Xref’s ‘Butterfly’ Transformation During COVID-19
Xref’s CEO Lee-Martin Seymour was recently featured on The StockDoc Podcast with Dr Nigel Finch. It was a great discussion, bursting to the seams with insights into what the candidate market is expected to look like post-COVID and details on how Xref has successfully navigated these challenging times.
Read on below for a portion of the discussion, or head over to the podcast to have a listen to the whole interview.
Lee-Martin Seymour: Xref is currently situated in Australia, New Zealand, North America and Europe and have got just over 60 people onboard our team of staff. Xref will be 10 years old in December and we are servicing about 1000 clients across the globe in a range of different languages. Within those thousand clients, there are around 10,000 users on the platform.
Our key value to the client is currently within the reference checking space. Everyone knows what it is like to be either a referee, a candidate or a hiring manager navigating the hiring process. It can be a time consuming process are there are a lot of challenges with the old way of doing things. Xref exists to remedy the common challenges people were facing with traditional methods of reference checking. We reinvented the way that people can take references, by automating the process and bringing it online. Xref gives people the assurance that when you hire a candidate, you know who they are, where they've worked, and what they've done. Xref gives you a tool that you can use to protect your business from breaches in fraud, discrimination, and privacy.
Dr. Nigel Finch: Lee, I've been impressed to see some of the changes that you've made in the company that are really designed to streamline and build efficiencies. Now, these are really important focus areas in any scale up business. Can you tell us briefly about how this posturing has helped you and your team during COVID-19?
Lee-Martin Seymour: Sure, we finished the December quarter in 2019, at a quarterly cost of about 5.2 million. So we entered the early COVID space as a big fat caterpillar and now we've emerged in Q1 of this year, as a beautiful butterfly, nice and lean. In a strange way, it's been absolutely fantastic for our cost base. There are two things at play here: One is that the world has woken up to the additional verification that you absolutely must do when you hire someone. Then secondly, we started out as a direct sales business with a sales army on the ground pounding the pavement, smashing the phones, selling what was, at the time, grossly misunderstood. Now, with the help of COVID, the world has woken up to the benefits of automated referencing. We’re now at a point where we can pivot into a fully digital go-to-market strategy, which carries a lot of opportunities along with that. No longer do we need to have a big sales force. Instead, we've got key account management and we've got key business development driving us. However, most of our leads now come in through our digital marketing efforts.
Dr. Nigel Finch: I noticed that the Australian Ethical Investments have increased their stake in Xref. Australian Ethical Investments, no doubt have a number of investment overlays that they use for screening and no doubt many of those are focused around the provision of the ethical product or service. I also expect governance plays an important factor in their investment decision making. What is it, do you think, that a professional investor like Australian Ethical Investments sees in your business?
Lee-Martin Seymour: Pre COVID people would ask us the question “are you business critical or are you a nice-to-have?” Through COVID however, it's been a real good test of our platform, because of the way we've held up and the way that non-recruiting companies have returned back to us. So, we can officially say that we are a business critical tool now in the world of recruitment. Australian Ethical has been with us for a while now, and for the past four years or so, we’ve always had some kind of institutional investor within our shareholding. It was really nice to have people like Aus Super and The Herald Fund. I think it's a good message to the market, when a company like Australian Ethical with the people that they have and their platform direction, include you in that fund. Anybody that knows those guys over there, knows the amount of diligence they do before they invest. We are on a journey and we have got a big future ahead of us, so businesses and funds like Australian Ethical, find that we fit right into their pocket.
Dr. Nigel Finch: I want to pick up on something that you just said, and that is, you know, that COVID-19 has been a real leveler for the business to business services. What you're saying is that this has polarized the technology market for tech services into must-have and nice-to-have services. How do you see your company's value proposition in this light?
Lee-Martin Seymour: During COVID, we split our client set into two halves. One being the essential clients such as Health, Not-for-Profit, Government, Education, and then the other half being non-essential. Then we independently tracked the performance of each of those styles of entities. As a result, we saw the non-essential part of the market like Travel, Banking, Hospitality and Retail fall off of a cliff in March and we've slowly seen it come back to post record levels after COVID. We've now got a really nice U curve, out of that sector. However, in the essential sector, we've seen them rocket all the way through, continuing on being very busy. In fact, the essential clients that we have, like health, have helped the lack of non-essential revenue coming in and helped evened out the peaks and troughs of COVID. Where that puts us, is squarely focused on the essential sector. So, now we're doing a lot around Aged Care, Health and education. Globally, our sales team now has that focus.
Dr. Nigel Finch: That's a really interesting way of looking at the market. The HR market is sometimes categorised into different phases, such as a phase where it's a candidate led market versus an employer led market. I know that you've been in this game for a long time, and you've seen many market cycles, so, I really want to tap in your experience to understand the market cycle that we're in today. Perhaps the best place to start is to look at some history. Over the course of the past two decades, what have you learned about employer behaviour during difficult times or recessions?
Lee-Martin Seymour: I've been fortunate enough to work in recruitment through the 2002 to 2003 crash after Y2K, and the 2008 GFC. And now, a global pandemic. So, every time this happens, people lose their jobs. Some people survive the pandemic or the financial crisis, and they work all the way through. Now, what we're doing at the moment is no different. We've lived this life before and we're not doing anything different.
We are all now focused on the 600 million people that have lost their jobs through COVID. And yes, we have to look at how those people are going to return to work, but, we're completely ignoring what is actually going to happen. That is, that everybody who has ‘survived’ through COVID is in businesses right now... But I bet your bottom dollar, as this market returns, those people that have made it all the way through, are going to be looking for a change because of the achievements that they've got through the COVID. What that means is that we are going to have people in jobs at the moment who are looking to move and we're going to have people that are out of jobs looking to move too.
So we are entering, not a candidate lead market, not a client lead market, but a chaotic one where both those elements are at play. However, if you are a line manager in 2021, and you have a candidate that has been employed all the way through, looking for a job, and a candidate that is still out of work looking for a job, you are more than likely going to recruit the person that made it through COVID. It’s unfortunate to say, but it is just the way the world works.
We think this 600 million strong labor market is going to return back to work, when in fact, everybody that's made it through is going to look for a job and block those people. So, we are going to go into a very chaotic market. Then when employers have 10 people looking at them asking for a job, the priority will then be for line managers to work out who's who in the zoo, and the only way that they can work out who is the best talent for their business, is to make sure that they do their background checks and references. While we're about to see one of the most chaotic markets, for Xref it is one of the biggest opportunities we’ve had in our 10 year history.
Dr. Nigel Finch: Back to the employer behaviour. There's an opportunity there, with 600 million people being unemployed at the moment. There's obviously an opportunity there for new employers to embrace your services and other services to assist with recruitment. What do you think is likely to happen to workforces more generally? Do you think that employers are looking for opportunities to downsize? Or do you think that they are still focused on this ‘right sized’ concept?
Lee-Martin Seymour: Well, both and we've seen companies like Bunnings and Crown, who've been quite quiet over the COVID period all of a sudden ramp their hiring because they're replacing those people that they let go during the pandemic. Companies that have downsized their headcount, if they are thinking of ‘right sizing’ that and recruiting again, they are being very cautious because they're seeing it as an opportunity to make the business look better. The silver lining of COVID is businesses have been able to ‘right size’ but I think that when rehiring, they're going to take even more caution than they would have done before COVID. However, much like employers are going to take time to hire properly, candidates are going to be really picky on who they're going to work for.
Dr. Nigel Finch: Let me ask you a question then on candidates because some commentators are referring to a ‘candidate migration’ to talk about the expected wave of workers that are looking to swap industries into industries that are ‘recession proof’ or move to more COVID friendly roles. Are you starting to see evidence of this? And what's your view on the depth of the candidate migration market?
Lee-Martin Seymour: This isn't the first pandemic, we've had them before, we just didn't know about them. This isn't the last pandemic that we're going to have. However, we're going to know about them earlier in the future and will have policies in place to help deal with them.
Recently one of our staff went into a hospital and met an ex-Qantas cabin crew member that had got a job in triage. Qantas did something quite nice there because as they were downsizing, they offered their staff out to health services. However, this individual explained that they’re doing exactly what they did on a plane, but they’re not 40,000 feet in the air, they’re on the ground. All that to say that they are more pandemic proof now. This is how candidates are thinking and so, we're seeing candidates shift their skills into more pandemic proof companies. That leaves the non-essential sector having to work really hard to attract, secure and retain talent away from the sectors that are more pandemic proven. Whereas before COVID, we didn't want to work for the Government, we didn't want to work for Health, but now people are saying, actually, you know, that's far more of an opportunity, given what's going on.
Dr. Nigel Finch: There's another thing that's on people's minds, what do you think will happen in Australia, when Federal Government employment subsidies fall away in April next year?
Lee-Martin Seymour: I think there's a bit of false hope out there with JobSeeker and JobKeeper. I think the XREF business used JobKeeper for exactly the right reasons. We retained some heads that we probably would have had to lose and it helped us get through, but we're very fortunate that we don't need it anymore and that we can break even on our own merit without that assistance.
However, there are businesses that are simply existing on those subsidies, and without it, they're not going to survive. Then there are individuals that are existing on JobSeeker that just can't get back into the workforce. So, we may experience a bit of delayed pain from the end of those cycles, but it's just simply something that we've got to get through. I think we just needed some time to protect our communities from a virus and then work out how we're going to survive moving forward.
Dr. Nigel Finch: The employment sector is certainly a pretty turbulent sector, yet exciting sector to be watching right now. What confidence do you have that employers will continue to use your service? And how do you remain competitive?
Lee-Martin Seymour: All of us globally, have all of a sudden figured out that we need to know who somebody within 1.5 meters of us is. We need to know who they are, where they've been, what they've done, and how healthy they are. So there's now an acute awareness of this human being that's in our lift shaft or joining our office. That's now echoed in the recruitment market.
We've now seen lead flow, bigger than ever because people are asking these questions. So, how do we compete at the moment? We're fully global, with multi language, with ISO27001, with GDPR, we have 24/7 support, we are the best-of-breed platform in what we do. We are as good in our service as we are in our platform and that really does set us apart. We've also been doing it for 10 years. We're not devs that have dreamt up a solution, we’re the industry that built a product for the industry.
However, moving forward, we are building products right now that are going to help answer those big questions around letting people go during COVID but not having any way to know who they were or how good they were and if they would be willing to return. We're now looking to answer some of the biggest questions that our clients are putting to us. We're building a product that in early 2021, we're going to be bringing to the market, because that's what we do really well, we listen to our clients and we see the pain point. What we want to do is provide further insight to clients, not just at pre-employment, but all the way through from hire to retire.
Listen to the full podcast here.