Declan Rowan

Today we are talking to Declan Rowan, managing director of Adelaide-based recruitment business Extrastaff. While an estimated 30% of the recruitment sector was wiped out by the GFC, the company has remained profitable throughout the downturn and has annual revenue of $25 million.

Declan talks to us about surviving the downturn, the state of the skills crisis and why he and his brother bought their business from their parents.

We are hearing a lot about skills shortages re-emerging. Can you give us your sense of the state of the labour market?

Obviously it’s like all of these things, it depends on the sector and from our point of view we’re a generalist recruiter, so we’ve got professional office people, we’ve got industrial and trades and also healthcare. In those broad sectors probably tradespeople and nursing for different reasons are getting more under the pump, although they are not back to the skills shortages we saw prior to the GFC. And I reckon if you look at the different drivers on that, one would be obviously the mining industry’s resurgence, obviously the trade type people are feeling that, and then on the healthcare side of things it’s probably just the ageing population.

So employers don’t need to be too frantic about skills shortages, but they do need to be aware of it?

Where companies have had issues through the GFC and they’ve maybe had to downsize, that’s not happening now. So employers just need to be conscious of the changing employment landscape, which means candidates have a lot more choice as opposed to the GFC where a lot of people didn’t have that flexibility to be able to switch jobs.

Should employers be worried about recruiters poaching their best employees?

Each recruitment sector operates a bit differently and in terms of most recruitment agencies a lot of it is candidate activated, in the sense that a candidate identifies an opportunity from an advert or has registered with an agency, rather than agencies necessarily headhunting. I think in the more senior specialist searches, it’s probably slightly different. I’d say most people find jobs because they are actively looking or they come across something they are interested in, rather than being tapped on the shoulder.

But is your sense that the people are looking now and answering your ads, are they people who are quite gainfully employed?

Yes. These are people who have maybe come through a period of uncertainty during the GFC but that has now more or less passed and whatever the drivers for them looking prior to the GFC may still be there – that can be career advancement or just wanting a change. The risk of moving to something that’s untested is probably less now that probably 12 or 18 months ago.

Another hot issue that we’ve been looking at is around the new IR laws and particularly the Modern Awards process. How have you guys found it at the coalface?

I guess we’d be similar to many agencies in that you operate across a lot of industries and therefore a lot of awards. So we see some of the simplification overall is a benefit. I think where it causes confusion is where you get a lot of employers who don’t necessarily understand their industry award so to speak. Most of the stuff is easy to follow once you know where to look.

But is that the problem you’ve found – employers don’t know where to look at and what awards apply?

Sometimes it has been, probably more with smaller companies than larger ones. But I think where you’ve had discrepancies between awards and maybe enterprise bargaining type agreements then they’ve probably caused issues as well, because people haven’t really kept in touch with what the underlying award was doing.

Your average small to medium business doesn’t necessarily have the internal resources to handle all of these complexities, which is annoying.

All our politicians seem to be very big on the idea of not changing our IR laws, but in your mind is there room for tweaking?

I think probably it would be better just to sit tight for awhile. I think rightly or wrongly all of the tweaking causes more of the confusion, even if it’s just to improve it. For the next short- to medium-term it would be nice to just have a stable platform.

Looking at the wider recruitment sector, it’s been quite a tumultuous couple of years?

Yes, very much so. I mean the industry itself was very much hammered in that Australia. That’s probably quite normal in any sort of downturn because the industry is very much a lead indicator of what’s happening in the economy. With temporary staffing, people obviously cut that back and for permanent staffing they tend to cease that all together.

Anecdotally people talk about 30% of the recruitment industry – be that people working within it and also the companies themselves – disappearing over that time.

And did you see a lot of competitors fall away?

Yes we saw a lot of competitors either scale back dramatically and depending on the sector that they were in some shut their doors completely. That’s not unusual.

What was your response?

In a number of offices we looked at our headcount so we obviously had some internal costs that we could look at. Where we were probably fortunate was the fact that we are very spread across a lot of industries, so our healthcare business has always been quite strong and that really was unaffected during the downturn. And then really I guess it was internally communicating what was happening on a day-to-day basis.

But it wasn’t without pain and we had a significant client go to the wall, leaving us with a significant debt. But aside from that we would have traded profitably through the whole period.

Do any big lessons jump out from this downturn?

I think probably speed of response. In any downturn you probably see people take longer to pay their bills which impacts on your cashflow. So the ability to keep on top of that through that period is paramount.

Can you give us a little bit of history about ExtraStaff? I know you acquired the business in 1990 but it is really a family business, isn’t it?

The company was part of a UK-based multinational and the reason we got into it is because my mother has been involved in the industry for a long, long time and she was running their business here. When they quit the market, we bought it. And I joined in about 1994 and my brother about a similar time and then in 2005 we effectively took it over, we purchased it from the family. At the time it was just two offices and just Adelaide and Melbourne and we’ve grown to eight or nine offices and a broader spread of business across that generalist market.

Prior to that had the family not wanted to grow quickly?

I think it was more the comfort of being in Adelaide and being a reasonably significant player in Adelaide. The problem that we faced as the business grew and the industry grew was that more and more larger companies started to enter and I guess consolidated some of the areas that we specialise in. If we didn’t join them we had to beat them so to speak in different areas and in different ways.

The decision to buy the company from the family, what was that driven by? It’s usually a great method for resolving succession problems.

I think the key thing there was the differing views on direction. From my folks’ point of view, they were probably looking at taking risk off the table and doing something different and for us I guess it was an opportunity. We knew the business very well, we knew what we wanted to do and we knew the fun and enjoyment of the business is seeing it grow and making more opportunities for everyone involved. To be able to achieve that cleanly, the real way was to allow our parents to exit and buy them out.

And that was a good way to keep outside business harmony?

Yes exactly. I mean family and business often shouldn’t mix. But we have a very strong family unit.

Do you still get to tap into your mum’s experience?

Yes well, she’s pulled away from it more recently but was very involved with our industry body and she dabbles in that and a bit of other HR consulting. We engage her for clients from time to time. But I think as the years have gone on she has started to enjoy her free time more and more.