Managing a recruitment business through the recession

Hays CEO Alistair Cox on how he's had to re-shape the business in the teeth of the recession.

Last Updated: 31 Aug 2010

Of all the businesses to be running in the last year, permanent recruitment must have been one of the toughest. Take Hays: last quarter the recruitment firm saw fee income plunge by a third, with permanent hires down a painful 50% year-on-year. So it’s been a difficult first two years for CEO Alistair Cox, who joined (from outsourcing firm Xansa) in mid-2007 just as the economy was going south. Ahead of its latest results next week, MT caught up with him to get the managerial inside track on his major restructuring job – which has included cutting headcount by a quarter in the last year alone...

With the market in the doldrums, Cox says cost-cutting was the first priority – and for recruitment businesses, that basically means people. ‘You have to deal with the headcount to deal with the cost base,’ he says. One advantage he did have is that the standard consultant pay model, which generally involves a low basic salary plus a large commission element, provides a built-in hedge for the bad times: if consultants aren’t placing people, your salary costs come right down. But he also introduced a hiring freeze and started moving people out of the business – some through the standard churn you get in recruitment (when people realise that it’s actually quite a slog) and some through performance management. Cox managed to shed enough staff this way to avoid a big redundancy programme, which has presumably saved him a bit of money.

But it’s not just about cutting costs, he insists. It’s also about (selective) investing: ‘You work out where the areas of resilience are, and transfer resources there’. As well as recession-proof roles like compliance and insurance, public sector recruitment has apparently held up pretty well – partly thanks to stressed private sector employers looking for a more secure job (a Hays survey out today suggests that 63% of public sector employers have noticed an increase in applications). Teaching is one such example, and Hays has built up a thriving business providing supply teachers. Cox reckons this will survive even if public spending is slashed: ‘Cut front-line education at your peril,’ he says. ‘If we’re not equipping our kids for an increasingly competitive world, we’re mortgaging our future as a nation’. He’s also opened up overseas offices in India and Russia, two markets that he thinks will be ‘massive’ in five years time.

He’s been pursuing a slightly different strategy, too. Instead of dealing with different bits of companies piecemeal, Hays now aims to provide big corporates with a ‘portfolio of expert services’ – in other words, it looks after their recruitment needs across the board through a single platform (backed by a new IT system). The idea is that companies get a volume discount on rates, while Hays can hoover up more market share. ‘We’ll come out of recession a smaller business, because demand has gone down so much,’ he admits. ‘But we’ll be a more dominant one in our space.’

Then there’s training, where Cox claims to have doubled investment. He says there were two areas where Hays needed to raise its game: selling in a recession (since most of its young-ish staff hadn’t experienced one before) and mastering a more complex sell – building deeper and broader client relationships, making processes more efficient, and so on. He’s also invested in marketing, where he freely admits that Hays needed to do a better job. ‘If you want to be the leading company at what you do, you need to have the market-leading brand. And today, I’m not sure that we have that.’ So he’s been busy hiring people into the marketing function who might be able to change that.

But will all this work? City analysts seem to think Hays has done pretty well, all things considered – although with unemployment still rising, it’s likely to be an exercise in damage limitation for a while yet. Cox himself remains pretty downbeat: ‘Personally I can’t see any green shoots,’ he told MT; 'we're still in 'batten down the hatches' mode'. So we probably shouldn’t expect too much from next week’s results...

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