The ketchup conundrum: critical skills shortages vs. a truly flexible workforce
How to avoid short-termism to address critical shortages with holistic resourcing strategies.
With Tim Jacob & Giles Sumner from Squadrato
00:00:00 - Balancing an abundance of short-term demand with strategic vision
00:10:30 - Planning and looking at the viability of other resourcing models
00:22:30 - The macroeconomic background leading to a ketchup economy
00:35:00 - Matching resourcing channels with business strategy and outcomes
00:41:20 - The impact of IR25 on RPO, MSP and project-based solutions
Transcript
Jonny Dunning: 0:00 Okay, so we are ready to go. Welcome back, guys. Welcome to 2022. And it’s great to see you both again. Tim and Giles from Squadrato.
Giles Sumner: 0:12 Hello. How are you?
Jonny Dunning: 0:14 Very, very good, thank you. So Giles, I’m assuming good Christmas. And sounds like a fairly busy start to 2022 for you?
Giles Sumner: 0:23 Very much so. I think the whole of 2021 whilst we will go through all sorts of variety of different changes, pin of husk, it’s a post pandemic, I suppose. We still obviously in some current restrictions, but I think throughout all of last year, we were talking with organizations, helping organizations who were seeing the customers they were working with wanting to do bigger things when it came to recruiting talent, there was spikes in demand across most sectors. And where Squadrato was always looking to help these recruitment organizations who have customers coming to them saying, “We’re struggling to hire talent, how do we do it in a different, in a better way?” And I think there was a mix of those organizations that were, “Yes, we want the press ahead with the kind of help you can give us, developing annuity services, creating products and services like RPO capability or MSP or statement of work capability.” Somewhere, we’re having live conversations with customers that needed something done really quite quickly. And others were, “Well, without busy, with that much work on at the moment, just transactional recruitment. We know we might want to do something, but we’re going to park it because for the time being, we just need to cope with demand.” And that’s an interesting kind of dynamic, because there’s no doubt lots of the recruitment businesses we’ve engaged with have certainly seen huge spike in demand and just want to focus on the very much here and now. And I think it’s something we’ll come on to later. But for suppose for Tim and I, it’s helped us sort of understand a lot of the sentiment from the recruitment businesses as to where they see themselves going longer term, how they...? We, throughout our time, Squadrato have helped businesses develop those kinds of services that have seen reward come quite quickly, because the demand has been there from the customers, it’s not been a concept that hasn’t actually seen something realized quite quickly. Whereas others are sort of saying, “Yeah, we know we’ve got a journey to go on. But right now, we’re just going to focus on the here and now and on today.” So I think that’s helped from our perspective, because it’s helped us sort of see where customers might end up going over the course of the next 24 months or so? And whilst the market then continues to sort of wax and wane with significant spike in demand? And some of the things that we’ll come on to, I’m sure when it looks at things like IR35. And what might happen, with that over the course of the next 12 months? So yeah, it’s been brilliant end of the year and a very interesting start to this year as well.
Tim Jacob: 3:17 Definitely a very interesting start the year. I think the other thing about this, particularly the first quarter of last year is that we also helped a couple of end user organizations with the conundrum of organizing IR35, assessing their non-permanent labor, their off payroll labor, and helping them put solutions and we, some recruitment partners as well, about how to manage that and get them across that hump of April last year. So that was interesting as well. Yeah.
Jonny Dunning: 3:47 If I think back to when we last spoke, we last got together in this format back in November 2020, quite a lot of water has gone under the bridge since then. Obviously, they say I 35 coming in, and all of the kind of, fallout from that. So Tim, what’s been the focus...? Giles, that’s really interesting to recap on. Some of the stuff you guys have been doing over the last year, it gives a good reminder as well as where your areas of expertise are for you guys in terms of helping recruitment companies, build up these annuity services and to a certain extent, move up the value chain. Tim, how have you seen that operate in the last year, bearing in mind the backdrop of IR35. And also bearing in mind when recruitment companies busy and they’ve just got a huge, massive amount of demand that they can’t possibly hope to fulfill, the candidate shortages or skill shortages. It’s quite difficult for you to prioritize the strategic stuff as well, isn’t it?
Tim Jacob: 4:52 Definitely. It’s a massive distraction because the bright shiny things in front of you. I don’t think it’s that inaccurate to say, all the staffing businesses that we work, with all the recruiters that we’ve worked with in the last 12 months have had the best year they’ve ever had, financially, revenues perspective. But I think, and this will chime with recruiters who are listening to this, one of the challenges is, you might have loads and loads of jobs. But which ones are the best ones to fill? And you’re increasingly seeing the agency market, wanting to move to commitment from clients, to work with them. So be that wanting to do some sort of retained agreements and retained work financially, be that trying to close the customer down? I think one of the things I’ve really noticed these particularly sitting on sales floors, like I was, yesterday, in a recruitment sales floor yesterday, he’s actually seeing that the recruitment consultants, but some of them for the first time, because this hasn’t been the market for the last five to 10 years having to really pressure, not pressure, really closed down customers to the process to make sure that they’re not wasting their time on a job that the customer is not committed to, or the customer is offering the right value benefits to attract the right candidates, that the role is fillable. So a lot of recruitment owners in their transactional business struggling with, we’ve got loads and loads of jobs on but are, are we actually feeling any more as a percentage than we were before? Let’s focus on the quality business, let’s improve the quality of good. And I think that naturally in our world, in our lingua franca would naturally lead us to, if you want to build trust with the customer, there’s a deeper relationship that you can develop with them, that will get them to where they need to be. But I think we both experienced, this is another kind of quite unusual conversation to hear recruiters on the desks actually having to deal buybacks on a regular basis on salary inflation.
Jonny Dunning: 7:22 When you say buybacks, do you mean counter offers?
Tim Jacob: 7:25 Counter offers, salary inflation, having to have sometimes for the first time in their career talk to customers about the fact that their salaries are not where the market is at because it’s changing so quickly. And that’s not been seen for a long time, particularly in client basis, specifically within professional services, sectors, tech, digital engineering, infrastructure engineering, those are the staff and businesses that we work with, their specialisms tend to be in that area. And it’s something that, a cohort of recruiters has not seen, in the way that it’s happened in the last 12 months. So, it’s a function of huge amounts of demand out there. And I think that should prompt recruiters and also end clients to try and take a step back and think about that, there needs to be a more strategic way in which you go about acquiring talent, there’s more to this than just having to go out there and attract talent with 10, 15 20% pay increases, which is not unusual at the moment that people are being moved for that sort of money.
Giles Sumner: 8:43 That’s true with non-permanent payroll workers as well, freelancers that, one of the stats are there’s sort of 60% of headset businesses surveyed have had to pay more than that, three quarters of businesses surveyed. And I think a reason Brooks and Legal survey, they’ve had to increase rates. I think, if you sort of chuck that, into the mix of many organizations have now just embraced hybrid working. So where the talent pool sits is another conundrum? What type of team structure needs to be in place because half the team won’t ever necessarily meet themselves face to face, or when you’ve also got to consider that, that then throws the capture of talent across a far broader spectrum? And increasingly, as I think we talked about last time, people’s work-life balance is now at the top of a lot of candidates pools of things that are critical to them taking the next job. So lots of different things that are impacting how recruitment organization service customers and customer demand. But all of that talks for me says, “More control is needed, more order is needed, more structure is needed.” Rather than, “We need to go to a wider community of suppliers, we need to engage more people,” it’s sort of the less is more resort, I think is [unclear 10:21].
Tim Jacob: 10:23 I think we’re gonna move on to this, but I think the COVID has just amplified some things that will already structurally in play and coming down the line and other things just accelerated and amplified some of these challenges, the causes that we were talking about, the result is that there’s a huge labor shortage in across almost every sector. There’s a huge labor shortage.
Jonny Dunning: 10:54 So when we’re talking about this kind of, the clear and present problem for recruitment organization, got all these jobs to fill, same problem from end organization, “We’re under resourced, and we’ve got skill shortages.” It feels to me like you can get too focused on, I mean, it’s clearly an opportunity for recruitment businesses. And it’s clearly a problem for companies where it’s a problem for everybody really, and but I think you can see how people can get stuck kind of spinning their wheels on that, in the sense that, intentions important? It’s really difficult to hire people, make sure you’re not losing good people, make sure you’re looking after people, you got paying the right amounts of looking after people, allowing people to work in a way that makes your company or this opportunity the best thing for you. But there’s also the wider view of talent. And effectively this wider view of resource capacity, which is where it starts to go into other models, how could you resource this requirement? Are you effectively utilizing internal resource? Are you giving them opportunities to get involved in a project based on exciting things? Are you effectively pushing out to contingent workforce? Are you effectively hiring? Or are you effectively outsourcing where that’s appropriate? So I think the ability to take that more holistic view, as you say, it’s not just a question of more, more, more and more volume, it’s a question of quality and strategic thinking that is ultimately going to lead companies to be very successful in the future, because this is one of the major challenges for organizations at the moment and it always is, but it’s very much at the fore at the moment. Oh, Giles you’re on mute.
Giles Sumner: 12:34 Sorry, I’m on mute. Yeah, I think I’m planning is always a challenge, it’s very difficult to plan and at the moment, in normal time to plan, what you’re going to need in six months’ time. But at the moment, with the last 18 months or so it’s been almost impossible for organizations to do that. And I think when you start to try and take a step back and look at where the available talent pools are, and also embrace, and I think this is something that the lens of IR35 has drawn focus on to organizations about how they use non-permanent labor? The outcome that they need doesn’t necessarily lead to the fact that they need to make a permanent hire, that there are ways in which they can deliver the outcome that they require, without having to increase the number of employees that they have. And it’s a shift in mindset and strategy to start to think about what it is that we want to achieve? And then look at all the ways in which we could achieve that, by blending all of the channels that are available to us. I think, and this is true, when you’re in the moment, you’re just dealing with a massive intro, and you’re just dealing with all of the shouting that, “We’ve got loads of orders. And we need to try and find a way in filling them. Let’s go to the way in which we filled them before rather than thinking about all of the different ways in which that might be possible out there to fill them so.” So there’s an education, and a change mindset that I think everybody’s having to go through quite rapidly at the moment to think about ways in which they can achieve those things.
Jonny Dunning: 14:37 Do you think it’s flowing up as well as down in the sense that some clients are being educated and driving this through their recruitment partners, but in some cases, the forward thinking recruitment partners are driving this agenda where they’re saying, “Look, there are other things we can do, we can help you on a wider basis. You may have slotted in here, but we can actually do these other things for you and address them broadly”?
Tim Jacob: 14:59 These are there as well. I know. The one, that the example that’s been in the news very much in the last half of 2020 was the HGV driver shortage. And the solutions that had to be put in place quite rapidly to try and solve that. None of them were short term fixes. There was a fundamental challenge in training enough individuals and a timeline that would be required to train those individuals. I think everybody would agree that we weren’t HGV drivers trained properly. But when you listened to the causes of that squeeze in HGV drivers? It dates back years, it dates back to the conditions, the pay, obviously, but the conditions, the HTV drivers have to put up with what they’re expected to do, it’s just not an attractive thing to do. And when you’ve got a tight labor market, just from a metric level, there are physically a fixed number of people to do all the jobs there are in the UK, you have to have some long term thinking around it. And that meant that government had to get involved. That meant that training organizations had to get involved, that meant that third party recruiters had to get involved in the solution. And certainly, when you talk about the global recruitment companies, their strategies are holistic around nurturing of talent all the way through the required skill shortages and sectors to be able to fulfill the needs that are coming down the line. But it’s not a simple answer, it does take people to take a step back and understand how they’re going to go about doing it. And the supermarkets, for example, we’ve all been to a supermarket in the last six months, seeing the pictures up there about becoming an HGV driver, they’ve had to pay more money, they’ve had to increase the wages. But they also if you’ve noticed the small print are offering training, bursaries, they’re offering all sorts of different incentives to try and attract talent into that ecosystem and you could you could say that, you could use that’s just an example. But I think it does need that change mindset, it does need that stepping back for an organization, for an in client organization to try and think strategically about what their needs are going to be? And the different ways in which they can fulfill those needs, both in the short term, but also the return on time?
Giles Sumner: 17:44 I think there are some things around again, the lens of IR35, and the talk of consider and see jumping ahead to what we might come on to but the government said there’s kind of a soft landing now IR35, wasn’t for the first 12 months so organizations who made very quick decisions that sort of Christmas 2020, say, “Right, we’re banning off payroll workers, there won’t be any.” Are they now successfully delivering what they need to deliver to the best part of 16 months on or 15 months on? Or are they now thinking, actually we need to flip back because we’re just not being able to achieve what we need to achieve now that there’s a burst in demand and burst in capacity. And that means we need to reconsider what a flexible workforce looks like? And I think it’s going to be interesting to see whether posts to the April, as things do start to get maybe a bit more serious around HMRC, looking at IR35 within organizations and how it’s been implemented as to whether there’s a further tightening of those opportunities that sit within an outside determination organization do get far more nervous about doing it? And then that puts an even more, going back to Tim’s point that, you’ve got to have a blended approach to thinking about outcomes. It’s got to be an outcome conversation. And I think you’re right, John, I think there is some, as I said at the outset, we’ve got organizations who are going proactively to customers, say, “You need to change the way you’re doing it,” but then also, customers coming to the organization’s themselves and saying, “You need to help us do recruitment better. We’re making an absolute rickets of it.” I think that there’s an also an interesting piece that we’ve seen, Tim and correct me if I’m wrong, but certainly the smaller to medium sized recruitment businesses have been drawn to Europe and the States as well. They’re almost whether it’s consciously finding some of the UK recruitment challenges in as we were saying, just too difficult to do, there’s still too much inconsistency from the customer or support process, or they’ve got different wrong kind of model in play. And it’s difficult to work with but have been drawn to servicing opportunities in Germany or the Nordics or even into the States, there’s quite a few of the businesses we’ve worked with, they are getting very excited about the amount of demand that exists outside of the UK. And so there’s a kind of an almost a lack of, UK will lose potentially, there’s a lack of capability from some of these organizations who are now starting to focus on less mature markets or markets that are maybe more open to listening to change.
Tim Jacob: 20:54 I think that’s also a function of the challenges that we have in the UK are replicated in other high income countries across the globe as well. And I think we probably need to be aware that I think the clients, the recruiters that we work with, a dealing in high knowledge, professional services, so there’s a ready market out there to do some things differently and that their clients are leading them there as well. But I think we both talked about to recruitment owners who were distracted by that shiny thing to try and to get them to come back to, there’s more you can do with your existing customers. There’s more you can do with the way in which you interact with your existing customers. There’s more you can do to increase your fill rates with those existing customers.
Jonny Dunning: 21:49 Yeah. And it comes back to the recruitment organizations have an opportunity to address this on a wider basis and companies do as well. And it’s likely that both parties are going to have to do that to evolve successfully. Because ultimately what we’re, the subjects we’re looking to talk about today are looking at the skill shortages versus the ways that you can be more flexible in your workforce approach. And, for me, that kind of that’s just the everyday for me, because I’ve had exposure across, the kind of permanent recruitment world job boards, all sorts of technology marketplaces, the gig economy, contingent workforce, etc. And obviously, services procurement as well. So, I don’t have any restrictions of, “I sit in this department. So I’ve got to be focused on this particular area.” And those people over there that I don’t really talk to, we’re dealing with that side of it. I just look at the whole thing. And I think if you take a kind of C suite point of view from an organization, I’ve said this many times, when it comes to resource and capacity, they’re just interested in understanding what is the most effective use of our resources? They’ve got various different channels that they can use to get things done. They need to have that resilience within their workforce supply chain, if you want to put it like that. And so they need to have different ways of getting things done. And they need to use the most appropriate way for the thing that they need to get done. So again, comes down to outputs, outcomes, and designing things around the work, not necessarily trying to design things around the worker. But the other side of it is all the social change, all the things that have happened to people, not just over the last two years, but over the last 10, 15 years. And, Tim, we’ve previously started talking about some of the kind of macroeconomic factors that sit in the background, I think Giles described them as boring but interesting bits. Tim could talk about those bits.
Tim Jacob: 23:49 It’s graphs. But it’s also that annoying thing of data, we become very familiar with looking at graphs and next slide bits and percentages and all the rest of it. But there’s a fundamental shift in the population in this country. That dates back. So if we go back to the sort of 80s when we were at school, Johnny and Charles was just starting work, I think in the late 80s.
Jonny Dunning: 24:17 Fax machines, I remember.
Tim Jacob: 24:20 Fax machines, all sort of things. Roughly in the 80s, from pre and before that, there was roughly, in the 80s and 90s, up until that point, you had roughly two people in their 20s entering the labor market for every one person in their 60s, leaving the labor market and I mean, our threes experience, our generations experience is that the size of the labor market increased. There were more people coming into the labor market than leaving it. Since the beginning of the 2010s, that’s changed. Today, it’s about the same number entering the labor market as leaving the labor market. So, roughly, in fact, it’s slightly less than the number of available people coming into the market, it’s actually slightly on the point of declining. And now that’s a function of huge social change in the last 30 or 40 years. It’s a function of technology, enabling different things, but the fundamentals of any population, the birth rate, and the birth rate in this country has come down, we’re not producing loads of people. Now, since the 2000s, we have been backfilling that with immigration. And that’s fine. But we’ve seen that isn’t fine for everybody. A lot of people, find that as a negative, some people find that as a positive, it causes friction within a population. And you could say that Brexit, the Brexit vote was a reaction to that. But whatever the reason, we turn the tap off. And you could argue that you can’t continue just to import hundreds of 1000s of people to fill the labor gap. I mean, it’s not really sustainable. Frankly, the only sustainable solution is we will have more children.
Tim Jacob: 24:31 I can’t have any more, I’ve got no more.
Tim Jacob: 26:38 In the higher income countries in Europe and in the States, we live in old societies. Africa...
Jonny Dunning: 26:47 And we are getting older and continue to be...
Tim Jacob: 26:50 Getting older. And you only have to look at Japan, which has chosen not to allow immigration as a small birth rate, and their economy has plateaued for the last 25 years. Because their economy can’t grow because there’s physically not enough people. So back to the UK, in the years before Brexit, I remember having a pub conversation with the people around this who were, up a graph of, so the context of the conversation was you see migration, it’s taking everyone’s jobs, it’s taking people’s jobs, it’s taking jobs away from British people. If you look at the unemployment rate, since 2010, the unemployment rate, at times, at its lowest that it’s ever been recorded. So the number of people out of work was at its lowest where we had the most amount of immigration happening. Because there were loads of jobs. We’ve just, in the last 18 months, three years since Brexit, we have disincentivized migration from Europe, it’s still possible, but we’ve massively disincentivized it. We haven’t, through government policy turned on the taps from other territories to bring in migratory labor. Although, there are some exceptions to that. But all of a sudden, the UK is not the place to be able to come from abroad to find a job. And we just don’t have enough people to do all the jobs that need to be done. And the effect of the interventions around lockdowns, constraining the economy massively, pumping loads of money into the economy to “support” it, which sits in personal bank accounts and corporate bank accounts. That’s all ready to be spent. And all of a sudden, we’ve got what’s been described by people much more eminently qualified in economics that this catch up bottle effect, ketchup bottle economy, where you’re banging, that you’ve got a huge amount of pent up demand in the ketchup bottle and you’re banging it to try and get it out. And all of a sudden, it’s going to come out all at the same time. And there’s going to be huge constraints and being able to deliver all of that growth and principally that comes down to the number of people who can do all the jobs that are available to deliver all of those orders and spend all of that money and that’s leading to inflation, it will just lead to inflation. The wages are on the rise, and they’re continuing to be on the rise because there are just physically the numbers don’t add up. So I think it’s always a challenge to realize that the world has changed from what you thought it was like, particularly 10 or 20 years ago, but there just isn’t going to be the same amount of people coming into the labor market. So you’ve got to do something different to drive economic growth, you’ve got to import that labor, you’ve got to automate the tasks that they do. From a macro perspective, there are very few big things you can do to change that other than creating more people’s come into the economy. So talking about it from a macro perspective, as I was telling you about the experience of recruiters that we’re seeing at desks at the moment, those in their 20s and late 20s, and 30s, they’ve never had to deal with wage inflation. They’ve not really had to talk to their customers very often, when they’re taking a job from them to go, “Your salary is completely off where the market is at the moment.” I mean, we’ve had this on a couple of occasions, particularly during the summer, where they’ve just never had to have that conversation. It was a different matter in the 90s when Charles and I were on the tools of stuff, technology was moving on at a pace and there was different things, but it’s realizing that this is a long term structural trend in the UK labor market, that you’re not going to go away. There’s this big strategic long term decision that certain sectors have got to make about how they’re going to physically get the number of people to deliver those things? For example, there’s a massive shortage of midwives at the moment. Now, obviously, with a declining birth rate you would expect you need less midwives. But attracting people into that profession means they’re not going to do other things, getting people to become HGV drivers means there’s no one going to be able to pack the shelves, or they want to drive the vans or no one to do this. There’s a real constraint on the labor market at the moment, which is because of the birth rate in this country, across all sectors, all population types, all regions, all ethnicities, backgrounds, whatever way you segment it, the birth rates going like that, and plateau into roughly below two, on average, across the piece, and there’s just not enough people around. So with that in mind, that’s the way that I would want to behave or have that in the back of my mind when I’m talking to customer about the challenges they’re having finding the right talent, and how they’re going to go about attracting the right talent? As we’ve been saying recruiters have had financially, some of the best year, some of them have, they’ve ever had in their history. And the sector in recruitment has had even better than that, that’s recruitment [unclear 33:14]. They’ve gone nuts. And one of the constant conversations we have with our recruiting clients is, “I can’t find enough people to fill all the jobs I’ve got. I’ve just had such and such a person poached to go work for.” Yesterday I was talking to one of our customers, he’s had a very senior talent partner, poached by Big Six systems integrator, they have doubled their salary, this isn’t going to go away. But there’s a real opportunity to be able to, for recruiters to deepen their relationships with customers to provide much more control and governance. We were talking earlier, John, you were talking earlier about seeing a number of different functions within an organization. Many organizations do have a view of what their workforce looks like, or even have a workforce plan. But in our experience, it’s not the majority, even large organizations of repute that you would have heard of, will not have a single version of how many non-permanent workers they’ve got in this organization? How many work permanent workers they’ve got this association or what the demand might look like in three months’ time for those workers? An equally fragmented way of saying, “If we do have demand, this is the way that we’re going fulfill it. We feel we need to reach out to this challenging market. The only way we can do that is multiple supply, is by throwing the net as wide as possible in order file talking to many agencies we can, sending them all the same jobs back. That’s how we go about, oh, and what we need 10 more tomorrow.
Giles Sumner: 35:12 We’ll go to a different 10. Because they’ll that first 10 they’re already looking at the stuff that we gave yesterday, which again, is totally unsustainable. So tapping into them, what is the talent pool you want to address? What are the types of people you want to have working in the organization, talks a lot, lots of things around ensuring you have the right proposition, the right kind of experience, you take people through the right journey, you’re giving them the right environment to thrive and succeed and to grow and develop and to tell other people that this is a great place to come and work? Comes back to this point around control, the control of that message, control of that proposition, control of that activity to capture and attract what talent is available, or could be available within a planned approach of thinking about outcomes? And as we’ve said, on a blended approach is always going to be the most appropriate way of doing it. But recruiters are going to find the definition of madness of doing the same thing, again expecting a different result, they might say, “Well, all we need to do is do what we did in 2021 and 2022 is going to be bumper.” But the same point you come back to is, the way you do that as you get more people in. So where are all these people coming from to help you deliver to that increased demand? Again, that’s going to flip as Tim saying, it’s going to flip from building the capability in the organization, just to do more from a volume perspective, to look at it from the customer’s end, to look at the customer side and get that customer engagement right. That customer commitment right. We’ve seen that from the outset, getting that control, getting that partnership in place, rather than it being just wanting to do more transactions, because that’s going to be unsustainable throughout the course of this year.
Tim Jacob: 37:14 And I think, in the context of the background of, look, there is going to be a labor shortage for the foreseeable future. I think, I was listening to one of Gary Goldsmith’s Pirates podcast from LinkedIn. So don’t just believe me, listen to Mr. Goldsmith built one of the largest recruitment businesses in the UK part of the team that founded S3. I know, this is a direct quote, but apologies guarantee if I’m mangling your word, “If I was setting up a recruitment business today, I wouldn’t set up a transactional recruitment business, I’d set up a recruitment business that does recruitment as a service RPO and MSP because that is what is going to succeed for customers, that is the way in which customers will need to operate in a more holistic way. They just gonna have to. That is the future. That’s how it’s gonna have to be done.”
Jonny Dunning: 38:23 It’s the application of logic in the face of the facts, really, isn’t it?
Tim Jacob: 38:28 Yeah, I’m just starting to have some consciousness about how you go about acquiring talent and have some rigor around it and some joined up thinking and some governance and a process and a way of doing it and have some sight of how you do it and some intelligence about how you do it and some technology that enables you to do that more efficiently? Like Vivio, for example. That surely has to be the better solution than just doing what we’ve been doing before.
Giles Sumner: 39:02 But if it’s not already at C suite level as agenda point one or two, which it should be, it should be, how we’re going to hire the resource or how we’re going to deploy the resource to achieve what we need to achieve? And if they’re not at that level, because so often, as I think we’ve said before, on this session last time, recruitment is not seen as the single most important topic, certainly within a people environment, but it sits sometimes uncomfortably within the HR community. Sometimes it’s not thought of as being needing the attention. It’s got a quick fix answer by, bringing some people internally to handle recruitment. Without thinking more fundamentally, as we’ve said throughout this session, what are we trying to achieve? What are the outcomes are we trying to achieve because it isn’t just about acquiring new it’s about retaining the existing thing, of course.0 I actually am working with a, an organization that moment who have, I suppose they’re in a sector that’s largely recession proof since they’ve kind of utility sector? And they’ve embarked on a project to hire around about 100 or so people into technology over the course of the next four or five months or so. And part of that has been acquiring new from external, of course, but they’ve been very keen to ensure that there’s internal mobility and of the number of roles have been filled, so far, half of come from internal moves, some of those within the technology department, but also outside and other outlying core business streams. So the answer to fulfilling demand in an organization’s got to be thought of, as we’ve said, from a broader perspective, rather than around how many do we need today? Because that’s just not going to cut it as we keep saying, but the great thing is, there is an answer to this, there are things to do from a both recruitment capability. As Tim’s just said, around, if you’re going to do it now, you would have annuity services as part of the things that you can offer your customer but you can revise the customer, you can tell the customer, you can show an evidence the customer, there’s a better way to do things, a different way to do things. Everything that was happening before pandemic, during the pandemic can’t be fit for purpose now, just doesn’t add up that is. So if there’s no more message, go back, consider what those outcomes need to be, and be open to a different way of approaching how talent can be acquired.
Jonny Dunning: 41:43 Yeah, I think it’s two great points. I think, just to come back to one other thing is, you’re talking about outcomes, what are the desired outcomes that fundamentally ties into overall business strategy? How effectively that’s communicated? How line managers understand their own responsibility as a part of that overall strategy? And I think if you look within the kinds of annuity services that recruitment companies can progress to, that can evolve to that can take on to broaden the partnership that they have with an end customer. There are various ways that they can help with those outcomes. You mentioned RPO, you mentioned MSP, a more joined up approach to managing this permanent and flexible workforce. And from our point of view, obviously, with a focus on services, procurement, the output based statement of work, we’re also seeing those annuity services expand into the provision of truly outcome based projects and consulting services that recruitment companies are able to provide. There are of huge benefit to customers, where you’ve got this kind of merging of the management consulting world and the staffing world where you’ve got, management consulting firms starting to act a lot like recruitment companies in some ways to fulfill the work they’re doing, particularly obviously, very relevant to the professional services areas you guys are looking at. And also staffing businesses, starting to act more like management consultancies and move up the value chain in that way. I’ll put this one to Tim first, how do you guys think this has been and is likely to be affected by IR35?
Tim Jacob: 43:22 But well, can I just sort of make a comment on what you said before about large management consulting businesses? I’ve not come across a single one of the big six, it doesn’t have a rate card or any of their consultants. So I’d say that they’re more like recruiting businesses than we give them credit for. I think, the impact of IR35 is definitely been to provide that lens on, hang on a second, who’s not on our payroll in our business, which many organizations didn’t have a clear view on three or four years ago? I think there’s been a reaction which has probably been twofold, we’re seeing at the moment where we are today. I think you’ve got certainly the footsie 250 organizations, being very compliant in the way that they adhere to the legislation, and have essentially got outsource permanent workers doing non-permanent work so they’re compensating them in that way. So they’ve essentially just paid the extra tax. I think there’s other organizations that as part of that, probably willing to accept a bit more risk around what work is inside, outside of IR35. But I think within that there have been organizations as part of that process of looking at what their non-permanent work is actually doing? What the value and output they’re actually providing? We’ve come to the conclusion that actually, there’s a better way of doing this, there’s a more correct way in which we can use that resource to get better value and better outcomes from what they’re doing by considering more closely how we manage what their outputs are, rather than manage their heads. And we’ve worked with, I am going to say, well, there’s three customers particularly that come to mind who we have worked with, to help them build projects through recruitment businesses, or I should say, to help them build projects or statement of work services and solutions. Giles and I’ve also done this years ago, before the IR35. Because it was actually the best solution for the organization, there was an obvious way in which they could secure the talent, interestingly, driven by the customer, having a concern that they weren’t going to have access to some very specific skills in a very specific business critical function. And they wanted a way of ensuring that they had a risk free way of having continual access to those skills, but they could call on them in a way that fitted with their demand much more than having them sitting on the bench doing nothing sometimes. So when were those organizations that have looked at that. They may have come to that solution as a result of the prompt as IR35, they may come to that conclusion. And I think it’s probably fair to say most organizations have come to that conclusion because they’ve had to inspect how they use non-permanent labor, or of payroll labor. But then there are certain clear circumstances where the best way of utilizing that talent is to concentrate on what their outcome is, is to manage them by the outcome, manage that talent pool by the outcome that you want, rather than the time or head that you want, sitting on a seat somewhere in an office. I’m speculating here, but I think possibly people are much more comfortable now because of the pandemic, presentism is not such a big thing as it was. And people are much more used to thinking about outcomes, what people are doing? But there are challenges for a traditional transactional, recruiter, being able to run those services, there are fundamentally different things that they need to become, but need to acquire the expertise in.
Giles Sumner: 48:04 Offshore.
Tim Jacob: 48:05 To be able to make those things work. And I think from a customer’s perspective, from an end users perspective as well, that there’s also a journey that they need to go on to be really clear about that being the right solution for the particular circumstance.
Jonny Dunning: 48:22 It takes investment on both sides.
Tim Jacob: 48:23 Yeah, definitely.
Giles Sumner: 48:25 Completely.
Tim Jacob: 48:26 But as I say, we can reel off a number of organizations where that is happening, and it has worked. And some of them, it needs maturing, some of them has been a bit bumpy along the way. There’s other organizations that we’ve touched as well that other recruiters that are finding it quite challenging to do, there is some challenges around it. But it’s no doubt it’s positioned with the customer, the NGS is in the right way. And then the circumstances of why that is just a better way of doing it. It fits more with the need of the business.
Giles Sumner: 49:04 I think what we’re seeing is whether isn’t a clarity on what kind of problem or task it’s looking to solve and achieve? What kind of solution service and outcome is looking to provide and support and the delving into the detail of some of the customer engagements will be (more)? We’re not quite sure we’re doing what we originally said we were going to do and the customer is not quite sure that they’ve actually got what they thought they bought in the first place. And I think a lot of it’s still got to be, comes back to as Tim says, very much a clear determination of what outcome is looking to be achieved? And then yeah, the gap for the organization providing is this, well, how do we acquire some of that capability to become more service and outcome based? Which by its nature is something that is an ongoing rather than just the gratification of a single transaction, or single placement or a single hire. But the disciplines of delivering these things are very much around partnering, coming back to what we’ve been saying around partnering with an organization to help them achieve some longer term goals to get embedded delivering these kinds of a Statement of Work solutions that get you a seat at the table where you can help influence the wider talent challenge and upselling these kinds of services into different kinds of talent acquisition models becomes far easier. And whilst I was saying earlier know, people got bright and shiny ideas about goods delivered in Germany or the states or wherever else, we said all along, the recruitment businesses have already got... That’s the most sensible thing to be said, so far on this conversation.
Jonny Dunning: 50:57 The dog timer has just gone off. The dog is like, “Wrapping, up guys.” And Tim has just disappeared from video, but hopefully he will be back in a second.
Giles Sumner: 51:10 You’ve got to keep that in.
Jonny Dunning: 51:11 Yeah, that stay, 100%. We’ll put in an avatar of Tim for the last bit. It’s super interesting, you guys are going to be very busy. And I think, again, with the IR35 lens, companies had the Ninja, they had to worry about the here and now, it’s gonna be you down the line soon, some stuff might have been done, capacities under threat, you’ve got all these skill shortages. It feels like chaos. But that’s where everybody’s got to get organized. And that’s what’s gonna keep you guys super busy. It’s going to keep us super busy. And I think it’s a great opportunity for organizations and recruitment businesses to just work more closely together and basically get more value out of each other.
Giles Sumner: 51:52 No question. The opportunity is to be opportunistic, and proactive now is to have start these conversations now in the run up to the end of April 22 onwards, when we see the kind of the wash of, “Okay, right, we’ve been doing this for a year now. Where is the risk? We should be having that conversation now, there should be. Going back to first principles around, we were really good at finding out who we had in the organization this time last year. Are we still looking at it with such laser focus, or slipped in around the corner? So, I think if you’re going to start to have those conversations again, a health check, check and balance, you know, objective, independent review, all those sorts of things help organizations ensure they’re now geared up to be fit for purpose, from April onwards, I think is all very valid. But again, through the lens of, when it’s come down to it, organizations are just paid more to keep the top talent, so rates have gone up to keep both inside workers engaged. But also, there’s still been plenty of outside either defy determinations to keep people excited. So it’s good to go through another period of, kind of reassessment or realignment that’s just going to provide opportunity for recruitment organizations to help, what you put off doing anything fundamentally different about managing your off payroll workers, surely, now’s the time to get that control absolutely right, given the demand that’s going to come or is coming now to bring in better people and churn the quality and all of that good stuff that comes from it.
Jonny Dunning: 53:47 Brilliant stuff. Great. Well, thanks, guys. Really appreciate your time, some cracking input there, really enjoyed that. Tim, I’m assuming you had to go off camera there for it to just sit your dog down and say, “We spoke about this.”
Tim Jacob: 54:00 When I’m on a call, you keep barking to a minimum.
Giles Sumner: 54:03 But we just agreed for the next one, the dogs going to have a leading role because I think he came up with some brilliant points there.
Tim Jacob: 54:11 Yeah. [unclear 54:11] style Zoom call. Definitely.
Giles Sumner: 54:15 Very good.
Jonny Dunning: 54:17 All right, guys. Thanks very much, Tim. Great to see you both.