Posted by Hannah Erdman Posted on
By Julie McCoy
The consensus is that things can’t get any worse in 2010; they can only get better. The economy won’t completely recover this year, but most staffing executives expect it to improve and are starting to see some light at the end of the tunnel.
Coming off an extremely tough year, many executives say 2009 was the most challenging time they have experienced, as the longest and deepest recession since the Great Depression caused revenue declines of 25 percent or more.
Yet staffing company executives are optimistic about 2010.
“Clearly, we believe that the worst is over,” says Jonas Prising, executive vice president of Manpower and president of Manpower’s Americas operations. “The question now is, what does the comeback look like? There is nothing to tell us that we would see a roaring comeback, but [instead] moderate growth.”
Staffing execs shared some of their plans and goals for 2010, challenges the industry will face, trends they foresee and what they plan to spend money on this year.
What’s on the radar?
Bill Stoller, a founder of Express Employment Professionals, says his company will focus on sales, strengthening its existing offices, opening new franchises and hiring better staff than ever before.
“I am very optimistic about next year, especially coming off such a disastrous year as 2009,” Stoller says. “Our clients and prospects, for the most part, are much more optimistic and are looking at a better year as well.”
Spherion CEO Roy Krause says his company plans to grow the professional staffing side of its business, which includes three divisions: The Mergis Group, Technisource and SourceRight Solutions. Currently, professional staffing accounts for about 43 percent of Spherion’s business, and the remainder comes from general staffing. The goal is to eventually be at 60 percent professional staffing and 40 percent general staffing, Krause says.
Another priority for Spherion will be hiring new people.
“We will do it proportionally as gross profits increase,” Krause explains. “We have plenty of room to expand. I hope we fill up every open seat we have over the next year. It would just be wonderful if that happened.”
Kforce CEO Dave Dunkel says he expects all four of his company’s divisions—technology, finance/accounting, health care/life sciences and government—to grow this year.
Mike Weinholtz, CEO of CHG Healthcare, says his company anticipates double-digit growth in its locum tenens and permanent placement divisions and will add staff in both of those units.
“We believe we can grow again in 2010 with focused execution even in a tough environment, in particular with our favorable business mix, which is about 70 percent physician-focused,” Weinholtz says. “We kind of like our position right now.”
Weinholtz says 2009 was the most challenging of his 23 years in the staffing industry.
“We had never seen a recession of this magnitude before. We really had to change the way we looked at our business.”
Bill Yoh, chairman of Philadelphia-based Yoh, says making sure customers are aware of all the services and skill sets Yoh offers will be a priority this year.
“Many of our customers only know us for one line of business—IT or engineering—yet they may use contingent labor providers for skill sets in other areas such as health and life sciences as well,” he explains. “We have a long history in many different lines of business and are actively communicating these capabilities to our customers.”
Another focus for Yoh this year will be to provide customers with a staffing solution that best fits them.
“Some companies want to just receive staff augmentation services, and they have little process in place,” Yoh explains. “Others may prefer an enterprise solution with technology and service level agreements. Our goal is to deliver the solution that best fits the culture and desires of the customer.”
Jim Humrichouse, president of Dallas-based Pinnacle Technical Services, says his company will focus on people and technology, which have always been its top priorities. He expects this year to be “a growth year” for his company.
“We’re going to start off with a lower base and then grow from there,” he says.
Scott Ragusa, president of contract businesses for Waltham, Massachusetts-based Winter, Wyman Cos., says his firm will hire new staff and continue to train and develop staff. Winter, Wyman also will grow its managed account program, a division focused on managed services that will service a larger VMS-driven business.
Amy Langer, a partner in Minneapolis-based SALO with John Folkestad, says her company will focus on keeping its existing clients and landing new ones. SALO also will grow its new division, Lawgic, which places attorneys.
“We intend that it will take off,” Langer says. A growing company, SALO also plans to relocate to a new building that will provide more space. “Overall, we’re really excited [about 2010],” Langer says. “We feel like there’s a lot of opportunity. We’re well positioned. I think we’re very energized about what we see coming up.”
Patti Penny, founder and owner of Springfield, Missouri-based Penmac Staffing, says her company is beginning the new year with a new Web site. Penmac also will focus on growing its two new divisions, Pemed and Pentech. Penmac also plans to step up its marketing efforts with a direct mail and phone campaign, Penny says, noting that her company is trying to blitz the Kansas City, Missouri, market.
Gary Nelson, chairman of The Nelson Family of Companies, says his company—which anticipates 5 to 10 percent growth this year—will concentrate on controlling expenses and continuing to improve competitive market share. Many of the company’s competitors have downsized and closed offices, which provides an opportunity to take that market share, Nelson points out. Additionally, Nelson Family will continue to focus on expanding its compliance consulting service and payroll services.
“Those are two areas we’ll focus on in addition to staffing,” Nelson says.
Amar Panchal, CEO of Akraya, a Sunnyvale California-based information technology staffing firm, says his company received GSA certification in October and plans to start providing staffing services to the federal government this year.
The federal government is a good area to be in right now, Panchal points out.
“They are definitely spending a lot of money,” he says. “We’re very excited about this initiative, and we think it’s very promising.”
Akraya, which offers solutions that go beyond staffing, plans to do more of that this year.
Doug Firestone, CEO of Arcus, a Hummelstown, Pennsylvania-based technology staffing firm, says his company will continue to focus on training and grow its Costa Rica office.
“We’re doing some really cool, cutting-edge things down there,” he says.
Arcus also will do more videoconferencing and social networking, Firestone says. In 2009 Firestone hired a social media strategist who will assist with social media-related issues in 2010 and beyond.
Mark Weinstein, executive vice president of Atlanta-based firstPRO, says his company expanded its Philadelphia office in 2009, and the plan is to further expand it in 2010.
FirstPRO also is looking at opening additional offices this year, including one in Washington.
“It’s just a hot, hot place to be right now,” Weinstein says.
Matt Schubert, president of Northbrook, Illinois-based Paramount Staffing, which is exclusively in industrial staffing, expects his company’s revenue to be up 10 to 15 percent in 2010 as the industrial market begins to bounce back and new clients added in 2009 bring in a full year of revenue.
Paramount also hopes to expand its on-site model with new and existing clients in secondary and tertiary markets.
“We have gained valuable experience in establishing a market presence within 30 to 45 days for areas [in] which we do not have offices already,” Schubert says. “We are optimistic [about 2010] because we have seen our clients pare down to such low levels of staffing that any type of demand will increase usage. In addition, the employment numbers continue to improve monthly, and this trend should continue.”
One challenge those in the staffing industry will face this year is that while the economy is expected to improve, it’s going to be a slow process and there won’t be a full recovery this year.
“The recovery will likely be slow and almost jobless, because even though GDP will likely grow, we expect unemployment to also grow—probably above 10 percent in the first quarter—and possibly remain in the 8 to 10 percent range for a year or more afterwards,” says Yoh’s Bill Yoh.
One thing that’s particularly challenging is there are so many people who are out of work right now, but their qualifications and backgrounds aren’t a match for the jobs that are available, says FirstPRO’s Weinstein.
“The second quarter of 2010 will be flat to slightly up,” Weinstein says. “The back half of the year should see significant hiring.”
Another challenge will be the increase in unemployment taxes.
“The staffing industry in general can’t accept—there isn’t enough room in our margins—to deal with the rise in unemployment taxes. I think it’s a major issue for the industry,” Spherion’s Krause says.
Staffing companies will need to tell their clients about the increase and that it needs to be passed on to them, says Manpower’s Prising. If it’s not passed on, there could be significant re-margining of the industry, he points out.
“It will be crucial for the industry to pass these cost increases on to clients,” Prising says. They are not a profit-generating increase. This is not a one-time event. It’ll happen in 2011 and 2012. We’ve had this in past recessions. The industry by and large has been good about passing it along, as we should. We believe it has to be passed on.”
Yet another challenge is that clients want more solutions and services but at the same time are demanding lower prices, says Joanie Ruge, senior vice president of Adecco Group North America.
“The challenge is, how do we deliver the solution at a lower price point and so that the customer is still profitable for Adecco,” she says.
With clients wanting more for less, making sure gross margins don’t slip will be a challenge, particularly for staffing firms with Fortune 500 clients, says Pinnacle’s Humrichouse.
“The way to fight margin erosion is to go after midmarket clientele,” he says. “Every staffing firm has to find clients that appreciate the combination of services they provide. Pinnacle focuses on larger clients where margin compression is much more of an issue.”
Another challenge will be the federal government’s restriction of H1-B visas, says Arcus’ Firestone.
“We have clients that are restricting H1-B visas. It’s going to become a problem,” he says. “I’m not sure how we’re going to overcome it. At the end of the day we’re going to see more offshoring and nearshoring. Our clients are going to need resources, and we’re not going to be able to provide technology resources.
“They’re going to go overseas. I don’t know where else they can go.”
Diversity-focused hiring is a growing trend, says firstPRO’s Weinstein, noting that more clients are placing an emphasis on and valuing increased diversity within their workplace at every level.
“An organization needs to be a reflection of its constituents and stakeholders,” he says. “It’s been a trend we have seen and it is continuing to expand. Clearly, those companies who are more diverse are outperforming those who are not, both in profit and in the ability to attract the best and brightest. Many have a strong appetite for diverse candidates. That bodes well for our firm, being a diversity-centric, woman-owned firm. It bodes well for the world.”
Yoh’s Bill Yoh says many companies will use 2010 as an opportunity to begin projects they had put on the back burner for the past couple of years. “As this happens, there will be an increase in the demand for contingent workers,” he points out.
Also, the use of managed services will continue to grow this year as firms “monitor cost, process and quality at an expertise level,” Yoh believes.
Recruitment process outsourcing also should grow significantly in the second half of the year, Yoh predicts.
“Many companies have gutted their HR operations and no longer employ the sourcing and recruiting expertise they once did,” he says. “As the demand for full-time hires returns, many will look to outsource these functions through an RPO solution.”
Additionally, human resources will continue to play a greater role in contingent labor decisions, Yoh says.
“Most HR executives are now charged with a responsibility for comprehensive workforce strategies, and contingent labor will be a key part of this going forward.”
There also could be an increase in mergers and acquisitions by large staffing companies that are looking to expand their geographic footprint and line of business, Yoh believes.
While no one knows for sure what 2010 will bring, one thing is certain: Most people in staffing expect it to be better than 2009. And they’re looking forward to the challenges.
“We’re hopeful for a better year,” Spherion’s Krause says. “We’re seeing some general economic recovery. … We’re seeing improvement across the country, pretty broadly. … We’re starting to re-engage with clients that haven’t bought services in a while.”