2009 in review and the year ahead
Richard Hayward
December 16th, 2009
What do good economic times and bad economic times have in common? They don’t last.
For almost all recruiters 2009 has been a tough year but as we head toward our Christmas functions and our holiday season the landscape looks much better than at the same time last year.
The solid performance of the Australian economy throughout the year in the wake of the Global Financial Crisis provided at least a better environment for recruiters than most people anticipated. The average Recruitment Consultant trying to find Permanent roles to fill might not have always seen it that way however. During the year Permanent positions were hard to come by in most sectors. Temporary positions measured by hours worked were also down substantially and did not provide a means of shifting revenue sources for most recruiters, try as they might.
Looking at performance measurements in more detail, courtesy of the RIB Report, for the June quarter 2009 we see that Gross profit from Permanent placements fell by between 40% to 50% on the previous Financial Year. From the second quarter of the 2009 Financial Year (marking the “commencement” of the Global Financial Crisis) there were two successive quarters of substantial decline in both Permanent and Temporary placement revenue. By the June quarter RIB Report respondents experienced stabilisation for a quarter on Permanent placements and a rise in September. By June Temporary placement demand (hours worked) saw a 15% rise on the previous quarter and then continued growth in September. Not surprisingly for the 2009 Financial Year recruitment consultant productivity, measured by Gross Profit contribution per dollar of salary, fell by 17% on the previous Financial Year. That it wasn’t more reflects the actions taken by managers and owners to bring their cost base under control in the light of the economic climate.
While challenging, for recruiters operating in the Australian market there was a much better environment than in many parts of the world. US recruitment industry data noted in the Palmer Forecast™ showed that by the June Quarter Temporary placement demand had its 9th consecutive fall on the same period a year earlier; a decline of 24.1% for the quarter. All sectors experienced a decline in Permanent employment and Health Care recruitment which usually only flatlines in downturns actually experiencing its largest decline ever (20%). The Palmer Forecast estimates that the Staffing industry in the US experienced a US$25 – $35 Billion slump in revenue during the year.
However, toward the end of the even the US market was seeing signs that the worst of the recession was over with a stabilisation of job loss numbers.
How did owners and managers in Australia respond to the downturn in 2009? Both anecdotally and from data such as RIB it seems that in most cases there was decisive and timely action by managers to reduce costs and adapt to the changing market conditions. This was through actions such as reducing headcount, staff working hours, rent and non essential activity. It is noteworthy to mention the number of companies reporting staff volunteering to reduce their paid hours in order to cut costs but still maintain the jobs of their colleagues. In many cases this seems to have worked well for employer and employee allowing employers to retain skills and experience and be ready for the upturn with sufficient resources on board. There is evidence to suggest that this is exactly what is happening now as the economy picks up.
Tough decisions were made in order to keep businesses operating and its thought that up to 30% of individual recruitment consultants were no longer working in the industry by June.
So for Australia while our circumstances were less gruelling the industry had its share of pain.
Not surprisingly Merger and Acquisition activity was down in 2009. Early in the year the few buyers around were mostly looking for revenue streams from Temporary “books” in distressed sales. Publicly listed Recruiters were nursing much lower share prices and had little capacity for acquisitions. By the latter part of the year, for some this had changed and the likelihood is that activity will be more positive in 2010.
The year ahead.
Predictions about the economy are essentially educated guesses as unexpected events will make their impact. The Nobel Economic prize winner Paul Samuelson once aptly said “economists have successfully predicted nine of the last five recessions”!
However, increased business and consumer confidence as expressed in media reports along with government economic forecasts gives the Recruitment industry much better prospects for 2010. Recruiters should expect more activity in both Permanent and Temporary placement activity from now and throughout 2010. The need to manage costs and focus on Consultant productivity will not change, a recovery that returns to the “boom years” will take a while.
Some sectors will be more active than others as our economy is more complex and globally interrelated than ever before.
Companies that have remained cashed up or who are capable of raising capital more easily will again look to expand by strategic acquisition and consider regional and sector opportunities to add to their existing capabilities. Potential sellers who deferred taking action in late 2008 and 2009 are already thinking about their options in 2010.
2010 does look better than 2009 and those companies who have successfully re-structured their business to manage through the downturn will be in a stronger position to take advantage of any upswing.
HHMC wishes Recruitment Extra readers all the best for the Christmas season and for 2010.
Richard Hayward is a Principal of HHMC Australia, a specialist Merger & Acquisition consultancy focusing on the Recruitment Industry. Richard has an extensive background at senior levels in the Recruitment sector having worked with international, national and smaller local companies for over a decade before joining HHMC. His clients, as either buyers or sellers include companies ranging from blue collar industrial, ICT, banking & finance, accounting, business support, and operations recruiting businesses.
This article was posted on Wednesday, December 16th, 2009 at 8:23 am.