Sustainability and growth of our business model highly depend on the UK and US recruitment/staffing market. Given the situation arise due to corona virus, the employment scenario in both these countries have taken a big hit. Any deference in the economic case directly hits the recruiting function in every organisation to start with, ultimately affecting the recruitment agencies.
Seldom do we have any sight of such calamity and most businesses and two weeks back, we’d all be recruiting more staff, attending operational challenges and strategising our business to equip for further growth. Well, times have changed, instead of growth in terms of the top line; sustainability and profitability have become vital parameters to weather this storm. All of a sudden, the boards are looking at cash on hand against spending a considerable amount on just generating more FTEs.
Offshore RPOs, especially the small-to-midsized ones, will need to alter their approach to sustain and come out of this pandemic with flying colours.
For starters, acceptance is critical. The journey from denial mode; i.e. we have many clients with a large volume of FTEs, and this situation will not impact us is an illusion. Pandemic will impact everybody. Sectors such as travel, hospitality, retail have already been affected. As per this article dated 29th March 2020, Unemployment in the UK is set to double in the next few months The sooner you accept this reality, better. It is only post-acceptance that you will be able to put take action.
Many small-to-midsized RPOs will have been catering to several small recruitment businesses or have a couple of midsized recruitment agencies as their clients. Considering the impact on the jobs and recruitment freeze in the UK recruitment market, offshore RPOs will already be bracing the following situations from the clients. Clients will have:
- Given notice to terminate the contract
- Decided to ramp down the services
- Approached for a reduction in commercials
- Put the agreement on hold indefinitely
- Sustaining Existing Clients
It’s a no brainer, supporting existing customers will be most imperative. This is the time when most clients will be in a distressed situation and looking to make cutbacks. It’s to support clients and demonstrate the loyalty to instil further confidence in the partnership.
- Volume v/s Capacity
Depending on the systems and processes you’d have implemented in the past, you should have the details of volume v/s capacity; i.e. month on month comparison of the activity. From your analysis, if you believe you have extra capacity; i.e. FTEs due to the reduction in the volume of work, it’s best to approach the client and propose a proactive ramp down. It is unethical to charge a client when the person deployed does not have enough workload. You can review the following jointly with the client and either compare it quarterly on the quarter or with last financial year if the partnership has been in place for over 12 months.
- The volume of work for the past quarter
- Output for last quarter
- FTE(s) deployed for the previous quarter
There is no room for error, especially in a tight market. Ensuring consistent quality output will play a significant role in sustaining the relationship, irrespective of the tenure of your partnership. Depending on the review, you can take an informed decision to ramp down or assign additional responsibilities to benefit the client.
Lastly, ensure your feedback and governance process is much tighter than ever. Weekly and Monthly review calls with your clients will play a critical role. Consistent and transparent communication is always crucial to forging long term relationships.
Review the commercial agreement and propose a mutually beneficial model for a quarter or two. This ensures that the client continues getting the necessary support, and the relationship is intact. Some examples below.
- A systematic sliding scale commercial model; for a quarter or two can be worked upon
- Flat discount on the FTE(s)
- Only bill the salary plus an average of 10%
- If you have cash and resources, migrate to a hybrid model
- Additional Support
As a part of the consolidation process, there is a very high possibility that your clients might have had to make redundancies as well. The market is tight, and recruitment agencies want to ensure they retain their clients, however, if they’ve let their staff go, chances are, they are under tremendous pressure to deliver as well. As a trusted partner, you can extend the support to take on additional tasks (of course, in consideration as good support against looking at it as a business opportunity). Best to connect with the client and discuss what additional help they might need.
The offshore team might be working upon only CV sourcing, Database Regeneration or Compliance and there will be tasks such as candidate generation, payroll, etc. which your client might not have transferred for the offshore team to work. This is the time for the offshore RPO to extend no-obligation support; i.e. a free trial (provided you have resources) for a specific duration until the client gets back up and confidence is gained.
- New Business
Given the situation and the financial impact due to contract termination, ramp downs, AND/OR potential prospects on hold, many offshore RPOs will review their sales and marketing budgets. Many will also how questions on how to develop new business in this scenario? Several offshore RPOs will decide on scaling down their sales and marketing function due to lack of visibility in the following months.
Yes, there will be a slowdown and not many recruitment agencies will make decisions on various aspects. However, in my view, Offshore RPOs must focus on the below factors for new prospect development.
- Unleash the power of digital marketing to create brand awareness
- Promote quality content
- When pitching, focus upon value add against cheap rates or cost arbitrage
- Soft sales approach; i.e. at the back of digital marketing against vanilla cold calling
Simultaneously, a structured sales process for your business development teams will play a critical role in your pipeline development. Carpet bombing thousands of agencies will get you some traction; however, it will be short term.
- Training & Development (Up-skilling)
Times are tough and challenging times require a new set of skills, especially from the leadership level to every person on the team. Invest this time in training and developing your Managers, Sales and Operational personnel.
Your clients will not react in the same way as they did before; especially in scenarios where there are errors. Train your Managers and operational staff to handle these situations. When conducting new business development, Recruitment business Owners and Directors will not react in the same way as they did before the corona virus situation. There are many free courses on skill enhancement and training to evolve thru’ difficult times. Invest this time and resources to train, develop and be the best recruitment process outsourcing company.
As mentioned on my previous blog “4 Factors Recruitment Agencies Can Work Upon During Crisis”, refer to work upon skill enhancement by Training Need Identification (TNI) and develop a skill matrix to cross-train your staff to benefit the client.
- Cash Flow
Cash is King. In times like these, the cash flow of many businesses will be impacted. It is a vicious cycle. You must sit with your Accountant and do a thorough review of how much oxygen do you have before it runs out. Basis this, you can form your strategy for the next 3 to 6 months. Remember, many of your clients will not pay in full, many will ask for discounts and a small percentage will default as well. Despite all this, you’ve still got the salaries and bills to pay. Some points for you to ponder upon:
- Review clients: Not all clients will have taken drastic decisions, however, it is imperative to do a thorough analysis and realistic prediction of which client will last how long from contract tenure perspective, consider the ramp downs, discounts, etc. and then review your monthly/quarterly cash flow. A non-bullish approach (as your Accountant will suggest) will help in sustaining your business thru’ this slowdown
- Reach out to clients: Openly discuss the realistic timeline your outstanding will be cleared by
- Review client contracts: When the client renegotiates, also ensure you are protected; i.e. the schedule and surety for payment
- Shelve Side projects: Any side projects you would have should be carefully reviewed and be put on the back burner until the cash flow and the market situation improve. Focus is vital and ensures you are 100% dedicated to the plan
- Review Budgets: It’s time to sit with your Accountant and review budgets and forecasts for the year. Also, review all the supplier contracts, discard what you don’t need in terms of tools and resources, renegotiate contracts where possible and get revised commercials
- Salaries and Increments: Many will have to make decisions to let go of team members. Best to discuss the situation with the team, see if the teams are ready to take a pay cut to help retain their colleagues’ jobs. Take respective decision depending on your circumstances
“Change is the only constant” and “Anything that doesn’t kill us makes us stronger“. Both these quotes prove to be apt for the current situation. I am hopeful that we will all come out of this much more robust and will have better client relationships, processes and systems in place—all the more prepared to shine when the time changes and ready to face more adversities in future.
About the author:
Ketan Gajjar has over fifteen years of experience developing and leading large scale offshore RPO businesses from scratch. He has worked with some of the mid to large-sized recruitment businesses, reviewed their systems and processes and executed turnkey offshore recruiting project to support both front and back-office recruitment functions.