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An Asian champion with an understated, process-driven culture
UNTIL it went public last year, HRnetGroup was probably the biggest recruitment firm that you had never heard of. Founded in 1992 by chairman Peter Sim, a former human resources director at Thomson Consumer Electronics and Honeywell, HRnetGroup began as a four-man outfit. Operating out of the eighth floor of Orchard Shopping Centre, Coca Cola was one of the group's first few clients.
Today, HRnetGroup employs 1,000 full-time consultants across 10 cities - Singapore, Kuala Lumpur, Hong Kong, Taipei, Tokyo, Shanghai, Bangkok, Beijing, Seoul and Guangzhou. They serve 2,000 clients, including 104 of the companies on the Fortune 500 list.
HRnetGroup provides both professional recruitment and flexible staffing under 11 different brands, and is the largest recruitment firm by revenue in Singapore, with a 22 per cent market share.
It is the winner of The Enterprise Award (2017) at the Singapore Business Awards.
When asked about HRnetGroup's understated nature and her father's reputation for being a very private man, executive director and chief legal officer, Adeline Sim replies: "The true headhunters work very much under the radar. That's how it works."
"Up to today, all our phone lines are unlisted because we started off as being headhunters. It's a lot about discretion - the candidate doesn't want it to be known that he's searching for a job. . . we do confidential searches for clients."
The group has evolved over the years but certain elements of its culture have not changed, Ms Sim adds. HRnetGroup remains a no-frills operation that has never had a budget for advertising and promotion, until its initial public offering last year.
HRnetGroup also prides itself on its lean organisational structure.
You'll find no secretaries, receptionists or even researchers at its headquarters in Ngee Ann City.
Salespeople - also known as recruitment consultants - make up 85 per cent of the firm's headcount.
This is unusual in an industry that often requires many layers of people to achieve a result.
"But for us, our people are very self-sufficient and they are both client-facing and candidate-facing. Every team will do their own research," says Ms Sim.
"You always have frictional losses when one person handles clients and a separate person handles candidates. In each of our teams, all members have equal access and air time with the client," she adds. "So you could be very young - just joined us for six months - and already be out meeting clients - we encourage that."
The reason that fresh consultants at HRnetGroup are able to hit the ground running is another part of the secret sauce.
Unlike many rival professional services firms, HRnetGroup is very process-driven. In fact, it is run like a factory, Ms Sim says unabashedly.
This unusual feature owes its existence to the factory backgrounds that Ms Sim's father and her uncle, executive director Sim Joo Siang, came from. Her uncle used to be regional human resources director of Motorola Electrics.
Ms Sim explains: "We already know, statistically, that our people need to do a certain level of activities to get to the results they want."
She uses her hands for emphasis: "If you intend to do three placements, this is how many candidates you need to meet; this is how many interviews you need to arrange for them."
"We use our data to work out a work process. We have a very structured methodology to our work, which is unusual in this industry," she says. "But it really helps. Particularly when we work with fresh grads, or people who are relatively new."
By breaking down the whole recruiting process into bite-sized blocks in a detailed sales manual, HRnetGroup makes sure that its consultants know exactly what they need to do to achieve their targets. Its workforce is surprisingly young too - the average age is 30.
Career progression at the firm is equally straightforward, Ms Sim says.
"How long it will take for you to be promoted, we've made it very, very transparent. So you won't find our guys staying as a consultant for years. They will progress up," she says. Discipline is all that is required.
Another practice adopted by HRnetGroup that's rare in the industry - the firm does not pay commissions.
Every quarter, each of the group's 24 business units will work out a percentage of profits to share among people who have contributed to the profits.
The profit-sharing model may not entice star performers, but Ms Sim is firm that moving away from an individualistic compensation model has built a more collaborative culture.
She says: "For us if you work cohesively, you will end up far better as a result. . . and I think that's what we have proven. People coming together is a lot more powerful than if you just look for star performers."
She adds: "For us attrition is very high in the first two years, like it is for the competition. But once people stay, they stay a very long time. We have 145 leaders who've been with us for many years and of that lot the average they've been with us is 10 to 11 years."
Having grown to the enviable size it is today, HRnetGroup also plays to its strengths. "Really it's about being process-driven, having economies of scale and being the Asian champion," Ms Sim explains.
HRnetGroup specialises very deeply in the sectors that it serves, she says: "This, we are able to do because of the size that we're already at. In this industry there are very few barriers to entry but a lot of barriers to scale."
She adds: "We're quite fussy about it (being specialists) to the point of turning away work. For example in Tokyo, I don't have enough people. I only have 50 people. So you have banks saying they're happy to engage us, and we'll say we don't have a team that's so specialised yet."
In Singapore, the group's home ground, Ms Sim's demands are even tougher. "In Singapore it's just about being fast and accurate. So for flexible staffing, you have candidates coming in the morning for an interview and by afternoon they're out with a job," she says.
"For professional placements, our speed will depend on the candidates' notice periods but even then we're very fast. Generally the moment the client gives us an order we expect our guy to already have a good candidate in mind, and all he needs to do is to check in with the candidate. Because he has done all his mapping, his homework."
She adds: "That kind of speed, you can't achieve if you're a 10-man firm, because you wouldn't know each space well enough."
HRnetGroup's recipe works. The firm has been profitable every year for the last 25 years, except for 1998. All growth has been organic, and the group has kept a balance sheet with zero debt from day one.
Last year, group revenue rose 7.4 per cent to S$391.9 million. Net profit in 2017 was S$41.3 million, flat from 2016.
Stripping out a one-off charge of S$3.6 million in IPO expenses and a S$4.4 million fall in government subsidies last year, normalised profit was S$45.1 million, up 15.4 per cent from 2016.
In Singapore, HRnetGroup is the biggest player in flexible staffing. Last year, flexible staffing accounted for 77 per cent of group revenue. "Elsewhere (in Europe and the US), up to one third of their workforce is on contract. We are very far from that threshold, so the upside is high," Ms Sim says. The stigma of having a contract job instead of being a permanent employee is also breaking down. "Today, if you want to work for Apple or Google, many of their jobs are contract jobs. The resistance of the better candidates is waning," Ms Sim points out.
Singapore accounts for 76 per cent of revenue and North Asia 21.6 per cent, so another focus is to grow the business overseas, especially in Tokyo and Shanghai.
Ms Sim says: "Last year was a difficult year for Hong Kong and the Chinese units. While they did grow, the growth curve was not as steep as previously. But what we saw was that after the national congress in October, companies became very confident about hiring."
The group is looking for a good partner to help it break into China's flexible staffing market. "In China specifically, we only have professional recruitment. We don't have flexible staffing. So the moment there's some hesitation about staffing, we feel the impact very immediately," says Ms Sim.
In March, HRnetGroup completed a S$500,000 investment for a minority stake in Glints Intern, which focuses on what Ms Sim calls "technology-enhanced recruitment".
She says: "Currently, while we utilise technology heavily, we don't actually derive any revenue from technology. So Glints was the first step into the HR (human resources) tech space. The idea is to use technology to churn out suitable candidates before getting recruiters to do the final one per cent of the work.
"We really like the Glints team. They are very young, with a true bootstrapping spirit that we recognise."
Part of Ms Sim's charm is her devotion to the firm, and her admission - unapologetically - that she doesn't try to separate family time from work.
"I don't want to sound militant, but we believe more in work-life integration rather than separating it out," she explains.
"In our Taipei office on Saturdays, you can find five babies coming to the office. We have no problems with that," Ms Sim adds. Her own children are swept along on her business trips to Shanghai and Tokyo, instead of being taken on family holidays like most of their friends.
"They just go with me. They're like luggage, literally," she jokes.
"But the very cool thing is that like me, they feel very strongly for the company."
FAMILY AND WORK
Her daughter was six when the family first started talking about taking HRnetGroup public. Because she spent a lot of her after-school time sitting in the group's headquarters, the child became a person close to the discussions.
Ms Sim recalls taking the elevator down from the Ngee Ann City office one night. Her daughter turned to her and asked aloud: "So how do you arrive at the correct PE (price-to-earnings ratio)?"
Ms Sim bursts out laughing: "And I remember there was quite a senior guy in the lift - I think he's an independent director for Metro. He looked at her and was like, how old are you? But I love it. Because then you really live and breathe the company."
Ms Sim's children are used to doing their homework across the table from bankers talking business with their mother - "it makes their learning so much more real", she quips.
But there are sacrifices as well, and her children sometimes just have to make do with sending their mother WhatsApp messages or e-mail.
"There's a downside to being an entrepreneur's child," Ms Sim admits.
"But I'm not the only one and many of my colleagues are the same. And at the end of the day, these children end up different. They have a work ethic that is different. They know that they are part of a larger whole, so they are a lot less self-centred because you are always part of a larger whole."
Herself the child of an entrepreneur, Ms Sim was 12 when Peter Sim set up HRnetGroup, so this was where she hung out. She was a consultant after her A levels, making cold calls to schoolmates out of her yearbook. She hired carpenters for Courts and temporary staffers to man Takashimaya's Christmas gift-wrapping stations.
Ms Sim insists that her devotion to HRnetGroup is not a singular feat.
She says: "It's not common for a person to say, I want to be a recruiter when I grow up. Nobody says that. But I think many of my colleagues have children who are happy to be in this business when they grow up, simply because they have grown with it."
Ms Sim's own children have also expressed an interest in joining the company, she says: "Because they can see that as a family, we put so much into this company. And we're not the only family - all the 22 co-owners have too, and many more families."
Ms Sim left law firm Drew & Napier in 2008 to join HRnetGroup, and is "definitely" in this business for the long term, she says.
It's a question that's come up before, when the family was approached by private equity firms asking if they planned to sell out.
In fact, the Sim family still owns 74.4 per cent of HRnetGroup, having scooped up more shares after the initial public offering.
"We felt that there was still so much more we could do. My father would be a better person to say this, but as a family we're not the kind to just sit around and have high tea," Ms Sim says with a chuckle.