Reply To: Veteranpoolen AB (Ticker: VAPB B)

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Tommy Kristiansen


Did some research on the recruitment and staffing agencies today, as I keep finding some interesting valuations. Talked with a couple of people in the industry from both sides: From the agencies themselves and the customers. I think some of the thoughts would be of value, even though not everything applies to Veteranpoolen:

Most recruitment agencies have become trapped between intense competition, the widespread use of HR-departments or HR-consultants in organizations and a higher demands from customers. It shows in the margins. There is no stickiness either, as customers are loyal to the individual consultant in the agency, rather than the agency itself.

What the customer really needs is a continously updated candidate base. The problem for the agencies, is that this is a high-workload task with low margins. They prefer to serve the customer throughout the recruitment process (about 100 000 kr nok), and a candidate base is in the range of 30 000kr nok. This database needs a lot of man hours to be updated at all times, and thus it’s not a thing that’s really worth doing for the sake of only selling that service.

Another problem is that recruitment agencies is a direct competitor with the internal HR-people. They offer what the HR-consultant do. So a company who can afford a throughout recruitment process, which is what the agencies want, often have their own people who do the valuations, testing etc. A company without HR, cannot afford it either.

Temporary staffing and more specialized recruitment agencies are a different beast in itself.

When a company needs temporary staffing, they probably need it immediately. The HR-people doesn’t have the time or the database for hiring themselves. If they recruit someone that’s not good enough, it doesn’t really matter as they are temporary. It’s more convenient to give control over to the agency rather than doing a tedious process on their own.

With a more specialized marketplace, where different industries needs different and niche competence, the need for a specialized recruitment agency is high. In terms of hiring into more vulnerable positions, like management, many prefer to put money into a good process with objective counsel from a third party such as agencies. This kind of service costs about 200 000kr and up from a to z, without that many man hours more than a lower-level recruitment. Alas, the margins are better and the relationships are stronger, and thus stickier.

Just some thoughts from my conversations.