The Recruitment Index, produced in conjunction with APSCo, returns to give an annual insight into how resilient UK recruitment firms believe themselves to be after what has been a bruising 18 months at the hands of the pandemic.
Firms, like last year, have scored a variety of factors crucial to the overall success of their business – from their incentive schemes through to the strength of their sales and finance teams, and diversity and inclusion policies. The Index also considers the impact of change management and, in particular, how effectively recruiters ran their businesses whilst working remotely.
When comparing the average scores in our Index across all questions relating to operational resilience, all sizes of firm felt less operationally resilient in 2021 than they did in 2020, which is not unexpected. The firms with a net fee income (NFI) of greater than £50 million have been impacted the most, with their average score changing from 8 in 2020 to 7.2 in 2021. It would appear from the Index that the ability to move quickly, both with client relationships and resource numbers, was impacted by the pandemic.
All firms felt that they had a more diverse client base in 2021 as opposed to 2020 – except those in the £2 million to £10 million NFI category. Firms have had to ‘widen the net’ during the past year, as they seek trade in the pandemic and take advantage of the opportunities that have arisen as we slowly move out of the crisis. Customer satisfaction and brand scores have also been impacted, with all sizes of firms experiencing falls in their average score during the year. With the fight for candidates being so competitive, it is important that firms focus on improving in this area going forward.
Due to the sudden impact of Covid, the performance of the leadership team and sales team became more important than it has been previously. The Index showed that leadership teams’ average score increased from 7.4 in 2020 to 7.9 in 2021, whilst the performance of the sales team increased from 6.7 in 2020 to 7 in 2021.
Worryingly, all sizes of firm believe they had a worse year than previously when it came to retaining talent. Employees have taken the opportunity that the pandemic gave them to re-think their priorities and career paths, which has led to a ‘brain drain’. Holding talent is essential for continued success in the future, as well as exit value, so a rethink of remuneration packages, training and development as well as diversity and inclusion policies is necessary when there is a real shortage of quality resources.
All firms responded positively when it came to whether or not they believed themselves to have sufficient cash or borrowing facilities compared to the previous year. All sizes of business have realised that cash is key to flexibility and have therefore ensured they cannot be caught out by any future Covid-like events. However, over the next couple of months with the furlough now ended and deferred VAT/PAYE payments required to be paid, there will be an increased strain on firms’ cash reserves.
Conversely, profit margins have been hit in all but the businesses with an NFI of less than £2 million. Continued review of margins and what can be done to recover these should be an area of focus for the next year across the sector.
The biggest challenge facing firms is a shortage of candidates – with nearly 50% of firms surveyed reporting this as their largest issue. Just over 40% of firms also have concern over the shortage of consultants. Both issues can be directly linked to the pandemic and will have an impact on their growth.
However, encouragingly, 66% of firms reported that remote working had a positive effect on their business, with 93% of firms not planning to change the remuneration of consultants who will now be working flexibly, ie both at home and in the office. These agile working practices without change to overall remuneration packages should improve the morale of the workforce and lead to higher retention rates in the future.
Overall, the Index shows that the shortage of consultants and candidates are key business issues affecting the recruitment sector. International expansion is still high on the agenda, with 26% confirming an increased appetite to expand overseas.