As the EOFY approaches, has your recruitment agency mastered the productivity-profit equation?
With the new financial year looming, now is the perfect time to think about productivity levels and how mastering the productivity profit equation across your business.
In particular, take some time to consider your recruitment agency’s Gross Profit (or Net Fee Income) per full-time equivalent staff member. Note: this includes ALL full-time staff members, not just your front-end consultants. Doing this will provide you with a clear set of benchmarks to work from and check your budgets by mastering the productivity profit equation for the year ahead.
How do you compare?
The latest staff productivity figures from Staffing Industry Metrics, measuring 103 Australian recruitment agencies, reveal improved productivity levels for 63% of participants in the last 12 months to April 2018.
Recruitment agencies with 10 or less staff
-Average annual gross profit per person lifted three per cent to $203,200.
-The top 25 per cent of participants lifted gross profit per person by two per cent to $242,300.
-The top 10 per cent improved by one per cent to $315,300.
Recruitment agencies with 11 to 20 staff
-Average annual gross profit per person dropped eight per cent to $171,200.
-The top 25 per cent of participants lifted gross profit per person by five per cent to $224,000.
-The top 10 per cent of participants improved by half a per cent to $288,900.
Recruitment agencies with 21 to 40 staff
-Average annual gross profit per person lifted fifteen per cent to $214,400.
-The top 25 per cent of participants lifted gross profit per person by 10 per cent to $228,300.
-The top 10 per cent of participants improved productivity by twenty-three per cent to $305,600.
Recruitment agencies with 40+ staff
-Average annual gross profit per person improved by one per cent to $246,300.
-The top 25 per cent of participants lifted gross profit per person by two per cent to $268,300.
-The top 10 per cent of participants improved by five per cent to $275,400.
On first glance, it’s the larger teams that are making the most headway in this buoyant market. However, careful thought must be given before simply adding more staff and hoping for the best. In fact, the sweet spot for Australian recruitment businesses is 1 – 10 staff, enabling an informal, efficient and flexible small business. Go above 11 staff and your business must change with better processes and back-end support. Get to 21 – 40 staff (we refer to this as the ‘valley of death’!) and a whole new approach is required, including multiple managers, compliance considerations and so on. Only when you get above 40 staff do economies of scale start to emerge.
What to do if you’re not hitting the productivity benchmarks
If you’re lagging behind the pack per the benchmarks above, rather than adding more staff instead focus on improving your efficiencies and overall productivity. This starts not by pushing your front-end consultants to work harder, but first by taking a good hard look at your back-office support. Is your agency being slowed down by archaic systems? Do you lack streamlined back-office processes? How effectively are your support staff freeing up time for your front-end consultants to focus on billable consulting work? Making some considered changes to your back office can have a huge impact on your return, without the need to grow your team and venture into the dreaded valley of death.