Recruit Holdings - Company History

An advertising agency started on a ¥3 million loan

In March 1960 Ezoe Hiromasa (江副浩正) founded Daigaku Shinbun Kokokusha (大学新聞広告社) in Minato ward, Tokyo, a business that carried companies’ recruitment advertising in university newspapers[1]. The founding date was 31 March, and the premises were a prefabricated hut erected on the roof of a small Tokyo building[2]. The groundwork had been laid while he was still an undergraduate: the University of Tokyo newspaper society had asked him whether he would go out and open up advertising for it, and he had been selling advertising space since his student days[3]. The major banks would not deal with him for start-up capital, so he negotiated twice with the Tamuracho branch of Shiba Shinkin Bank and borrowed $8,333 (¥3m) against his father’s land and house[4]. Before long he signed contracts to handle the advertising of several university newspapers single-handedly[5], and in October of the same year he incorporated the business as Daigaku Kokoku Co., Ltd.[6]

In 1962 the company launched Kigyo e no Shotai (企業への招待), a magazine that carried nothing but job openings for university students[7]. To put the first issue together, Ezoe called on some 200 companies, mostly firms he already dealt with through the university newspapers, and built the format by asking their recruitment managers how the pages should be laid out[8]. It was the turn from being an agency that brokered other publishers’ space to being a publisher that issued its own title and opened up its own advertisers[9]. The arrangement — take the advertising fee from the companies listed, and use it to create a place where individuals and employers meet — was later called the ribbon model, and it has been handed down to the Recruit of today[10]. In April 1963 the company was renamed Japan Recruitment Center, and in August that year Japan Recruit Center was established[11].

An early computer, and the beginnings of a property business

In 1968 the company became the first Japanese firm to install an IBM 1130[12], and began using it to process aptitude tests and similar work. Bringing in a computer at a time when they were still a rarity was a way for a company that dealt in information to speed up and streamline its operations[13]. In 1971 it set up Recruit Computer Print to digitise the pre-press stages of producing its magazines[14], taking the production process in-house as well. In the same year it completed its own office building in Nishi-Shimbashi[15].

In 1970 the Government Housing Loan Corporation’s lending scheme began, and by 1973 the number of new units sold nationwide passed 150,000 in a third condominium boom[16]. New-build properties, however, could not be advertised until their prices were fixed, which left prospective buyers deciding to apply without ever obtaining adequate information[17]. In 1974 Ezoe took on the sale of Neo Corpo Gyotoku, a building put up by Hasegawa Komuten, and this became the forerunner of what would later be the condominium development business of Recruit Cosmos[18].

What Jutaku Joho proved about the portability of the model

In 1976 Japan Recruit Center launched the monthly Jutaku Joho (住宅情報) and moved into housing and property[19]. Ezoe pressed the venture through against internal opposition, holding up the aim of changing property advertising by conveying accurate information.[20] It was diversification that carried the job-magazine format — take the listing fee from the advertiser, deliver the information to the reader[21] — straight across into another field. By 1978 it had grown into a title read by roughly half of all home-buyers in the Tokyo metropolitan area, and it moved into profit[22].

Ezoe described Jutaku Joho as the ideal form of two-way communication linking supplier and buyer[23]. In 1979 the magazine introduced a screening function to weed out dishonest listings of companies and properties[24], placing the credibility of the medium itself at the base of its earnings. In 1996 it launched the internet service Jutaku Joho On The Net ahead of the rest of the industry[25], leading the shift from print to online as well. The Jutaku Joho name was used for thirty-three years before being consolidated in 2009 into the housing master brand SUUMO[26].

Torabayu, Car Sensor, and diversification by start-up

In 1980 the company launched Torabayu (とらばーゆ), Japan’s first mid-career job magazine aimed at women[27]. The Equal Employment Opportunity Law would not come into force for another five years, and the title’s name spread into everyday speech as a verb, to torabayu.[28] In 1984 it launched Car Sensor (カーセンサー), a magazine devoted to used-car sales; that business grew out of an idea proposed during the induction training for new graduates[29], and in April of the same year the company renamed itself Recruit Co., Ltd.[30]

In 1985 it set up Recruit U.S.A. Inc. to support the recruitment of Japanese companies operating in the United States, and in the same year it began an information service based on remote computing[31]. In 1987 it established a supercomputer laboratory[32], committing people and money to research into computers and to promoting their use. As of 1986 the Recruit group numbered twenty-eight companies[33]. In a lecture published in the Securities Analysts Journal, Ikeda Tomoyuki (池田友之), president of Recruit Cosmos, said that most of its work is of the start-up kind, explaining that much of it lay in fields no other company had entered, or where others had entered but Recruit earned the founder’s profit by going about it differently[34].

Cosmos swells, and the Recruit scandal

The cash generated by the magazine business also went into acquiring property, and in 1984 the company bought Nippon Light Metal’s Ginza head-office building[35]. The condominium business of the subsidiary Recruit Cosmos grew too, recording sales of $1.2B (¥176bn) in 1987 and overtaking the parent company Recruit itself in scale[36]. In 1988 it came to light that unlisted shares in that same Recruit Cosmos had been transferred to figures in politics, business and the bureaucracy, and Ezoe resigned as president[37]. In 1989 Ezoe himself was arrested[38], and the company that had begun as one man’s sole proprietorship faced the gravest crisis in its history.

What the scandal damaged was not the earning power of the core business. The magazine operations went on holding high margins, recording recurring profit of $567.7M (¥74bn) in the year to March 1998, a recurring margin of 21.4 per cent. On the other side, the collapse of the bubble wiped out the unrealised gains on the property held by Recruit Cosmos, and the non-bank lender First Finance was left carrying bad debt. Ezoe stepped down as chairman in 1988, having spent roughly thirty years at the company since founding it in 1960.

Joining Daiei as a rescue

By 1992 the group’s liabilities had reached $14.2B (¥1.8tn). The publishing and information business at the parent was doing well, but Ezoe was standing trial over the Recruit scandal, and the collapse of the bubble had left the affiliates Recruit Cosmos and First Finance in deteriorating shape. Ezoe felt, in his own words, that at this rate we will end up under bank administration, and, as a defendant, that he could not hold together a support structure within the group. He therefore handed the role of group overseer, in his place, to Nakauchi Isao (中内功), president of Daiei.

Ezoe approached Nakauchi about selling the shares some ten days before the press announcement of 22 May. The agreed price was about $359.2M (¥46bn) for roughly 10 million shares, or 33.9 per cent of those issued. According to a senior figure at Sanwa Bank, that figure came not from any asset valuation but from a rough-and-ready calculation of net assets divided by the number of shares outstanding. Ezoe gave his reason for the sale as follows: I thought that, rather than Recruit being placed under bank administration, joining Daiei would make the employees happier.

Daiei sent a total of six directors into the Recruit group, among them the former managing director Takagi Kunio (高木邦夫). On the receiving side, however, president Ida Naotaka (位田尚隆) declared that I will carry the responsibility for running the group and for personnel; Mr Nakauchi is there as a co-ordinator, stating publicly that Recruit could rebuild itself without joining Daiei at all. The intentions of Ezoe, who had let the shares go, and of Ida, who held out for independent recovery, did not match, and Nakauchi was caught between the two. Daiei’s own interest-bearing debt on a non-consolidated basis then exceeded $3.9B (¥500bn), and it was also carrying the Fukuoka twin-dome project at a cost of $2.1B (¥260bn); the purchase was judged a financially dangerous gamble.

Debt swollen by assumption, and the constraint of staying private

The rebuilding plan set in motion in 1993 was designed to move the bad assets of the two affiliates onto Recruit’s own books. Recruit first took over $3.2B (¥360bn) worth of condominiums and land from Cosmos, holding the properties that carried unrealised losses together with a subsidiary established to process those losses, and working through the disposals. From First Finance it assumed $5.4B (¥600bn) of liabilities, leaving that company to concentrate on writing off its bad debt. Taking on close to a trillion yen of new borrowing in total, Recruit’s liabilities swelled to $12.6B (¥1.4tn).

Being unlisted, the company had no means of raising capital on the share market, and repayment could come only from operating profit in the core business and from refinancing. Recurring profit for the year to March 1998 reached $567.7M (¥74bn), but support for Cosmos and First Finance forced an extraordinary loss of $621.9M (¥81bn), leaving net profit at just $15.3M (¥2bn). Even so, over the four years to March 1998 the liabilities came down to $7.0B (¥922bn). Executive vice-president Takagi Kunio said the company expected to compress the debt by around $1.9B (¥250bn) over the next three years; First Finance carried accumulated losses of $825.9M (¥108bn) as at the end of that March.

In June 1997 Kono Eiko (河野栄子) succeeded Ida Naotaka as the third president. She had joined mid-career in December 1969 as the company’s first woman in sales, and, disliking the inefficiency of making appointments by telephone, had devised the practice of cold-calling in person; when Ida made her executive vice-president in 1994 the succession was already settled. On taking office she set out a review that would cut existing businesses not by ten or twenty per cent but by half. The group was carrying around a trillion yen of borrowings, and the task was to shift to a structure that repaid the debt out of operating profit rather than relying on property that could be sold even at a loss. New titles kept coming through this period: the travel magazine Jalan (じゃらん) in 1990 and the wedding magazine Zexy (ゼクシィ) in 1993. In 1996 it started online recruitment sites including RB on the NET, now Rikunabi (リクナビ), and in 2000 launched Hot Pepper, covering restaurants and other parts of everyday life.

Squeezing fixed costs, and a Recruit stake with no settled buyer

Recruit decided to abolish most of its welfare provisions — including family allowances, housing allowances and Shinkansen commuting allowances — by the end of December 1999. The provisions removed came to roughly $1,757 (¥200,000) per person a year, some $6.1M (¥700m) a year in total across a workforce of about 3,500, and all of it was transferred into bonuses and salary. The pool funding bonuses was raised from about 11 per cent of operating profit to about 11.5 per cent, and performance-linked pay was increased by between $105 (¥12,000) and $158 (¥18,000) a month at a standard appraisal. That the company had no labour union was among the conditions that made such changes possible.

Daiei planned to cut $1.8B (¥205bn) of interest-bearing debt in the 1999 financial year, and placed the sale of its Recruit shares at the centre of that plan. SoftBank had come to the negotiating table twice, in 1997 and 1998. In 1999 a consortium of Kadokawa Shoten, Toshiba and Sumitomo Corporation put itself forward, only to withdraw on 15 October, leaving a contest between a three-way group of CSK, Bellsystem24 and Tokyo Electric Power offering $1.3B (¥150bn) and Recruit itself offering $878.4M (¥100bn). Transfer restrictions in the articles of association meant the shares could not be sold on Daiei’s wishes alone, and Recruit was reluctant to see the CSK consortium take them.

Recruit’s interest-bearing debt stood at $7.4B (¥839bn) at the end of March 1999, and the company was asking its bank syndicate to maintain the outstanding balances. Buying the shares back would require fresh borrowing, and to the banks that could only look like moving debt from one pocket to another. The share transfer question was nonetheless settled in February 2000, and the accounts for the year to March 2000 recorded record highs in both operating and recurring profit. Revenue fell 2.8 per cent year on year to $2.6B (¥281bn), but operating expenses dropped 8 per cent and recurring profit rose 17.7 per cent to $784.3M (¥85bn). Because $742.5M (¥80bn) of the roughly $928.2M (¥100bn) needed for the buy-back was met by bank borrowing, borrowings fell by only about $92.8M (¥10bn).

Failure abroad, and taking in the staffing business

In 2004 the company took the wedding magazine Zexy and other titles into China, and withdrew within a few years. Kashimura Mio (柏村美生), who proposed the Chinese venture and led it, looking back on the reason for going in, said that China was growing economically, the number of marriages was large, and there was a hunger for information — but that it never found its feet because the company was held captive by the model that had succeeded in magazines. Recruit ended its solo overseas expansion in 2011, and that experience became the premise for the later overseas strategy built on acquisitions.

In December 2007, under president and CEO Kashiwagi Hitoshi (柏木斉), Recruit acquired 80.14 per cent of the issued shares of Staff Service Holdings, the largest temporary staffing firm in Japan, from chairman Okano Yasujiro (岡野保次郎), making it a subsidiary. Staff Service was unlisted but ranked first in the industry, with revenue of about $2.7B (¥323bn) in the year to March 2007, some 1.57 million registered staff and 5,847 employees. Recruit’s own staffing operations then had combined revenue of about $1.6B (¥191bn) and ranked only fifth, so the combination created a staffing group with revenue on the order of ¥500 billion, more than twice the size of Pasona in second place. Falsified contracts over dispatch periods had, however, come to light at Techno Service Kyushu, a Staff Service group company, so the integration also brought compliance problems with it. The year after the acquisition the Lehman shock struck head-on, and demand for temporary staff fell away sharply, above all in the manufacturing sector hit by the collapse in exports.

In July 2010 the company bought the American staffing firm The CSI Companies, beginning an overseas expansion of the staffing business through acquisitions. In 2011 it brought Staffmark Group and Advantage Resourcing Europe under its wing, gaining operating bases in the United States and Europe. At home it started the Hot Pepper Beauty booking service in 2007 and introduced Juken Sapuri (受験サプリ) in 2011. In 2008 it moved its head-office functions to GranTokyo South Tower.

A declaration of listing, and ¥100 billion for a search engine

In April 2012, after nine years, the presidency passed from the fourth president Kashiwagi Hitoshi to Minegishi Masumi (峰岸真澄), who became the fifth. At the results presentation in May, immediately after taking office, he set out the goals of being number one in the human-resources business and having half of revenue from overseas by around 2020, and at the June general meeting he announced his intention to list the company. Minegishi said that, having met a hundred and some tens of venture managers abroad, he had come to feel keenly that being accepted as a business partner required the company to be trusted, and that if we were to expand everything abroad under our own steam, even fifty years would not get us more than what we have built up in Japan. He set an investment envelope of $5.0B (¥400bn) to $6.3B (¥500bn), acquisitions included.

In October 2012 the company moved to a holding-company structure by corporate split and changed its name to Recruit Holdings Co., Ltd. In the same month it acquired 100 per cent of the shares of Indeed, the American job-search site. The acquisition was driven by Idekoba Hisayuki (出木場久征), then thirty-six and newly an executive officer, who had come to feel the limits of a paid-listing model in which salespeople gathered the job openings. Indeed at the time covered more than fifty countries in twenty-six languages and was used by some eighty million people a month. The acquisition price was not disclosed, though press reports put it at about US$1 billion.

After the acquisition Idekoba moved to Austin, Texas. His TOEIC score at the time was 400 and he could barely hold a conversation in English, yet a year later he became chief executive of Indeed. Chris Hyams, who had been at Indeed since its early days, recalled the period of the acquisition: I was one of the people who said, well, I guess the fun times are over. The first thing the two management teams exchanged was a discussion of where things would stand in twenty and thirty years, and Hyams said that coming under Recruit made it possible for us to think long-term and invest in bold challenges. On 16 October 2014 Recruit Holdings listed on the First Section of the Tokyo Stock Exchange, opening at ¥3,170 against an offer price of ¥3,100 and closing at ¥3,330.

The Idekoba era, and parent and subsidiary fused by AI

Minegishi explained the purpose of listing as improving the diversity of financial strategy, the transparency of management and the company’s credibility globally, and said he expected investment capacity on the order of $6.6B (¥700bn) over the following three to five years. Acquisitions continued after the listing: Peoplebank Australia and Chandler Macleod Group of Australia in 2015, and USG People of Europe in June 2016. In June 2018 it bought Glassdoor, the American company-review site. At home it rolled out Air Regi, Air Pay and Air Shift, a series of back-office services for small shops and restaurants. In April 2018 the businesses were reorganised into three reporting units: HR Technology, Matching & Solutions, and Staffing.

In April 2021 Idekoba Hisayuki became president and CEO. He runs the company from the United States and says this causes no inconvenience, since even before Covid, essentially all meetings were online. In the recruitment market under Covid the number of job postings ran some 20 per cent above pre-pandemic levels, in Europe and America above all, and many companies remained unable to hire the people they needed. Idekoba identified as the problem the fact that, of the billions of job applications made every year, around 90 per cent never receive any reply from the employer. The company already had more than a thousand kinds of test available, and he argued that by having machines learn from the results and the answers given at interview, together with how well the person went on to perform after being hired, recruitment could be made scientific and efficient.

Consolidated revenue for the year to March 2024 was $22.6B (¥3.42tn), with operating profit of $2.7B (¥403bn) and net profit of $2.3B (¥354bn). Revenue, $11.3B (¥1.2tn) at the time of listing, had grown to ¥3.4 trillion, and market capitalisation, then ¥1.8 trillion, stood at about ¥18 trillion as of January 2025. In January 2024 the nationwide roll-out of Indeed PLUS began: when a company posts a job opening it is distributed automatically to whichever job sites best fit the requirements of the vacancy, reaching up to 70 per cent of the users of the main Japanese job sites. From the 2025 financial year the domestic human-resources operations are to be merged into the same reporting segment as Indeed. In the year to March 2026 the HR Technology business had revenue of $9.2B (¥1.45tn), closing on the $10.6B (¥1.68tn) of the staffing business.