When asked if he was interested in a role with recruitment giant Page Group, Kelvin Stagg assumed it was as a finance professional for one of the firm’s clients. At the time, he had just finished a six year stint at drinks giant Allied-Domecq after it had been acquired by industry rivals and was interested in new opportunities.
But the invitation turned out instead to be for work at Michael Page, as the firm was then known, as its group financial controller and company secretary. He accepted in July 2006 and was elevated to CFO in June 2014- following a few months as Acting CFO.
In that time he bore witness to a dramatic rebalancing of the group’s business away from a reliance on the UK to geograpphical spread across 37 countries, partly as a result of the global financial crisis. The result is that Page Group, a FTSE-250 constituent, reported record gross profits of £208.8m in the second quarter of 2018, up 16 % from the same period last year, and said in July it would beat analyst expectations for the full year.
“On a Monday it was pitched it at me at lunch with CEO Steve Ingham and CFO Steve Puckett, CEO and CFO. They offered it to me on the Thursday and I accepted on the Friday, I think I started a week later and that was 12 and a half years ago,” says Stagg.
Over that time Stagg has played a key role in ensuring finance can help the business thrive through difficult times and growth opportunities. “There’s been a series of accidents and opportunities, that you just grasp as you go,” he says.
A people business
The opportunity of playing a key role in a cyclical business was the main motivation for joining Page Group, says Stagg as against the anti-cyclical models of Allied-Domecq and FMCG giant Unilever before that. “At the time I thought I’m not sure about recruitment as an industry,” he says, “as it was a little bit salesy.
Another attraction is working in a so-called people business. “You don’t join recruitment if you don’t like to talk to people. We don’t have any other assets, own any buildings, we don’t own anything, other than a group of people,” he says.
That fact has been a huge benefit to the group, launched above a laundry in east London, by Michael Page and Bill McGregor in 1976, in being able to reduce down rapidly when approaching difficult times.
That happened soon after the early effects of the financial crisis began to be felt. Uo to that point the group was “flying,” says Stagg. From 2005 to 2007 operating profit had gone from around £50m to £155m and in 2008 was three months off beating the target of £225m. “There was money coming out of the floorboards. The phones were ringing off the hooks, and there just weren’t enough candidates out there,” says Stagg.
But things came crashing down with an abrupt thud when the financial crisis kicked in. To illustrate the point he says: “We made £2.8m in May 2008 in banking in London, one year later it was £180,000. For a consultant ringing banks, the responses weren’t polite. I can’t think of an industry that would be more brutally hit than recruitment,” he says.
Stagg says that given 78% of Page group’s cost base is people, that is where the axe must fall early on. The group employed 5,500 staff in May 2008, which became 2,900 a year later. “The only thing you can move in a hurry is the people, unfortunately it’s as brutal as shoving them out the door as quickly as you can, because you’ve got to get them off the payroll.”
In 2009 the group still made £21m of profit that, added to the £150m of cash on the balance sheet, ensured the group wouldn’t go bankrupt provided headcount was quickly reduced. That was undertaken relatively easily because of the team profit share model it runs, compared to the individual commission approach of peers, in which team members that aren’t contributing tend to voluntarily leave. “In 2008-9 we pretty much made no redundancies whatsoever, as they all walked,” Stagg advises.
Cometh the hour
Stagg was made CFO of the group in relatively abrupt terms, following the 18 month tenure of his predecessor “who didn’t fit very well with the business”. He admits to having imposter syndrome, “something I’d never had in a previous job,” because of the challenges of the role. He says this was partly due to not having anyone above him specifically pushing him on direction, as well as the complexity of having to manage former peers.
In the event, Stagg says he was able to address these expectations but nonetheless hired an external coach to discuss issues once a month. “I think we both agreed after about six months that we weren’t quite sure what we were getting out of it. It was as much a sounding board-he did a 360 for me at the beginning and came back with some feedback, which was quite helpful,” he says.
One of the key areas he realised he needed to work on was public speaking and presenting, as for a long period of his career Stagg hadn’t done much. Twice a year he now delivers presentations to City analysts and an annual address to the group’s 150 top staff from around the world.
Another important consideration is ensuring his relationship with CEO Steve Ingham is managed effectively. “Steve and I have a close, open relationship but I have got to have independence if I think there’s something wrong. I’m very lucky that we have the right moral compass here. Steve has always had the right moral compass, that has never been an issue. But fundamentally the board need to be comfortable that the fact that we are friends won’t jeopardise the integrity and the independence that I need to show as CFO,” he adds.
Stagg says a fundamental aspect of ensuring strong leadership of Page Group’s finance function is effective revenue recognition. “We recognise it at the point we make the placement, where the candidate has resigned from their job and signed the contract with the new company to start. We believe that is the point where they have the benefit of having that person, even if they don’t start until later,” he says.
Stagg says that for Page Group the new IFRS standard on revenue recognition didn’t make a significant difference to the group because it had maintained a consistent approach on the issue. “The one debate was around where you got a retainer- we successfully argued that a lot of work goes in before that, understanding a client’s requirements,” he adds.
Stagg says that it’s important to have members of the finance team who understand the workings of the recruitment industry. “I need to have people working for me who know where the lines are. We do lots of little trades so we have the odd fraud now and again. But they are rarely frauds to personal benefit, they tend to be from someone who doesn’t want to let the team down, and therefore they make up a placement hoping they’ll get a real placement, and hope they’ll get away with it,” he says.
Stagg says that Page Group has a specific process for opening new country offices, involving leader and deputy, each with at least ten years’ experience hiring a team. He says this is “so the culture they have is transported with them is then embedded from the start. If you go to any of our businesses, whether you go to Bogota or Geneva, or New York they all are the same,” he adds.
One surprising aspect of the financial crisis was how slowly the global economy was restored compared to previous downturns. It meant that Page Group needed to seek out greater efficiencies. The result has been to install regional shared service centres in Buenos Aires, Singapore and Barcelona. “Its roughly half the cost for a credit collector in Barcelona as it is in Germany. It’s something I’ve been driving through over a period of time,” Stagg advises.
Another was the rolling out of GFS, which stands for ‘global finance system’- which allows all finance teams to be on the same global platform. “It gives us-better data information and allows us to be geographically agnostic. Why do purchase to pay (P2P) in Slough when you can do it in Argentina?” he says.
When it comes to using new technologies, Stagg says Artificial Intelligence (AI) is not being used in finance, but is used for candidate matching- but even then in a measured way. “We believe recruitment requires a human touch,” says Stagg.
The proof was that when the group tested an online tool that promised to be able to detect a huge amount of information about a candidate through behavioural analytics only 15% replied to the questions, in the UK, Mexico, China and Belgium. It transpired that candidates need to receive the initial questions from a fellow human being. “What we’ve been trying to do more recently is to make sure that the algorithm that puts the people at the top correlates with what our people actually thought of them,” he says.
Work is now underway with Google to develop a Revenue Attribution Model (RAM) to discover the most effective ways for sourcing candidates. There is also an innovations lab run with consultants Cap Gemini to develop internal ideas.
One immediate impact is that the group is “questioning hard our recruiting model. Currently everybody in our business is a 360 recruiter, they find a job and then find a candidate and join the two together. They’re quite different tasks and actually finding candidates can be improved through this technology.
“Our people are now closer to customers because they’re only working with clients, they don’t have to spend all their time interviewing candidates. They can see the candidates shown to them by video through these tools,” says Stagg.