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Slowdown hits staffing firms

By Seema Sindhu in New Delhi
December 19, 2008 13:32 IST
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Freeze on hiring in the corporate sector has cast a chill on the recruitment companies' own operations. While senior executives at major executive search firms deny having reduced their staff strength, they admit that retrenchment could begin if the situation does not improve next year.

A Sudarsan, vice president, sales and marketing at Expertus HR (a wholly-owned subsidiary of US based Expertus Inc), says: "In the last six months there has been a 40-50 per cent reduction in executive search business. But we, at Expertus, have not reduced our own staff. If the situation becomes worse next year, we might have to lay off people."

At TeamLease Services, though, manpower has already been rationalised. "Like all performance driven companies, we believe that tough times call for tough decisions," says Sampath Shetty, vice president at TeamLease. He claims that the company's revenue has dropped by 25 per cent and it has asked its non-performers to leave on the basis of their performance management reports. Having said that, "we continue to hire quality senior people in our teams," according to Shetty.

Yet there are HR firms like Iconium Consulting Group which are not handing out pink slips. Instead, the company has taken the salary cut route. Paul Tangirrala, managing director at Iconium, says that the back-office and operational teams have taken a meagre cut in their salaries. Besides, miscellaneous expenditure, including power and telephone bills, has been brought down by 35-40 per cent.

Given the decline in business, companies are also focusing on improving employee productivity. "Earlier we used to get 150-200 people requirement in a month which has now halved. Obviously, we are able to spend more time on each requirement improving the strike rate in our recruitment," says Sudarsan. At Iconium, the lean period is being utilised to train the average performers to turn them into the "best productive force," says Tangirrala. TeamLease's Shetty is also focusing on "re-skilling" and "up-skilling" his people. "We have recalibrated our work force so that we are prepared when the market turns around," he says.

However, it may be a while before the market really turns around for these recruitment firms. A Manpower Employment Outlook survey for the first quarter of 2009 says that Indian employers are reporting a much slower hiring pace compared to the last quarter. Employers in different industry sectors and regions have reported a considerable decline in anticipated hiring activity for the first quarter of the New Year.

However, the optimists remain unfazed. They claim that some new opportunities have offset their losses. E Balaji, CEO and director, Ma Foi Management Consultants, says that if recruitment has slowed down in some sectors (such as automobiles, manufacturing, real estate and retail), others like pharma, healthcare, life-sciences, non-conventional energy are hiring much more. "These sectors were struggling to get good people earlier as most engineers were joining IT and telecom. Now they see it as an opportunity to get the right talent as companies in IT and ITeS defer hiring," says Balaji.

There is some new business too. After the collapse of the big investment banks in the US, NRIs are looking for career opportunities back home. That has cushioned the impact of the slowdown in the domestic recruitment market to some extent. Besides, there is an increase in demand for temporary staff.

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Seema Sindhu in New Delhi
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