Australian Recruitment’s Biggest Profit Killers

Assuming that higher revenues will naturally lead to higher profits is a dangerous mistake to make, says Peter Linas, international managing director of Bullhorn, who reveals the industry’s biggest profit killers.

Australian recruitment is in trouble, or at least that’s what the latest industry profit figures suggest in a benchmarking study from RIB Report.

For the last four years revenue has been steadily climbing, with more jobs flowing in and more recruiters being brought in and trained up to meet demand. Despite this, profitability is at its lowest for the majority of recruitment agencies and 27 per cent of RIB Report’s survey participant companies traded at a loss last year, which for a country that evaded the global financial crisis (technically, at least, thanks to its almost limitless natural resources, tourism industry and strong trade links with a booming China), suggests big problems with productivity.

North American and European recruitment businesses are probably less susceptible to poor productivity, having ‘cut the fat’ five years ago when times were much tougher. Now that business is once again picking up, it’s important not to lose sight of what keeps a recruitment business in the black. As for getting Australian recruitment businesses to a point where they reap the rewards of increased revenue, the industry can learn a lot from its international counterparts.

The goal of any recruitment business should be profitability through a stable, high performance team made up of people who are happy, well-trained, committed, and productive.

High staff attrition, low morale, and a time-consuming and expensive onboarding and training programme for new starters can be a major drain on profits.

Our most recent Recruitment Trends report revealed that Total Number of Placements is consistently rated the top metric for determining a recruiter’s success, but this isn’t necessarily an accurate reflection of agency profitability.

We’re encouraging customers to focus on profit-led metrics for a true measure of business health. Profit per employee, profit per $1 spent on staff expenses, and profit as a percentage of sales, all give a better indication of how well a business is doing than revenue alone.

Getting new starters to a point of productivity is still essential, and rather than cutting corners where training and onboarding is concerned, it’s better to focus on finding a more efficient way of working. Make the most of any free training, resource guides, or webinars your technology providers offer, and choose a solution with excellent, intuitive search functionality.

One of Bullhorn’s long-time customers and Australia’s largest IT recruitment consultancy Peoplebank delivered a major boost to productivity and employee morale when it increased workflow efficiencies by 300 per cent. By replacing a slow and poor-performing online system with Bullhorn, it was able to integrate key reporting applications, reduce administration, and give its recruiters more time to spend on revenue generating activities. Peoplebank reported that after streamlining its workflows, its recruiters were happier, more motivated, and saw a marked improvement in productivity.

Making your recruiters more productive is the key to increased profitability, which is the truest sign of a healthy recruitment business.

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