Plans to expand your staffing agency internationally? Stop right there – read this before you go any further.
Around 60% of all UK recruitment start-ups close in their first two years, with half of those not making it past year one, meaning recruiters are more likely to fail than succeed. Staffing founders who get past this point are often lulled into a false sense of security at their early growth rates, and strive for global ambitions far too early: international business expansion failure rates are almost as high, with up to 4 in 10 quickly floundering.
Even when recruitment CEOs ride the waves of prosperity, every new territory means contending with new competitors in every single marketplace. Globally, over 160,000 staffing consultancies are already serving industry hiring needs, seeing SMEs fight large, well-established agencies with internationally recognised brands.
However, all is not lost. Notoriously bold, resilient and innovative, savvy recruitment entrepreneurs can launch overseas to unlock revenue, profit and growth opportunities. Setting up your consultancy overseas comes with its own set of challenges and considerations, and the odds are against you even before you start – but you can succeed. Here’s your roadmap to navigate international expansion, from the contractor management partner behind the best recruiters.
What are the Biggest Challenges of Opening a Recruitment Business in a New Location?
What’s worked for your business before is not guaranteed to work again, and this is particularly true for the hiring industry. International expansion isn’t simply a case of replicating a successful model in another office, filling in paperwork and translating your website and job adverts into other languages. International expansion is its own world of strategic chances, rules and possibilities.
The most common pitfalls waiting to meet recruiters who aim to expand outside of the UK are:
- Market Entry Strategy – Every country is different, meaning every client market and candidate network is also different – and understanding these nuances is the vital foundation to success. The same low barriers to entry that empower you to expand your agency internationally – little need for infrastructure and resources other than a telephone and a desk, instead relying on skills and knowledge to succeed – mean brutal competition. New entrants often make the mistake of assuming demand or familiarity with approach: some markets will be accepting of contract and temporary hiring processes, for example. Others will be suspicious of investing in short-term skills that their company stands to lose after a project ends, and others will lack knowledge but be willing to learn with the right guidance.
- Brand Management – Even large global companies fall victim to damaging mistakes when encountering new territories. Beloved global brand Coca Cola accidentally labelled a new drink with a Chinese phrase to sound like its original name, but that actually translated as ‘Bite the Wax Tadpole’. Arch rival and fellow world-renowned beverage leader Pepsi also encountered problems in the Chinese marketplace, by attempting to launch the slogan ‘Pepsi brings you back to life’ but which actually translated as ‘Pepsi brings your ancestors back to life’. Without the influence of native personnel and first-language speakers, brand positioning and messaging is very easily mistranslated, with disastrous results.
- Cultural Sensitivities in Business Development – Misunderstandings arise all too easily from disparities in overseas business practices, communication styles and social customs. From the most polite way to greet new business partners, to innocent mistakes in seating arrangements, the wrong first impression can lose pitches and decimate customer relationships before they’ve even got off the ground. In an industry built on people and connection, word of mouth and referrals are the lifeblood of recruitment, making business development pitfalls for new entrants in this sector far more fatal than for any other industry.
- Regulatory and Legal Compliance – Navigating entirely alien regulations regarding operations, employment, taxation and environmental legislation is frustrating, not to mention time-consuming and resource-depleting for any expanding business, but particularly so for recruitment agencies. The intricacies of human rights, working conditions, licenses, permits and visas, payroll, the legal responsibilities of your client businesses and your own – and the combination of all above – are a minefield for unprepared consultants. Whether intentional or not, failure to comply with legal requirements can result in mammoth fines equivalent to £millions or significant revenue percentages, damaging business operating sanctions, and even prosecution for business founders who are held responsible for legal missteps.
- Wider Macro-Economic Risks – In addition to legal and compliance threats, new entrants will be met with a wide variety of challenges from external sources over which they have little control. Political instability has the potential to unseat and replace whole governments overnight, rendering long-term planning useless. The financial impact of political instability on client businesses extends to their temporary recruiters, who are depending on regular day rate payments for large runner bases. At the most likely end of the scale, staffing specialists will have to contend with fluctuations in exchange rate: a critical industry challenge due to the standard usage of margin and markup percentage rather than fixed fees charged by other sectors.
Rethinking your desires to expand your recruitment agency overseas? The challenges in front of you are gigantic, but can be overcome with a willingness to adapt, investment in learning and improving, and diligent planning. The first two are up to you, but we’ve got your global staffing expansion roadmap covered.
The 5 Steps to International Recruitment Agency Expansion – Your Map to Success in Any Country
1. Start Fresh With a Dedicated Market Research and Feasibility Study
The advice of Satya Nadella, CEO of Microsoft, will resonate with staffing Founders and Managing Directors: ‘In today’s interconnected world, expanding into a new country is less about geography and more about cultural empathy, strategic alignment and the relentless pursuit of excellence.’
Before diving headfirst into anything, entrepreneurs must go against their natural instincts and take an objective step back to move forward. Treat an office expansion as you would an entirely new start-up: be strategic first, act second. Conduct thorough market research and be prepared to confront some difficult questions:
- Is there actually demand for your services? An honest look at the market size and potential to grow your market share will inform specific opportunities to hone in on niche audiences you can serve most effectively, as well as ways you can best address the mass market.
- Who is the demand coming from? This may be a very different customer base from your UK agency in terms of potential client industry, subsector, business size, pain points and long-term goals.
- Why does the demand exist, and how best can it be met? Local competitors who understand the market better are a huge threat; new entrants need to differentiate themselves and offer real unique value. Your business can capitalise on gaps in the market where local competitors are choosing not to operate or not meeting a specific demand, to really capture and engage client and candidate audiences.
This market understanding may require major adaptations in your initial expansion strategy, but better to invest time and energy reworking your approach at the beginning, than to pay dearly for it further down the line.
2. Become an Expert in Regulatory and Legal Compliance by Working with the Experts
Just like the UK’s IR35 rules for employing interim managers and contractors, every country’s legal framework will be detailed, complex and require in-depth understanding. Consult local legal experts to ensure you not only understand the theory behind the new territory’s labour laws and visa regulations, but also how to implement these in practical terms.
Work with expert in-country lawyers and international employment compliance specialists to create guidelines for your recruiters through every stage of the resourcing, placement and onboarding processes. Include the following:
- Recruitment licenses and certifications required for agencies to practice and for employers to hire, eg the Dutch NEN-4400, AUG (Arbeitsnehmerüberlassung) for Germany, and H1B in the USA
- Background check protocols eg criminal convictions, citizenship, drug and alcohol testing
- Necessary documentation for new hires eg passport, residency status, bank accounts and other forms of ID required.
Knowledge is power: to protect your company, your consultants, your clients and your candidates, and therefore your future business growth. As with the UK, knowing these standards ahead of time and training recruiters to understand these before embarking on a search will also reduce time to hire and therefore also reduce client frustration and candidate dropout rates.
3. Know Your Customer Base – Really, Truly Know Them
“To succeed in business internationally, you must build relationships with people, not just their countries. Adapt, listen, and understand their culture.” – Richard Branson, Virgin Group Founder
Build a picture of what your new candidate base looks like and their professional and personal needs: research and adapt your ways of working to the local work culture, communication styles and business customs. Trust is vital to any relationship, and with international recruiters starting on the backfoot when compared to local competitors, coming to the table with the ability to build rapport and demonstrate value to candidates from the very beginning will pay dividends.
Using your market research and conversations with clients and partners, build a personal profile of your ideal customer to best serve them:
- What are their business goals for the next few years: where are they investing e.g. purchasing technology tools, investing in product development, aspiring to broaden existing capabilities or pivot into their own new customer markets? This will help you visualise how they will grow and change as an organisation in the next few years, and subsequently work with your client to create their long-term hiring strategy.
- Where do they spend their time and get information from? This will span social media such as LinkedIn, Xing, WeChat, message boards, online forums and physical spaces such as events led by national industry bodies and renowned sector leaders. Your team can access these spaces to learn more about and further engage your client audience.
- What are their biggest frustrations with their existing/previous HR and hiring partners? What would they change about this relationship and the services they receive? Your response can fill the gaps and quickly satisfy and delight clients, positioning you ideally in comparison with longer-established competitors.
- What are their biggest frustrations, challenges and needs generally? There will be areas that appear unconnected to hiring but where lack of skills or people management is a root cause, enabling your consultants to empower clients with relevant advice that can further position them as long-term valuable partners.
Build the same type of persona for candidates, with a much bigger focus on candidates’ personal needs and goals, including their worries and experience of the recruitment process. Recruiting ethically is a particular concern for resources moving candidates across locations away from their own home country, for example placing Philippines- or Malaysia-based contractors into roles based in the UAE.
What British staffing specialists take for granted is often considered a much higher or lower standard overseas, depending on the country and their historic legislation. For example, candidates may be used to poor treatment from consultants who communicate poorly, or who demand upfront payment before providing services, presenting the opportunity for your team to quickly demonstrate better services. Diverse and minority groups in non-EU countries may not receive the same legal rights, employment prospects and professional treatment as those in the UK and Europe. Talent with different backgrounds will need different levels and types of communication, support and, often, altogether different services.
Recruiters need to pay attention to candidate care at every step of the hiring process to ensure candidates are protected by third parties as well as by clients and their own agency.
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4. When You Know Your Clients and Candidates, Connect With Them Directly
“Global expansion requires the deep understanding of local markets, the ability to adapt and the willingness to embrace change. It’s not just about business growth; it’s about cultural appreciation and integration.” – Jack Ma, Founder of Alibaba Group
Take advice from the legendary entrepreneur Jack Ma to create a deep understanding of your new local candidate and client markets:
- Build Individual & Group Relationships – Join local business associations, attend industry events and network with key players and influencers in your space. Open doors to market insights, referrals and new connections for potential new business.
- Carefully Select Your Local Presence – All founders know that a physical office in your new country can enhance your credibility – but the right exact location can make all the difference. Choose a strategic location that’s visible and accessible to clients, candidates, the talent you want to recruit for your team and the supplier and partner relationships you seek to cultivate.
- Craft a Personalised Message – Tailor your positioning, messaging and business proposition to communicate your value to the local market in the way that best resonates with them. In addition to translating your marketing materials into the local language, leverage the digital and physical channels where your market exists, in the way they use them, and engage with the things they care about as well as promoting your own services.
- Build a Local Team – Hiring local talent is essential for a successful expansion. Ironically, staffing specialists often struggle to recruit and retain their own internal teams, with this challenge compounded in new unfamiliar marketplaces. Finding the right employees for your own business brings valuable insights into the local client and candidate markets, bridging the cultural gaps your existing team might not be able to overcome.
- Manage Your Whole Team, Local & International, Collaboratively – Train and upskill your new team to align with your agency’s values and standards, and train all your global employees to best serve your new markets together. Invest in technology that supports remote work, project management and collaboration across time zones, to streamline operations and harmonise communication between resourcers and account managers around the world. Involve your whole international team in the success of your new territory by encouraging the values and behaviours you need your company to stand for, wherever you recruit. As well as short-term commission and initial bonuses for placements, incentivise every representative of your business to champion your international growth plans by rewarding colleague-to-colleague support, knowledge-building and activities that contribute to local market relationship-building.
5. Commit to Continuous Improvement – Learn from Your Mistakes and Successes, and from Those of Industry Leaders
Once you’ve established your agency overseas, don’t expect the next steps to come more easily: continuously monitor your progress and remain open-minded to chances to pivot, course-correct and enhance your offering. Proactively, regularly collect feedback from clients and candidates: look at it as honestly and objectively as possible, and really utilise the findings, however difficult to hear, to improve your services. Track the key performance indicators that matter to service quality and business improvement, and be prepared to make adjustments to your strategy as needed.
Don’t struggle alone: reach out to others in your network with whom you don’t directly compete, to build mutually beneficial business partnerships based on shared advice and support. Study the market leaders and those succeeding in your niche to understand the specific actions they took to innovate, and the strategies and tactics they harnessed to respond to their challenges.
Take inspiration from case studies of global champions in the staffing industry, such as:
- Acquisitions – One of the world’s largest staffing firms, Adecco Group expanded from their headquarters in Switzerland to operate across 60 countries. Their growth strategy included acquiring other companies with an existing foothold in the local marketplace, such as Drake Beam Morin in the USA in 2011 and VSN Inc in Japan in 2012. Adecco also established a joint venture in Shanghai with Chinese HR services provider FESCO. Adecco’s acquisition made use of these organisations’ established brand presence, knowledge and networks for a strong start to their venture into new territory.
- New Disciplines – The Robert Walters Group, founded in 1985, grew into a global specialist professional recruitment consultancy by narrowing down into niche areas and providing high-quality services. Their expansion strategy included launching new disciplines across Europe, Asia, and the Americas. The Group carefully researched and proactively engaged with local clients and candidates before each expansion to ensure new services outside of their proven success were best informed and pivoted in the right direction from the very beginning.
- Knowing Their Strengths – Rather than launch into unknown pastures, staffing giants Michael Page sought to leverage their inherent capabilities and strengths. Their three strategic goals are delivering operating profit for shareholders and people, making a social impact, and focusing on customer centricity. Every action of every team member, every day, must contribute to furthering one of these strategic goals.
- Strategic Partnerships – Sander van ‘t Noordende, CEO of Randstad, shares why a core strategy focused on the continual development of partnerships was crucial to international expansion: “We have continued to focus on execution and operational discipline, balancing field capacity with strategic investments in growth segments and our Partner For Talent strategy. As a partner for talent and through our four specializations – Operational, Professional, Digital and Enterprise – we provide clients with the high-quality, diverse and agile workforces that they need to succeed in a talent scarce world.”
Find the Best Partners to Support Your International Growth Journey
Expanding your recruitment agency into a new country is a complex but rewarding journey. The vast benefits of partnerships – local knowledge, relationships and connections – are also keenly felt in supplier relationships, which are vital components of international recruitment industry success.
Generate has worked with hundreds of clients and thousands of candidates across countries and continents. Our 100+ international payment solutions empower any recruitment agency to set up in a new country with all the compliance and financial advice, systems and support required to succeed. Find out how our contractor management specialists can help your agency expand abroad.
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