see a strong partnership forming.

Don’t be scrappy

During a crisis, it’s natural to want to compete at all costs and take a more scrappy and less strategic approach to your agency’s success. But as we come out of the crisis, if you’ve been adopting a lot of scrappy business and clients then you’ve probably wasted a lot of time on things that don’t bring you a lot of value.

8How to cut agency costs and regain profitability

Saving travel time

Recruiters could be saving around two hours each day without a commute, giving this time back to recruiters to spend on time with family or flexible meetings or great efficiencies.

Virtual flexibility

Working in a virtual environment allows us to do more client meetings and have more virtual face-to-face time with clients than ever before. Previously, we were constrained by location and time restrictions.

Wider talent pool

No longer restricted by location, your talent pool just got a lot wider, which means a more diverse range of talent and more efficient ways of working.

Greater trust

Recruitment leaders were forced to trust their consultants to work from home during the pandemic, and it was a big learning curve for some managers. Moving forward, we need to be able to proactively trust our staff to work from home and build a culture of trust.

Productivity

The rise of remote work has shown many agencies about the importance of working smarter not harder. Productivity needs to be measured on output and the results produced, rather than calls logged or other outdated performance metrics. Agencies should be empowering their staff to choose the work environment that works best for them and providing them with the tools they need.

How remote working can address these inefficiencies

9How to cut agency costs and regain profitability

Measure against potential not percentages.

It’s tempting to look at your business numbers and say “we’re 5% up from last month or 20% up from last year” but we should be measuring ourselves against what our potential is.

There’s a real differentiator between not measuring against actuals and instead measuring against potential.

If you look at your key accounts within your business, your top 10 accounts might be your top accounts but how much market share do you actually have of those accounts in comparison to other agencies? Your top account might not count you as their top suppliers, which puts you at risk so it’s understanding where the potential is and how you track against that potential.

KPIs and data are critically important to determine what you need to improve. However, I think where KPIs have gone wrong is being used as an easy way for managers to assess recruiters’ performance, but I don’t think KPIs tell the real story.

Measuring people purely on output is the way to go, and the data that sits behind that, the KPIs, the activity and the conversion ratios, that data can help people make better data-driven decisions.

How we measure success and our efforts

10How to cut agency costs and regain profitability

How technology can help

Building out a tech stack that flows and integrates seamlessly is crucial.

Explore and identify what you need on two sides. The first is what you need to make your business more agile, efficient and effective, examining where you can automate repetitive tasks through technology and systems.

The second is exploring where you’re using technology to influence and impact customer and candidate decision making, determining what you’re using and how that’s helping customers to find candidates and use your services.

Technology is about making us more agile. I find it incredible how many recruiters I talk to who use Excel all the time and have Excel spreadsheets all over the place. Recruiters need to examine how they can use technology to make themselves more agile and reduce the repetitive tasks that we’re doing.

11How to cut agency costs and regain profitability

ConclusionWhile the COVID-19 crisis has dramatically impacted the world of work and the recruitment sector, recruiters across the globe are changing with the times, adopting new technologies and cutting out inefficiencies.

Exploring how your agency operates and what improvements can be made so your recruiters work smarter not harder is critical.

With this strategic approach and the right technology and automation tools, your agency will have the foundations it needs to cut costs and inefficiencies, pursue potential and profitability and see long-term growth and success.

12How to cut agency costs and regain profitability

About JobAdderJobAdder is a leading cloud-based recruitment software solution that helps in-house and agency recruiters find and manage talent more effectively through automation.

JobAdder’s flexible powerful technology works with existing recruitment processes and HR systems to offer a seamless experience. Recruiters get the tools they need to do great work, ultimately enabling them to focus on what matters most.

If you would like to know more about JobAdder, click here to contact us or visit www.jobadder.com

Attract candidates fasterEffortlessly post to more than 200 job boards and social sites. Create branded career pages.

IntegrateConnect JobAdder with the tools you already use as part of your recruitment process and talent management.

DashboardCustomise to prioritise what’s important. Measure performance and make data-driven decisions that support your goals.

TrackSee job status, review resumes, conduct interviews, update candidates and hiring managers.

SaveDetermine which job boards have the highest ROI and allocate budget efficiently.

EfficienciesDesign workflows, create jobs, email templates and auto-responses to match your hiring strategy.

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