CASE Forum

Recruit Group: Is "Sink or Swim" the Best Way to Grow?

Recruit Group has grown by releasing young talent to get on with the job. But as the business grows more complex, is it time to adjust the management model? Or is it a case of "if it ain't broke, don't fix it"?

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THE CASE

When Ayano Senaha touched down in London on a new assignment for the Japanese human resources conglomerate Recruit Group, she soon found herself in a delicate situation. Her mission was to find out why one of Recruit Group's three U.K. acquisitions was underperforming. But this was her first-ever overseas assignment, and the U.K. management team was wary of trusting someone so young and inexperienced.

"You can imagine, there I was in London -- I knew nothing about the business, nor the country, and my English was not very good either," she says. The fact that she had been parachuted in from Recruit Group's Tokyo base hardly helped matters. "The managing director quite rightly looked at me and wanted to know when I'd be going back to Japan."

Sena, as she calls herself, was not fazed. During a decade-long career at Recruit, she had achieved impressive results in highly competitive areas, including corporate planning and sales. Her initial reaction to the new challenge was to identify how she could best contribute to the U.K. business, which started by making managers aware of a problem that few people in the firm actually knew existed.

The Ribbon Model
Recruit Group, which started as a publisher of job listings in Japan in the 1960s, has evolved to include some 200 businesses and brands across Asia, Europe and the United States. The company operates various platforms that provide key client data services in sectors as broad and diverse as real estate, accommodation, hospitality, health and beauty, education, and the company's original -- and still core -- business, recruitment.

The fundamental proposition underpinning all these businesses is to create new value by developing digital platforms that bring together clients (businesses) and users. This is the essence of its "Ribbon Model," whose goal is to find win-win matches between the needs of clients and users. The three main drivers of growth are: internal startups; horizontal geographic growth through acquisition; and vertical growth through proprietary technology and know-how.

It was Recruit's focus on results, combined with its faith in the ability of bright, young "intrapreneurs" to identify opportunities that drive company-wide innovation and growth, which brought Sena to London. Entrusting such a high level of responsibility to someone so young and untested in an international role would be unthinkable for many large organizations, but at Recruit it appears to be the norm.

Accelerating Business Development

Under Sena's persuasion, two of the three U.K. companies were merged and, shortly after, Sena took the reins of the entire U.K. operation. This would seem in keeping with Recruit's philosophy that, when entrepreneurial employees step up and take ownership of a project, management is quite happy to get out of the way.

This is not to say that management takes its eyes off the ball, though. Management uses a "stage gate system" to keep track of new businesses as they go through development phases. "We would expect to have about 500 moving through the first stage (the entry phase during which no money is committed)," explains Yoichi Aso, head of open innovation projects. "After about four months (the point at which initial investments are made), that will have been whittled down to about 20, and we end up with fewer than four at the final gate."

Soon after Sena's intervention, things began to look up. As their operations were streamlined, the EBITDA of Recruit's two remaining British subsidiaries turned positive within the first year of her tenure and more than doubled in the second. When she completed her three-year tenure, Sena was lured back to Tokyo with the promise of a new role: Executive Manager of Business Development.

Sena's next assignment was to realize the value being created in Recruit's Silicon Valley acquisitions. But as Recruit's reach expanded, doubts began to surface. Would Recruit be able to rely on a system of global management based primarily on thrusting home office personnel into overseas leadership roles? Was it time to begin entrusting more responsibility to local managers? Or to put it another way, should it begin favoring the value of experience over the promise of youth?

The company's appraisal system is based on a "Will/Can/Must" tool in which individuals express their willingness to accomplish something, their ability to achieve it, and what they must do to get there in the next six months. This shifts a lot of responsibility onto the employee. But as Recruit's operations continue to grow in size, reach and complexity, is it enough to stake the business on the belief that "where there's a will, there's a way"? What is the right balance to strike between individual freedom and centralized management control?

WHAT I WOULD DO

Crawley, Eileen
June 20, 2016 16:25:14

I would like to know more about the tough personal challenges that Sena faced when she arrived in London and that others in the business might have experienced, too. There’s no mention of cross-cultural training for such a powerful role in another society. We’re told at the end that Sena was moved to a different continent, culture and business, to face yet more cross-cultural challenges in another tough business environment. While this case centers on individual freedom vs. central management control, I wonder what the question would be if Sena had failed? Whose responsibility is it to ensure that a young employee is appropriately prepared for a completely different business and cultural environment? While I understand that individuals must learn to take the initiative and be tough and resourceful, management also has a responsibility to ensure adequate support and preparation of its younger staff to take on demanding positions, especially overseas. Surely, there must be a process of training and development, as well as support for staff, to enable them to succeed. What a pity there does not appear to have been any opportunity for Sena to use the skills and lessons learned in her position in London to train other staff being sent in the same direction, instead of pushing her off to start from scratch again, on another continent. It seems as if all the challenges she faced have been ignored, instead of used for the benefit of others in the company. What a waste of a resource! I would hope HR makes sure that its expatriates, of any age, are given the training and support they need to accomplish their tasks, and that their learning is passed on to others, as a form of internal knowledge management.

Eileen Crawley, HR & Training Consultant and co-author of “Introduction to International Human Resource Management” (Oxford University Press, 2013)