W100: Co-opetition - Embracing the enemy

Written by Chris Atchison

When provincial legislators quietly changed the laws governing Ontario’s recruiting industry in 2001, few if any people outside the sector paid notice. But for Sylvie Hyndman and Nancy Wiesner, the abolition of character reference and registration requirements for recruiting agencies posed a huge threat to their Brampton, Ont.-based firm, Dynamic Employment Solutions Inc. (No. 46 on this year’s PROFIT W100).

Within a couple of years, the market was flooded with upstart recruiters that had surged over the lower barriers to entry. These newer agencies were comfortable eschewing such effective but time- and cost-intensive practices as face-to-face interviews in favour of phone calls. Meantime, online job boards such as Workopolis were achieving critical mass in the marketplace.

Hyndman and Wiesner faced stark choices: compete on price, surrender market share or adopt bold new ways of doing business.

“After 15 years of doing this, you say to yourself, ‘Am I going to change industries, or change with the times to stay in my industry?'” Hyndman reflects. “That’s why I said, ‘This is what I know and love, so I have to figure out a way to use technology to my benefit’.”

Here’s the twist: competitors can use that technology as well.

Dynamic allied with like-minded recruiting agencies to share client and candidate leads through an online database, allowing them to match employers and employees with greater accuracy and speed than their rivals can. So far, so good: co-operating to compete has increased Dynamic’s own placement rate by 10%, while partner organizations have also enjoyed an uptick in business. Still, “co-opetition” has not been an easy sell for Dynamic’s founders. And anyone hoping to work with the enemy must be able to achieve the careful balance that keeps co-opetitive partnerships from crashing down.

At the heart of Dynamic’s arrangement is its proprietary 3DORS database technology. (The name is an acronym for “three-dimensional online recruiting service.”) It allows the recruitment companies within the network — 10 to date — to post client orders and share detailed information about job candidates, which helps them make better matches, faster. (Users can conduct keyword searches to find what they’re looking for.) Just like real estate agents, who co-operate to unite buyer with seller, the respective recruiters in a 3DORS deal split the commission 50/50; 3DORS, which is a separate company co-owned by Hyndman and Wiesner, takes a 10% cut for facilitating the transaction. (Hyndman says that because 3DORS is administrated at arm’s length, Dynamic has the same access privileges as other companies in the network.)*

Linda Ford, president of Brampton-based Access Career Solutions Inc., has been putting 3DORS through its paces for the past year. She quickly recognized the system’s potential to grow her business. While she has long shared leads with competitors, Ford saw joining the 3DORS network as a way to achieve significant growth without incurring a big capital expense.

“Expanding the people database without having to invest in new Web technology is really getting a piece of technology that someone else has created without all the effort,” says Ford. While the network may not be beneficial to a bare-bones recruiter who merely flips resumés to clients, Ford believes the 3DORS network helps her deliver high value to customers: “They don’t really care how we find someone, as long as we find the best person for their team.”

But not all recruiters are so enthused about the 3DORS concept. “Getting the average businessperson to wrap their head around that is way more complicated than I thought it was going to be,” says Hyndman. “The concept of sharing for the greater good scares the pants off a lot of people.” She and Wiesner have met resistance from competitors who, they say, are far too set in their business ways to embrace a co-opetitive approach. Others simply don’t think it’s beneficial to share their hard-won client lists for another recruiters’ benefit, worry that co-opetition could compromise their own unique competitive advantage or treat 3DORS with cynicism: better for Dynamic than for their businesses.

As Joel Baum, a professor of strategic management at the University of Toronto’s Rotman School of Management, explains, co-opetitive networks are most effective when players join with congruent resources and earn congruent dividends. If competitors don’t see an immediate return on investment by playing nice, they’ll often revert to traditional means of doing business and compete head-on. “When there’s an imbalance,” says Baum, “it’s much harder to do the co-operation because it’s much less clear that we are benefiting in a mutually advantageous way.”

That’s the reason Hyndman and Wiesner have carefully chosen their partners. They’ve so far approached veteran recruiters who they feel understand workers’ rights and employment legislation, employ similar candidate testing and screening procedures, and have their own well-developed roster of clients. “Think about it from my perspective,” Wiesner says. “If I’m having another agency represent a candidate for me, I need to be comfortable that the other agency has the same level of expectation as I do.”

By working with rivals strategically, Dynamic’s founders say they’ve become more competitive on an industry-wide basis. They’ve even seen employers return to veteran agencies such as theirs after employing less professional search firms. Business has been so brisk, in fact, that they’re franchising the Dynamic Employment Solutions brand across the country. All franchisees will, of course, be members of the 3DORS network.

By embracing the very technology that could have been their downfall and opening their arms to industry foes, Hyndman and Wiesner have lifted their company to new heights. They’re confident of going even higher, if they can master the art of persuading others to adopt the 3DORS model.

“People look at me like I have six heads when I explain it,” Hyndman laments. “In five or six years, we’ll all be laughing, going, ‘That’s an old idea.’ But right now it seems a little too groundbreaking for a lot of people.”

*Revised from the original article that appeared in the November 2008 issue of PROFIT.

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