expansion

Multi Business Lines = Multi Conflicts?

As companies grow, a natural evolution is expansion in different geographies and/or business lines. For recruitment companies, this can also be governed with changes in the way people work and how companies engage people. In the 50s, we see a build up of temporary work, in the 80s, outsourcing became a new cost reduction trend and that also included recruitment services. While a company like Nestle can differentiate their products by packaging. Differentiation in a service industry is subtle and lack of it has more detrimental impacts on conflicts of interest.

Consider a common example and a true story. A company is confronted with 2 separate businesses of the same company, one in providing recruitment services, another in providing recruitment process outsourcing (RPO) services. The first team offered recruitment services at X% of salary with potential volume discounts. The second, not knowing their colleagues had pitched recruitment, now offers on-site recruitment services charged with a margin and salary of recruiters on board.

As the company considers both offers, they are left with wondering: if 2 on-site recruiters can handle the recruitment, why bother using recruitment services from team 1? And why is the same company offering me completely different services? At some point, the company will also wonder: if I need 2 on-site recruiters over a period of time, why not just hire them?

The example is simplified but the reality is not far. This happens when there are no clear rules of engagement and differentiation. While the dynamics of a services work best at being flexible, differentiation will be important to give room for each business line to grow without them choking each other’s growth. Sending a clear message also allows the sales team to better communicate the services.

Create differences by considering the following for each business lines. Ideally, when there is no cross over, it will be able to stand on its own and even create hybrid partnerships for their client.

Defining rules of engagement

The business rules should be clear for each business. This will allow them to pursue business within the areas where they should engage and avoid potential conflict with another team. The following can be considered when defining the rules:

• What is the level and type of candidates recruited by the team? This can mean level of experience, seniority, functional levels, salary ranges, contract or permanent hires.
• What is the service delivery model? This can mean individual delivery, volume, and geographical coverage.
• What is the pricing model? Is this by margin, salary of candidates, one-time fees?

Defining rewards and penalties system

Once the rules are defined, it needs to be followed. And each team will need to know the rewards and penalties for following or working outside the rules. They should be aware of:

• When should a business opportunity be passed over to the other team?
• What is the reward for passing on an opportunity and/or helping the other team to follow through for win?
• Who are the authorities to arbitrage a conflict?
• What kind of penalties are involved for working against the rules?
• When are these penalties waved or exceptions?

Building a business sharing environment

While rules are established to avoid misbehavior, a positive growth environment is important to create a counter balance to the restrictive nature of rules. This can also be a platform to create hybrids and partnerships. Business sharing is about communication. And communication can be encouraged but without a structured approach, daily activities will choke agendas and communication will be left till the last moment and often too late for any collaborative work.

• Organize periodic cross team meetings for business sharing of latest wins and losses. This can be organized at the highest level as management meetings and at lower levels with subject matter experts.
• Make use of intranet to post wins and loses. This can be a form add on to in-house CRM or an extract of CRM information. It can include key accounts, contracts, and potential leads.

Celebrate success and publish case studies

Celebrate cases where teamwork from various teams contributed to success. Creating case studies of hybrid models that worked for clients will also be a form example for future cases. Some times, studying losses are just as important to understand what worked and what does not. This may also provide information for changes in rules where it has not worked.

The above are process changes. In almost all situations, the people aspect is key and needs to be the first to be addressed. An analysis of the different business and existing situation and creating open communication with management to create the desire for change will build strong foundations for future changes.

Expanding in Asia – People Matter

Coming from Asia and working in Europe, I’ve had the occasional discussions where companies look to expand in the east. Most of them are companies doing well in UK with a portfolio of international clients also looking to expand in Asia. Some are opportunistic especially when the recruitment market in Europe has slowed and others find it necessary to retain an international brand.

Whatever the reasons, the growth of China is a great carrot stick even at a slower annual GDP growth of 8.2%. Other than that, there is ease of doing business in Singapore and Hong Kong, English as a widely spoken 1st or 2nd language and relaxed labour laws that promotes mobility and thus recruitment. Other positive indicators include the persistent trend of offshoring and outsourcing to Asia.

The basic questions of expansion are “where” and “how”? Yet the answers are not so straightforward. After much analysis (see below for additional considerations), I am still convinced that finding the right person comes first before any other considerations.

Finding the right person is difficult
While globalisation is a continuous trend, recruitment is largely local with senior level recruitment less sensitive to geography. The fact remains that you serve a local market in recruitment and thus local knowledge and network is important.

In a service industry where profits rise and fall is tied entirely to the productivity of the people, finding the right person to launch your business in Asia is key. With the right person, he/she can also bring in a team that can start up quickly.

Pairing Sales & Operations
If you try to find someone who is strong in business development and tenacious in setting up a new business, you’ll hit a brick wall very quickly and setting yourself up for disappointment while time flies past. It is rare to find a good operator who is also a good sales person and vice versa. Working on combinations can be a workable solution.

With a strong base of clients who have operations in Asia, you can prepare an existing hire to relocate to Asia. Pair this person with a local person who is familiar with set up to split up the work. Typically, a finance or legal person is a great choice although not evident. A finance manager with business acumen will have the tenacity to work with administration not to mention the knowledge in keeping finances in check and prudence in risk taking.

Alternatively, a local strong sales person with established clients can be paired with an operator who is already familiar with your system and processes. A good consultant with desire to move can be a good choice.

Buying may not be the best option
For companies with cash (a rarity in this economy), buying may be on the table. The logic is, a profitable company will bring immediate returns while keeping the efforts of starting in a new market minimal. It may be true for other industries; this is a potential trap for service industries where human capital is key. Most boutique firms up for sale are made up of free agents. A cultural change mismanaged can mean huge turnover and worse, people leaving to set up on their own with the client base you had bought.

Unless there is strong legal binding and strong leadership and conviction to the new management and parent company, you can see your investment walk straight out the door before your logo is on the wall.

To pick the right place to start looking for the right person, a quick list of considerations.

Work from strengths
Without over simplifying the matter with generalisation, there are key characteristics in each market. For example, Hong Kong is a big financial center while Philippines is home to contract manufacturing; Singapore is an international hub with a small local market while Malaysia has a large local market next door.

If you already have strong expertise in a sector or function, you can choose the geographies to enter based on your expertise and potential for knowledge transfer and clients cross selling.

Each market can also be rated based on the following:
• Ease of entry – cost of entering and administration required.
• Licensing – complexity of labour laws and the types of licences required.
• Strength of currency – while cost of hire is low in some geography, it also meant that their profits when converted are lower. Contrary to product industry, in service industry there is no cost advantage.
• Availability of talents – in tight talent markets, training and mentoring will be required.
• Professionalism – there is a wide range in the level of professional ethics in Asia.
• Saturation of market – eg. In Hong Kong, while financial services is dominant, there is also highly competitive.

Sometimes, the most obvious choice may not be the best choice. To avoid entering into a red sea of competition, pair your top strength with secondary markets and your secondary strength in primary markets for example.

Build on your leverage
If you are already in business, you have leverage – your clients. While your clients may or may not have strong influence or ties with their Asian operations, they are still connected. They can point you to the right person and make introductions.

Your clients’ presence in Asia also meant that they had already tested the market. Based on their industries, their presence can also give you immediate business intelligence on the viability of a certain market based on your own expertise. Note: It will not however, tell you the saturation of the market in terms of competitors.

Partnering with a client
Some of your clients may also be considering entering into a new market. You can sound out your clients with your intentions and smoke out potential partners. A large recruitment project is the best way to enter a market with some assurance while allowing you to build up a database of candidates.

For an analysis of the criteria by country, write to me.