Despite the slowing economy, more employers are requesting proposals for recruitment process outsourcing services. The CEOs of Hudson Highland Group and Spherion commented that RFP activity and the new business pipeline for RPO deals remained strong during each company’s second quarter earnings conference call.
Both CEOs also acknowledged that some existing RPO customers have ceased hiring or have opted to take recruiting back in-house, causing a decrease in RPO revenues for both companies during the recent period.
Despite what he called a severe pullback from two clients, one in telecommunications and the other in the airline industry, Spherion CEO Roy Krause said the company will continue to invest in RPO, adding that while proposal activity has increased, it’s taking longer to close new deals.
Jon Chait, chairman and chief executive officer for Hudson Highland Group, said that so far, the company’s 2008 revenues have been bolstered by a strong global economy which offset declining demand for staffing services at U.S. customers. Now, he says the slowing economy appears to be spreading, most notably to parts of the U.K.
Chait also noted that the current economic cycle differs from prior recessions, resulting in a change in many of the classic recessionary patterns experienced by staffing firms. In previous recessions, economic contraction led to a recession, which resulted in more full-time employee layoffs, reduced demand for direct-hire placements, and finally a reduction in temp workers later in the cycle. The current cycle is similar to the 1995-1996 era, where slower economic growth produced an initial reduction in temp workers and slower direct-hire decision processes, but not the large numbers of layoffs or the recessionary decrease in permanent hiring activity. He said that skill shortages are continuing to fuel the demand for full-time workers in specific jobs and industries; however, candidates are reluctant to change jobs.
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“We see candidates exercising caution,” says Chait. “They are wary of being the last one in the door and then the first one out, if things get worse.”
Both companies also announced recent SG&A cuts in response to the weakening economy.