Outplacement expert sees pause in U.S. job cuts
NEW YORK (Reuters) - Right Management, the No. 1 global outplacement firm, is seeing a pause in the job cuts that drive demand for its services, but it is too soon to tell what comes next, the chief executive of the Manpower Inc (MAN.N) division said on Friday.
"We hit some pretty high numbers, there is clearly a pause right now and they have stabilized," said Owen Sullivan, Manpower executive vice president and CEO of both Right Management and the Jefferson Wells accounting unit.
"There is a direct corollary between the volume of business we do and the slide in economic numbers," Sullivan told Reuters. "The flows in terms of outplacement candidates really peaked in the February, March timeframe."
U.S. employers have cut millions of jobs since the start of the recession early last year. The unemployment rate, at 9.4 percent, is the highest since 1983, but the pace of job cuts slowed in May, with 345,000 jobs lost, fewer than expected.
That has fueled speculation that a jobs recovery will gain traction in coming months.
Sullivan said many clients are now questioning whether they have cut enough jobs, with others asking if they have cut too deeply. They are hesitant to predict increased hiring this year, with most estimating it will pick up in the first quarter of 2010.
The key question is: "Did the rightsizing take place at the right numbers? If so, we'll start seeing outplacement numbers trail off to more normal ranges. If not, there could be more outplacement activity in the latter part of the year."
Outplacement accounts for about 60 to 65 percent of Right revenue, with the rest comprised of the talent management business, where services include strategic planning, executive coaching and employee assessment.
Demand on the talent management side of Right is softer than in prior years, but remains "healthy," Sullivan said, with employers increasingly anxious about positioning their business for after the downturn.
The talent segment is traditionally more cyclical, but is supported by long-term trends such as a looming shortage of skilled workers worldwide; shifts in employee attitudes toward more independence; and changes in technology, including the rise in social networks. Recession does not change the need for tools to manage such long-term issues, Sullivan said.
SCALABLE BUSINESS
Outplacement helps employers set their workforce strategy and assists laid-off workers in finding new jobs. It helps employers communicate details about job cuts, and the reasoning behind them, to both the workers who are losing their jobs and those who remain behind -- which is crucial for morale.
As job losses slow and companies start adding workers, demand for outplacement services will decline, albeit with a lag, he predicted. Demand typically softens in the third quarter and strengthens in the fourth.
Right Management is able to scale its business by using a network of adjunct career counselors, who are hired for stints as short as three months. As demand wanes, it employs fewer such adjuncts, helping protect margins.
Right reported a 31 percent sales increase in the first quarter to $136 million, and its operating margin more than tripled to 21.4 percent. Analysts have credited the unit with keeping Manpower profitable in the first quarter, when the global jobs downturn hit its other segments. Continued...
