CPL well placed to weather the storm in recruitment market

Mirroring the economy generally, CPL's financial performance during the year to June showed bumper results up to December and then, as things began to nosedive nationally, a sharp drop from January/February of this year.

"I was surprised at the speed of the change in the economy overall," acknowledged chief executive and founder of the stock-listed recruitment firm, Anne Heraty. "It obviously impacted on our results."

She did see early warning signs on the horizon to some extent, however. "The construction sector began to tap out in late 2006 and early 2007," she said. Then in 2008 the pressure began to extend to other sectors.

It's not going to end there. While overall sales were €257.6m in total, CPL's results showed net fee income dropped 18pc in the second half of the year, with one analyst predicting a possible drop of one-third in 2009 and a 63pc dip in share price.

Currently the live register shows 235,100 unemployed in August, up from 161,900 at the same period last year -- a show-stopping 6.1pc unemployment rate.

Unemployment

"Most people were not forecasting that unemployment would be over 6pc at this point," Ms Heraty said. "I notice that most forecasters have revisited their estimates and say unemployment could go to 7.5 or 8pc by 2010. Hopefully they're being pessimistic and that forecast is too high."

While she admits to being somewhat taken aback by the rapid rise in jobless numbers, Ms Heraty maintains that the mobile nature of the workforce and its willingness to "go to where the jobs are" could mean that the live register is not driven up quite as high as experts fear.

"People now are prepared to move to where the work is, it's a much more fluid market," she says. This will be cold comfort though, to those forced to go elsewhere to chase jobs.

But recruitment here is being pared back to essentials by many firms. "There will always be skills shortages and every company's going to have skills gaps from time to time, that will still go on, but predominantly recruitment is now about core staff rather than expansion.

"Typically in a downturn, companies will stop or slow down hiring staff. Then they move into a very cost conscious mode and the next move is they look at contract staff they don't need and finally they get to their own core company staff. As things improve they discover they've cut too much and begin to hire back again. That is the way previous downturns have gone and that's the way I would expect this one to go."

She rejects the proposition that CPL's business has suffered because clients are cutting back on using recruitment firms.

"No, it's because they are recruiting less, full stop," she says. "It's actually because they're not creating the jobs. In many ways we are able to deliver the recruitment service for a company much more cost effectively than they would themselves."

But if hiring is dwindling so markedly, how does a large recruitment company plan to survive? "I do think it'll be a difficult year in 2009," she accepts, "but there'll be more opportunities as well. In the last downturn in 2001, it was a great opportunity to plan and that's what we did at the time. That's an opportunities for us, actually, as the market tightens and competition comes under pressure."

Growing CPL's own talent base, and sourcing the right recruiters is always a tough task. "Service companies are largely people-based and the way you drive shareholder value is by having real talent."

Despite the recession, CPL has its sights fixed on acquisition. "For the past number of years the majority of our focus has been on organic growth, particularly at an international level, but what we would do now is back that with acquisition."

CPL is on the hunt for recruitment companies that represent good added value for its books, possibly in sectors where it doesn't currently have presence. This is as likely to take place abroad as in Ireland.

Already it has presence in the UK, Barcelona and several Eastern Europe locations. The UK has not been a great performer, but mainland Europe office setups are doing well, Ms Heraty said.

"The expansion abroad is all local recruitment for the local marketplace and we're forging ahead with that. It's worth 5pc of our company. You know from a standing start it's quite a good result, and we would expect that to be higher next year.

"We're now well spread with a number of really solid bases in a number of sectors. Even by next year I would hope we would have a much larger presence internationally."

Like most companies CPL's own workforce has become very international, and it has capitalised on this in its expansion plans by backing managers who have worked in its Irish business but now want to return home to open local CPL offices.

Returning to the wider recruitment business, she sees some sectors holding their own.

"You can drive value through IT, so I'm not surprised it is healthy. Also the IDA seems to be having a really good year in terms of attracting Foreign Direct Investment. Ireland seems to be developing quite a reputation in the computer gaming sector and there are quite a number of both indigenous and multinational companies here. There is also very good work coming in the area of higher-value call centres at second and third level, providing more complex support. While finance is tough in certain parts, areas such as internal auditing, accounting, financial controller, financial accounting are performing well."

While she sees the knowledge economy as important, she emphasises the need for upskilling in the labour market at every level. "The people that are under pressure are those working in the vulnerable industries who don't have the skill sets needed for the future."

She rejects the suggestion that commission at CPL must be feeling the squeeze, arguing that the company keeps commission down and costs keen by improving efficiencies. "While margins are always under pressure, over the last five years our fee base didn't go up substantially, it held steady."

Ms Heraty is the only female chief executive of an Irish listed company. "It's hard to call why it is," she said.

"There's no single point. I see companies that have worked hard to do everything they possibly can to recruit professional women in the workforce, and then I've seen people make choices [ie the choice to stay at home and with their children] -- that's one reason.

"Isn't it wonderful that people can make those choices in the workforce, to be able to work full-time or part-time?"

Gender

In the long run, she says, both genders will look for family friendly approaches from their employers.

She doesn't see further legislation as the route to crack the glass ceiling.

"Too much legislation can drive the exact opposite of what's intended.

"But if you look at the male-female balance coming through universities and colleges, particularly on courses like science and engineering, finance, 50pc of the intake is going to be female and the employer is going to have to think 'how am I going to keep these people?'"

She doesn't expect redundancies at CPL any time soon. "You can never say never, but hopefully we would use this as a time to hire.

"Trends in employment are only visible in the six-to-eight weeks that jobs are registered with CPL by clients, ahead of hiring."

The rest is up to the wider economy. But, she says: "The best way to manage your people costs is to recruit better."

Taken from independent.ie

Posted: 11 Sept 2008 at 04:01 pm

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