Making overseas count
Simon Kent reports from a Recruitment Live which discussed international finance.
At the end of February, The Global Recruiter hosted a Recruitment Live discussion in association with Cambridge Global Payments on the subject of international finance for recruitment companies. Bringing together a diverse range of recruitment leaders, operating in different business sectors and often using different models, the conversation highlighted some of the challenges that come with creating and maintaining an international business. Attendees were not only able to explain how and why international business was sometimes lucrative, sometimes frustrating, but were able to give each other advice and support on how to resolve some of the emerging challenges. In attendance were:
Anthony Goodwin, Chairman, Antal International, John Gaughan, CEO, Finlay James, Adam Stolerman, Partner, TrintonExec, Simon Michaels, CEO HW Fisher Business Solutions, Dave Wilson, COO, Serocor, Shaun Pope, Financial Director, Serocor, Elizabeth Whittaker, Director of Financial Accounting and Operations, Alexander Mann, Richard Stevens, Founder and CEO, Momenta, Kayleeann Maritz, Global Marketing Director, Momenta, Roop Panjwani, Group Finance Director – International, nGage, David Earl, Business Development Manager, Cambridge Global Payments, James Campbel, Account Executive, Cambridge Global Payments, Simon Kent, Editor, The Global Recruiter
The discussion kicked off with a broad conversation about identifying the potential of overseas markets and deciding the best ways to tap into that potential. Anthony Goodwin explained that the whole ethos behind setting up Antal was to go after emerging recruitment markets which had less competition around them than in the UK. When he set up his business he felt the UK market was saturated with recruitment businesses and therefore identified locations in central and eastern Europe where demand for talent was growing and would power a new business. Richard Stevens agreed that the potential of overseas markets was certainly a strong attraction for his business. Having established a foothold in the UK contingency market there was the recognition that it was only by going abroad that the company would enjoy significant growth. The business gained a first-mover advantage by taking its services to Australia and beyond. Another way to the international market, shared by those in the room, was to be client led. Alexander Mann Solutions found that the clients they engaged with in one country would often ask whether the company could deliver the same level of service in another location. In this case, international expansion is not so much a case of ‘planting a flag’ on new territory and trying to claim the market, but creating an international framework and then making that framework operate in each new location.
The power of research
As Simon Michaels notes, one thing involved in each case is the level of research before setting up in that location. Businesses cannot simply head out somewhere new and expect everything to fall into place and just as market and client knowledge is imperative so too is an understanding of the financial rules, regulations and implications for each new country. Michaels notes as well that in a country such as the USA compliance, regulations and financial demands change from state to state which adds another layer to how the business must operate. What emerged from the conversation is that while some aspects of international finance to support recruitment businesses can be simple and straight forward – eg. opening the appropriate bank account – other aspects can present challenges which can compromise the efficiency of such an enterprise or at least make International business more problematic. Moreover, for the dedicated finance manager/director of a recruitment business there are times when someone in the business might leap into an international working arrangement which then proves challenging to set up the required back office support. A few of the recruitment businesses around the table outsourced their global back office function to parts of Asia, or elsewhere, usually to achieve economies of scale, and to ensure the right level of skills were in place for the business. With this outsourcing, however, came the importance of ensuring the quality of staff and service delivery was good. Recruiters found this arrangement was also enhanced if there was an in-house specialist in the outsourced function who could make sure the service delivered was consistent and correct. In some cases, local complexities have meant that the only answer has been to have a local expert on the ground to ensure the business remains compliant. Adam Stolerman noted that in the US there were some unique demands that the business had to be aware of and meet in order to remain compliant. For other recruitment businesses it seems location can cause complexities, sometimes because the financial restrictions and demands of a country mean moving money around becomes more costly and arduous, sometimes because banks simply do not offer financial services to certain locations. More than one business had had the experience of a bank which would happily provide a service in one country, but refuse it in another. It seems that whether or not a recruitment company can secure the financial services it needs can depend on a financial institution’s own exposure within certain markets. If their own risk across a certain location is high it is unlikely they will take on a proposition in that location, no matter how straight forward or secure that business may seem to the recruitment company itself and no matter what level of service is being delivered in other jurisdictions. David Earl from Cambridge Global Payments notes that while some cases may be difficult to resolve, there are options for recruitment companies that may be able to mitigate costs and risk. Once example is to have an account in the local currency of their client or develop a risk management strategy to protect gross margins via long term forward currency contracts. Creating a sustainable and successful recruitment business in another part of the world does require on the ground research and an in depth understanding of how finance and talent markets operate in the locality. It also depends on how recruitment services are perceived by the local markets – while a place like the US offers higher margins for recruiters, delivering a service and creating a business that looks and feels right for that market is not always straight forward. It was generally felt that once an international recruitment business has been established in a particular location that initiative is able to develop and adapt to local changes as they occur. While requiring the usual attention and management from senior leaders in the business, these out-posts are able to look after themselves in the main part, usually increasing the number of local employees in comparison to ex-pat workers to make the business become truly part of that country rather than a satellite business. By following this model, recruitment business have been able to gradually offer their unique selling points and market leading services to a world-wide receptive market.