Recruitment industry set to struggle in ‘09

By Lucy Craymer and Niko Kloeten, NBR - 13th February 2009

Two recruitment firms have closed their doors in the past three months and other recruiters have downgraded their financial forecasts as the job market weakens.
IT recruitment firm Agility Group went into receivership in January, while IT temping and recruiting company BCG decided to go into liquidation at the beginning of December.
Jacqui Barratt, the New Zealand director of the Recruitment and Consulting Services Association, says that the recruitment industry is like all sectors – companies that were professional and had good practices would do well in hard times while others would struggle.

“It’s not about the size, it’s about the performance of the company,” Ms Barratt says.
But she adds that some of the big recruitment firms have had to downgrade their financial forecasts considerably in recent weeks.

She says the recruitment companies that will suffer most will be those who only focus on permanent placement because companies will now be employing more contract or temporary workers.

“People who have a variety of services will be better off,” she says.
She says it is important that recruitment companies manage their cash flow and chase up firms that do not pay on time.

Kelly Services country general manager Steve Kennedy echoes Ms Barratt’s advice about recruitment companies offering a variety of services.

“Some recruitment companies have fallen over,” he says. “If you’re 100% tied up in recruiting permanent staff you’ll have to navigate very carefully through the next 12 months.

“In 2009 and beyond companies will be looking more favourably towards temporary recruitment.”

Strategy Recruitment director Barry Brown expects to see at least some sort of rationalisation of the recruitment industry this year, similar to what has happened recently in the property and finance sectors.

“After the sharemarket crash in 1987 there were a lot more specialist recruiters. Now while I don’t expect things to go back to how they were back then, I do think there are too many people and companies in the recruitment industry,” he says.

And his advice for recruitment companies heading into a tough year is: focus on what you do best and don’t branch out too much into other areas.

“Stay focused on the part of your business that is going to give you the dollars you need.”

Frog Recruitment director Jane Kennelly says these are “interesting times” for the recruitment industry.

She says that in December, a business development role attracted 207 responses in just 48 hours, and estimates the response would have been between five and 20 applicants four months ago.

“In a matter of days we moved swiftly away from the half-decade shrill cry of ‘it’s all about talent shortages’ to overnight experiencing a dramatic upswing in the number of candidates looking for work.”