“Sitting in your business, but not hitting your P&L, is an additional 18% bottom line profitability – you are just not currently realising it.”
This was my statement to a recruitment business the other week, having taken them through a number of assessments and completed a TRN analysis of their company. A great business by all accounts, growing, making profit, solid team, great leadership and getting a lot of things right – they were just missing fundamental something that was sitting in front of their noses, they just hadn’t seen. An external pair of eyes was all they needed to see it.
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This is not untypical from a lot of recruitment businesses that we talk to, in fact from a lot of businesses full stop (including ours!).
We spend a lot of time inside the four walls of our offices, running the machine and getting caught up in the day to day operations, that before we know it a month has passed, Q1 moves on into Q2 and we have moved forward in some capacity but the question I always ask myself, my business and the organisations we work with at The Recruitment Network, is did we move forward in line with our potential?
In other words, could we have done more? Had mistakes been made?
Having spent some time with the Times columnist and acclaimed author, Matthew Syed at one of our recent TRN events, I have come to realise that making mistakes is ok and interrogating where those mistakes have happened (and why) is often the best way to create better outcomes and performance moving forward.
Looking statistically at the evidence, that recruitment company that had missed over £400k in profitability, the answer for them in this instance lay in their conversion ratios, once a candidate had been sourced. They had done all the hard work, found candidates for their open jobs, qualified them and presented them to their clients in their shortlists.
Sticking to the “3 x 3” minimum standard we set for them of always sending 3 CVs to any, qualified jobs (reference to cube19’s statistics on improving conversions), they had overachieved their targets around getting candidates out for 1st Interview, but this is where the slippage started to come into play.
At a top level, in summary, their conversion ratios from 1st Interview to 2nd Interview was sitting at around 18%. From 2nd Interview to Offer, they were converting about 45% and then from Offer to Placement around 80%.
This just didn’t feel right.
A lot of work and investment of time and resource had been put into generating the interviews (possibly the most important KPI in recruitment), but the conversion from 1st interviews to 2nd interviews were too low and if we could improve that by just a further 10%, then it would equate to an additional £400k in fees, following the same conversion ratios from 2nd interview, to offer to placements as they already had, based on their current average deal size.
The campaign we are now running with them, that the whole business is focused on, is centred around “1st Interview Conversions”, identifying anything and everything that impacts the conversion from 1st interview to 2nd, from the (better) qualification of the job, to the duration of the process (and therefore drop-outs on the way) to (better) candidate preparation and so on. There are about 7 or 8 key drivers of this conversion ratio that we will analyse and improve as part of this campaign to trigger that £400k improvement and will we make a significant dent on next quarters outputs.
The question to ask your business, is what one focused campaign could you run over the next 90 days, that everyone is paying attention to, that will have the most impact on your bottom line yield for the next quarter.
We are doing a lot of this at the moment for TRN members, as we look to help recruitment business leaders squeeze more profitability and efficiency out of their business and will be sharing some more examples of how to do this in further posts and in the Knowledge Library on TRN World.