 As The Recently Acquired Kelly Business Breaks In To Profit Interaction Recruitment Reports On The Integration Of Its Acquired Kelly Services branches.  It may have been a mixed summer for some of us in recruitment but for Interaction it’s been hands on and hot as the management team set about the formidable task of integrating the newly acquired Kelly business.It was back in March 2009 that Interaction acquired 30 branches from Kelly Services. It was an acquisition that overnight propelled Interaction into a national agency with branches across the UK. The Kelly business that Interaction purchased is reputed to have lost over £50m in the last 6 years, despite these being so called boom years for our industry. Interaction’s management team led by Andrew Gilchrist (Chairman) and Richard Morrissey (Managing Director) have had their work cut out trying to ignite and revitalise a business in the deepest recession any of us have seen. So what has happened and how have Interaction got on? Chronicle of a turnaround The original Interaction business has always been very profitable and continues to be so. Says Gilchrist: “Our 2009 results will be a bit lower than the record results we delivered in 2008 but, given the recession, will be very respectable. Our balance sheet is strong and so we are well positioned and able to move quickly as opportunities arise.” Turning to the Kelly business, Gilchrist and Morrissey say that it is set to report profits in August and September and that the turnaround is running ahead of plan. Naturally both are delighted with the results. Their focus has been on growing sales, team building and reducing overheads, and progress made in these areas is resulting in an earlier than forecast break in to profit. They report that there is still much to be done and whilst it is still early days they are very pleased that their actions are bearing fruit.
This is not the first turnaround Gilchrist has managed. He was previously finance director of several public companies. In his last role, Gilchrist was finance director of Datamonitor the business publisher. When he joined them in 2002 the business had made substantial losses for several years, however, very quickly after joining Gilchrist reported profits. The company’s market cap jumped from £15m when he joined until 2007 when Datamonitor was sold for £600m and was reporting record profits. He and the team at Interaction have set about turning around the Kelly business with the same vigour and speed. The turnaround seems well underway at the newly Kelly acquired business. So how has this been done and what are Interaction’s plans? Morrissey says: “We have worked to a 5 point turnaround plan, stabilising sales and retaining the newly acquired clients, assessing the team we inherited and keeping the good staff, recruiting new staff to build our existing team, identifying and winning new business, and reducing costs wherever possible. The results are coming through but there is still much to do’  It all sounds very obvious so what exactly has happened and was it all plain sailing? On stabilising sales and keeping the clients on board Gilchrist says ‘The team we inherited has done a great job. They, together with the staff at Interaction, deserve a lot of credit for what they have achieved and so quickly, especially given the backdrop of the recession. We have staff who should be very proud of their efforts; they are playing their part in turning around a business and creating a strong national agency. Clients needed reassuring that following the acquisition, Interaction would deliver high service levels and I believe that we have delivered on that promise. We have been through a hiatus period with all the change and now we can go further; we hope to show clients and candidates even better levels of service than they received prior to our involvement. Interaction has always been about great service and we are instilling this in the acquired business.’Gilchrist says that hard decisions had to be taken with one or two clients. ‘There were some clients we inherited that were just not viable and we have stopped trading with them. Margins in UK recruitment are amongst the lowest in the world and some are just not viable’ says Gilchrist. But by and large the clients they took over have stayed. He adds ‘I hope clients are noticing the difference we bring at Interaction. Our team is brimming with experience and a desire to help. We are turning this business around and we can offer clients a turnaround in service too’  Clients appear to be pleased with results to date. Shelley Cushway, Partner Relationship Manager at Aviva UK remarks ‘’At the beginning of this year we worked with Interaction to transition around 450 temps from Kelly Services to Interaction as a result of the Kelly Services restructure. The temporary workers were UK wide reporting to an extremely wide stakeholder base making the transition fairly complex. Throughout the transition Interaction were responsive and planned in their approach, working closely with us to anticipate issues and resolve them. Our Account Manager, Jonathan Laud remained very close to our internal stakeholders, the result of which was a smooth, quiet transition that has been very successful. We are now working with Interaction on a business as usual basis and receiving good feedback from our internal stakeholders on the service they are providing.’’ Morrissey talks about the team they inherited. ‘It is fair to say the team we took on was insecure and unsettled. Kelly had planned to close the offices so staff had a high expectation of redundancy. We found that a lot of staff were pleased to see us’ says Morrissey. ‘The strong staff have remained with us and, given the problems in the Kelly business, we were very pleased to find so many high quality staff had remained. It is also fair to say that some staff were not at the level we required. A number recognised this and left as we arrived and some we had to part company with. We gave everyone a fair chance and we are delighted with the people who have decided to stay and work with us. We have put in place simpler and more motivational bonus schemes. We have run lots of competitions with big cash prizes and New York trips. It gets excitement and competition amongst our staff and it’s great for spirit.’Gilchrist and Morrissey have been busy recruiting staff and have attracted consultants and managers on from other agencies. Morrissey comments ‘Our new brand and proposition has attracted interest from staff at all levels. People are very interested in what we are doing and think it is both dynamic and refreshing to be doing this in the current climate. Here we are in a deep recession and Interaction is doing the opposite to everyone else. The competition is closing branches and making redundancies, some are going out of business. Interaction, however, saw the opportunity to become a national agency over night by adding on 30 Kelly branches. Ambitious recruiters and those who read the news want to know more about what we are doing and can see the opportunity.’  Gilchrist adds ‘We have plenty going onand we are on a big recruitment drive. In the past few months we have recruited over 50 experienced consultants and managers. Good people want opportunity. You only live once and I believe there is no point being an unheard voice or a number in a big corporate, so people see us as a place they can have more autonomy and be valued as a person. There is the recession but we are very positive here. With everything that’s going on within the business we are able to offer people opportunity and that big next move. We are recruiting top talent who are helping us build the strong team we have here.’We spoke to several staff who have recently joined Interaction to get their views. Tracey Shapley is Director of Perms at Interaction. She was previously a Regional Director of Blue Arrow. ‘I took up the role at Interaction because I wanted to work in a business where people are people and not numbers’ says Shapley. ‘At Interaction we focus on making sure we recruit the right people. We want ambitious people. We offer support and training and we retain our staff. My role is to grow the perm business here. We have a really generous commission and bonus scheme and that really motivates the perm team. Business is busy and with so much going you wouldn’t know we have been through a recession; it certainly doesn’t feel like it. Morale is high and the market is getting better. My team is doing well and we look forward to good times ahead. Its all so positive.’ One person who has been in the business a long time is Rob McSherry. Rob is North & Midlands District Manager. He joined Kelly in 1996 and transferred over to Interaction at the acquisition. He has noticed a big change. McSherry says ‘there have been several big changes for me. Interaction has empowered us and given all of us much more autonomy; we are encouraged to think and be creative, we can make our own decisions and we don’t have to wait on head office; there are less rules and procedures. There is a positive ‘get on and do it then’ approach. Staff like the freedom. Clients are finding that Interaction is not rigid and is very open to tailoring solutions and working with client requests. There is emphasis on right first time and finding commercial solutions to situations, which is not often the case in our industry. Yes, a lot of change, but its exciting and we are relishing the new energy here.’  Coventry branch manager Dawn Lawson joined Interaction in June. ‘I’ve been in the industry some 12 years working previously for Blue Arrow and Select Appointments. I joined Interaction because it is the exciting place to be. Interaction is innovative and very go ahead. As branch manager I like the feeling that I am running my own business and I have autonomy. Interaction has recruited experienced staff and as a team we have the experience to offer quality services. Customers want to deal with experience; they have important businesses to run after all. Maybe its because we are a national but a small national that enables us to focus on quality. I know it’s a cliché but ‘small enough to care, big enough to count’ really sums up what we have here. You can feel the growth and positivity.’John Morley joined Interaction shortly after the acquisition. He is the Corporate Sales Director and is a recruitment veteran with 20 years in the industry and 8 years in operational management at Reed. The last 12 years were spent at Spring Group as UK sales director – general staffing. Says John ‘’Right now, Interaction is one of the most exciting destinations in the UK staffing sector. The integration of the Kelly network and workforce, into what was already a highly successful business, has created an exceptional proposition. As a business, we retain and continue to attract some of the best talent in the industry, which is clearly evidenced by our performance and the feedback that we are receiving from our clients and candidates. We have already made significant headway with major client organisations and are now positioned to build upon this success, through broadening the range of core and value added services that we can offer. For me, it’s about having the opportunity to contribute to the development of a business, where exceeding the expectations of our workforce, clients and candidates is central to our culture. As an independent we are all empowered and can advance without the complexities and politics that are common place in complicated hierarchical systems. I have no doubt that we will build a market leading business. Watch this space...’ David Blanchard is Sales Manager of the Industrial Division, joining after a several years at Gap Personnel and Jark. ‘I joined Interaction because it was the only recruiter doing something positive in this recession’ says Blanchard. ‘Decisions are made very quickly here and the senior people are actively involved in the business and we work as a team. I win business and need to know we are set up to deliver. The staff here are very strong and I can rely on them to service our clients. I am very at home at Interaction; we offer business solutions here and have a truly consultative approach with prospect clients, offering them advice in ways that efficiencies and productivity can be improved without just dropping the price! Interaction is what I believe in and is enabling me to achieve some fantastic results.’ Morrissey explains that Interaction has had to reorganise the former Kelly branches. He says ‘’many were purely servicing branches and they were not set up to develop their own business. We have changed this and they are all now focussed on identifying, developing and winning new business.’’ He is shortly to announce some major new wins of a national scale. There are also several local SME wins at most of the branches. Each branch is supported by the corporate sales team headed by John Morley. Morrissey is delighted at the growth in the client base since the March acquisition but says there is much more to be done. Says Morrissey ‘I’m pleased with how we have started and it is good to see the client list expanding, but we have just scratched the surface. There is more to go for and we will continue to build market share. Clients like our service and we have injected real spirit into our branches. Every week we will see new clients signing up with us.’’ The final piece in the turnaround has been to address the cost base which was very high. Gilchrist says that a severe axe had to be taken. ‘The cost base in the acquired business was too high and not viable. In some areas we are spending more. We are growing the number of consultants and managers in our business and hope to see that cost increase as we continue our recruitment drive. Our focus has been on addressing the head office cost and in reducing non-people costs and overheads. The more we pay out in bonus and commission the happier I will be as they are tied to success, but there were costs in this business that we have had to take action on. Property costs were enormous with some branches costing £100,000 per year in rent and rates. We are getting out of expensive leases. We move to cheaper premises but with new decoration, lighting, carpets and kitchens they are proving popular with staff – we are making big savings and need to in order to make this business viable. We have merged a handful of branches; we looked at several branches and thought we just wouldn’t be able to make them successful as stand alones so we merged them. You have to be realistic; there are things we can do and those branches would have been very hard to save. We are reinvesting the cost savings in new staff who can drive sales. That’s our formula – our business is about investing money in great people. We are opening branches, Manchester, for example, is just about to open and we have several more openings planned. I am always looking out for successful teams and we will back people who come to us wanting to do an opening.’ Plans and strategy So what are the plans for Interaction, what is the strategy and where is Interaction heading?  Gilchrist and Morrissey are looking to grow the business. Says Morrissey ‘The UK recruitment market is worth £28bn – there is plenty to go for. We don’t even have 1% of the UK recruitment market, so there is plenty of business out there. We will open a few more branches but we plan to grow existing branches in to bigger units. We will double our headcount over the short term from just over 180 staff to near on 300 staff. We are looking for consultants, managers and specialists to join us. We have great opportunities and packages to offer. We are a personal business not an impersonal or bureaucratic national agency with lots of forms to fill. We treat people as people; Andrew and I know everyone here and it will always be that way; staff know they can talk to us and get quick decisions.’Morrissey has recently recruited a corporate sales team. ‘We recruited some really experienced people and are bidding for and winning major business across all sectors. We are also winning the smaller and local business which is so important to us. ‘’ Gilchrist is also looking at further acquisitions. He says ‘We won’t do many deals but we will try to do a few sensible deals. We have the infrastructure so consolidation type deals suit us best. We may look outside of consolidation such as to buy branches where we have no geographical presence or to a specialist area that we could roll out across the group. An acquisition of a finance or technical recruitment business for example would make good sense as we could roll that out across our network.’ Gilchrist says he is in no rush to buy; ‘it’s really about waiting for something that suits us. We have plenty going on in our existing business, plenty of people to recruit and market share to go for, but I expect to do something and we are looking. We welcome enquiries from owners looking to sell and we want businesses that fit what we are doing and make sense to what we have here. We must be focussed; we can’t be everything.’  It seems that things have worked out for Interaction but Gilchrist points to several frustrations and failures. Gilchrist and Morrissey worked hard to complete the acquisition. Says Gilchrist ‘Kelly was a major acquisition which turned up at the 11th hour. It is fair to say we had not planned to do a deal of this size at this stage and had to adjust very quickly. We had to do it and get on with it. We had to work rapidly to upgrade our infrastructure and IT and have invested heavily in new software and systems. It was very hard. The head office team have worked so hard. Some of us have not had much holiday! Some clients had never heard of us but just because you have a big name and a so called brand that doesn’t mean you are any good. Some of the biggest and longest established brands in our industry lose large sums of money How well run is that? We may have had a smaller brand but we run a good business and look after our clients and candidates. Size isn’t everything, its how efficient you are. There are some very big brands out there with balance sheets that are in a mess. They have no funds to invest. We have funds and we are investing.’’ Gilchrist is frustrated by agencies that are flouting the minimum wage laws. He says ‘some agencies are openly using travel and expense schemes illegally. Customers are attracted to the cheaper prices these agencies offer but don’t seem to understand the consequences and liabilities that could hit them. The Inland Revenue are short of money and are catching up with illegal schemes. Someone will pick up a bill for millions when the Revenue unravel these scams. It causes all us fair players a lot of lost business. Interaction will have no part in these dodges; we won’t operate illegally and we accept that until these scams are closed that we will lose business to illegal operators.’ Another frustration is the scarcity of recruitment staff on the market. Morrissey says ‘we have only been able to recruit half the people we wanted to as there is a real shortage of good consultants and managers on the market.’ So not everything is going their way but Gilchrist thinks that the authorities are wisening up to the illegal travel and subsistence schemes and that as the economy picks up recruitment staff will be on the move. ‘These things will right themselves over time’ says Gilchrist ‘in the meantime we just need to focus on what we are doing here.’ So what is the their biggest challenge? Says Morrissey ‘it has to be finding enough great staff to join us. We are growing and that provides great opportunities for staff. We will grow the team here and we are continuing to search for talented and ambitious staff at all levels.’ Adds Morrissey ‘Interaction is a good place to work. The rewards here are superb and that’s why people are joining us. But I would like to see more people applying.’ And finally...... Morrissey and Gilchrist are clearly excited and believe that Interaction is establishing itself as a major brand. The acquisition of the Kelly branches seems to be going well and is providing more opportunities. We will watch Interaction with interest to see what they do next. Watch this space.
Andrew Gilchrist can be contacted at:- andrew.gilchrist@irweb.co.uk  |