This article was originally featured on the Australian website on the 4th of July 2016.
A seismic shift is occurring in job recruitment.
As the former head of listed salary packager McMillan Shakespeare and insurer AAMI, Michael Kay attests to the enormous cost of finding and hiring new workers.
Now chairman of the recruitment platform ApplyDirect, Kay says AAMI experienced 20 per cent turnover in its 3500-strong workforce.
“Because we were growing at a compound annual rate of 18 per cent we were recruiting in excess of 1000 people a year,’’ he says. “Recruitment was a constant frustration’’.
Given this, the insurer was forced to use recruitment agents, who typically charged 10-15 per cent of a call centre operator’s first year salary (and much more for a senior position).
Last year the Productivity Commission valued the recruitment sector at $11 billion and Kay reckons half of this amount is wasted. “We are very attracted to what looks like a very inefficient industry.’’
The size of the prize has spurred a new land grab in the listed recruitment sector, 1½ decades after Seek began to inflict enduring pain on traditional print ads.
While their mantra varies, the newcomers strive to displace traditional recruiters in favour of a direct sourcing model between candidate and employer.
It’s also about finding talent in a game where only 25 per cent of jobs are filled by advertising, even less so for high-end positions.
Last month both ApplyDirect (AD1) and LiveHire (LVH) listed with mixed results, following the path blazed by the fallen hero 1-Page (1PG) in October 2014.
Seera, co-founded by former Seek executive Bradley Burchall, is eyeing an IPO next year based on a “people management plat-form’’ that also tracks an employee’s performance post hiring.
Three other recent IPOs — CVCheck (CV1) Tikforce (TKF) and Xref (XF1) — are involved in automating the process of verifying the credentials of both candidates and employees.
Given the hyperbole and the inexecrable jargon about talent communities, curated pools and cloud-based platforms, it’s impossible to know which player has a sustainable model with a half-decent chance of developing the requisite scale.
Nick Waterworth, who heads the traditional white-collar re-cruiter Ambition (AMB), ac-knowledges the sector’s seismic shift.
“There’s no doubt we are in the middle of the second massive land grab in the online space,’’ he says.
“Quite a few plays will work and quite a few won’t work. From an investor point of view, trying to work out which one falls in which category is a bit tricky.
“Just because it’s online and has a groovy name and a website doesn’t mean it is going to work.’’
Industry legend and now Live-Hire chairman Geoff Morgan says no single model is likely to prevail, partly because recruitment in essence remains a human-to-human activity.
Globally, he says, many companies still swear by the old news-paper method (god bless ‘em). Others go to the other extreme and use robo-call techniques to winnow candidates. “There is never going to be one perfect way because we are talking about human beings whether they are candidates or employers,’’ he says.
An irony of the advent of on-line job ads is that it’s made the process harder for both parties. According to Morgan, five years ago the average job took 20 days to fill and now it takes 40 days.
“With a click of a mouse people can apply for 1000 jobs,’’ he says. “This clogs up the employers’ time, while genuine candidates who apply never get a response.’’
While the sector looks a fat goose ripe for plucking, executing a profitable strategy as a small listed entity is the toughest of jobs.
1-Page shares listed at 20c and famously soared to a peak of $5.69, valuing the entity at a fruity $870 million. With the envisaged revenues and big-name paying clients slow to materialise, investors have taken a reality check on a patently overvalued play.
As its name implied, 1-Page’s schtick is to sift candidates via a succinct one-page summary. The business model also provides a structured way for current employees to refer suitable outsiders.
According to rivals, the model was too cute by half and was poorly explained and understood. “We just don’t see them in the market,’’ one of them says. “It probably doesn’t help that they’re based in Silicon Valley and not here.’’
The newcomers aren’t exactly cursing 1-Page: despite the ultimate disappointment, the initial runaway success of the listing sent brokers scurrying for other HR plays.
“(1-Page) gave us a path to listing in the early days,’’ Kay says. “But we were preparing to list at the end of last year when they crashed and burned, so couldn’t proceed.’’
A key impediment for the new-comers is developing meaningful scale.
LiveHire’s offering centres on a cloud-based “talent community’’, with subscribing companies paying a 50c fee for each connection with a candidate (the company claims a current pool of 100,000 job seekers).
LiveHire’s cornerstone client is Melbourne’s Alfred Health hospital network, with 8000 employees. “It’s about building a talent pool and keeping the talent pool fresh,’’ Morgan says.
LiveHire claims “no known peer in the sourcing and recruitment space’’. In a sense, it’s redux version of an old fashioned jobs board concept. Unlike Apply-Direct which has banished recruitment agents, these intermediaries can be involved on the LiveHire platform.
ApplyDirect claims 75 paying employers including BUPA and Optus. ApplyDirect also powers the job website for the NSW government, the country’s biggest employer.
Ultimately, ApplyDirect’s success lies with converting 600 more non-fee paying employers who were given early access to the platform.
According to Ambition’s Waterworth, there will still be room for the “high touch, high price bricks and mortar presence’’ of the traditional recruiter, in the same way that physical travel agents and stockbrokers have survived.
“But it’s a little bit fuzzy at the moment,’’ he says. “There is room for pure online plays and disrupters but there are too many around.’
Meanwhile, the $5.2bn market cap Seek (SEK) shows few signs of becoming a disrupted disrupter.
Upping its stake in Brasil On-line and Seek Asia last month, Seek affirmed current-year earnings guidance of $175m and made an early stab at 2016-17 net profit of $215m-220m.
Seek has also made successful forays into education both domestically and through its Chinese business Zhaopin, which should also hedge the company against any weakness in its mainstay local jobs business.