Jobs for the bots – the new recruitment game
How to invest in recruitment stocks when the machines take over the hiring process.
Job seekers are often warned that a recruiter will accept or reject an application in a matter of seconds, with a missing keyword or a grammatical error consigning the paperwork to the “rejected” pile.
Attributing a previous employment separation to “personality differences” doesn’t help either – and don’t even think about using emojis in the covering letter.
Given the job wranglers have to sift through thousands of resumes and florid covering letters, the hasty approach is understandable.
But when the machines (algorithms) take over the process, applicants will have to be even more careful to hit the right note with key words that precisely describe their skills and other attributes.
Hiremii chief executive Chris Brophy argues that despite the online shift led by sector titan Seek, the recruitment business is still largely a bricks and mortar game where applications are vetted by “boiler rooms” of young people.
“Boiler rooms can only grow as quickly as they can open new regions or acquire other firms,” he says. “This is an old model.”
The Perth-based outfit listed recently after a $6m raising, with the charter of entirely automating the process to speed up the time-consuming and costly process.
Hiremii uses machine learning and artificial intelligence to shortlist candidates and also pre-vet them.
While the candidate needs to be careful to match their attributes with the job description, a key advantage is that the process removes unconscious bias.
After all, algorithms are inherently not prejudiced against older applicants, people with a disability or those of colour – unless they are trained to be.
As well as a fixed-fee recruitment business, Hiremii has a full service labour hire arm called Oncontractor.
Brophy says the standard hiring process takes 40 to 68 days, with the employer bearing the costs of the agency, its own costs and the site such as Seek.
For a $100,000 role, the on-boarding costs an average $15,000 to $25,000.
Hiremii reckons it can get the process down to two days and charges a flat $4500.
“The employer, by the way, remains responsible for the final interview process, although we reckon a robot just as easily could ask ‘what are your strengths and weaknesses?’ and ‘where do you expect to be in five years time?’,” he says.
The robotic approach is certainly gaining traction, with Hiremii’s revenue growing from $73,000 in 2018 to $6.2m last year, with December half turnover of $3.5m.
Hiremii has 31 clients on its books, including the accounting firm PwC and the asset manager UGL, with overall revenue highly skewed to the latter.
The rosy revenue trajectory didn’t prevent Hiremii stock from having a soggy debut, with the shares now trading at less than half their 20c listing value.
If the stock were a new recruit on three months’ probation, it would be in danger of being sacked.
Brophy says he’s “flabbergasted” by the poor reaction to the listing, which coincided with a general sell-off of tech stocks.
“Nothing fundamental has changed since we lodged the prospectus,” he says. “We have no debt and (we have) money in the bank to scale up.”
Remarkably, Hiremii’s own workforce consists of 10 people, including Brophy, the CFO and the chief tech guy.
The recruitment sector has generated patchy returns at best over the years, despite the country’s prolonged low unemployment.
Still, Hiremii estimates the hiring market is worth $40bn a year: $15bn for pure recruitment and $25.7bn for contract labour hire. It’s also saturated, with more than 9000 firms competing.
A decade ago at least a dozen recruitment firms graced the ASX boards, including Programmed Maintenance Group, Skilled Group, Talent2, Chandler McLeod and Julia Ross’s Ross Human Directions. Most were taken over, privatised or simply withered away.
Operating under the PeopleIn brand and founded 25 years ago, People Infrastructure remains one of the more substantive players with a $420m market cap.
The Brisbane-based outfit has been an active acquirer of late, snapping up casual staffing, nursing agency and surveying businesses in three states.
The company has shrugged off the pandemic blues, reporting first-half underlying earnings of $21m, up 49 per cent, and guiding to a full-year number of $35m to $37m (38 per cent higher at the midpoint).
While Hiremii claims its business model is unique, it is often compared with that of Livehire, which is backed by industry doyen Geoff Morgan of Morgan & Banks fame.
The company listed in June 2016 at 20c apiece and now changes hands at 36c, ascribing a market worth of just over $100m.
Livehire reported record March quarter receipts of $1.54m, 77 per cent better than a year previously.
Arguably a better way for investors to tackle the sector is via the gig economy (the recently listed Airtasker) or stocks in the broader HR game not so reliant on a one-off transaction.
We’re thinking of stocks such as McMillan Shakespeare, Eclipx and Smartgroup Corp in vehicle leasing and salary packaging sectors.
Elmo Software and Paygroup play in the boring but important payroll management space.
After all, everyone likes to be paid on time and without hassle: turning up every day to the dark satanic mill is hard enough.
Tim Boreham edits The New Criterion
tim@independentresearch.com.au
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