Despite The Numbers, This Is A “Different” Kind Of Recession

Nov 11, 2008
This article is part of a series called News & Trends.

What’s worse than losing the presidential election? Winning it three days before the unemployment rate jumps to 6.5 percent after the U.S. economy loses another 240,000 jobs.

That bit of bad news was released by the Bureau of Labor Statistics confirming fears that the economy is in a recession that is only deepening.

Yet for the recruiting industry, Jeremy Eskenazi, founding principal of Riviera Advisors (profile; site), says, “I think this whole recession is different than in the past.”

During tough times in the past, when companies started laying off, among the first to go were the recruiters. “Companies thought recruiters were nice to have, but they axed them right away,” Eskenazi told us. Now, he says, “I have not seen a recruiter get fired first.”

What’s different is that employers have more of a challenge hiring workers. Even while some workers are laid off, there are always some positions that have to be filled. These are the jobs that generate revenue or are otherwise critical to keeping the company operating.

“It’s a much harder thing to do today to get people to quit their job and move,” says Eskenazi. “Recruiters are professionals at doing that, and employers know they need them.”

He cites the case of one large bank whose recruiting leader told him at a recent STARoundtable meeting that the bank needs good recruiters more than ever now because of the negative publicity affecting the industry and her bank in particular.

Terry Terhark, CEO of The RightThing (profile; site), echoed those comments. “I’d caution all companies not to wholesale reduce their recruiting,” he warns, even though recruiter layoffs will mean more more work for The RightThing, one of the leading RPO firms in the U.S. In fact, he says, that is already happening.

“We have more RFPs in house than ever,” he told us, referring to the volume of inquiries from companies that want The RightThing to take over part or all of their recruiting operation. Terhark said the company had its best third quarter ever and is on track to have an even better fourth quarter. This is coming despite a slowdown in the hiring by the company’s clients.

“Our clients are like all the other companies out there,” Terkark explains. “We’ve seen a flatness to a decline (in hiring). Some are down 10, 20 percent in their hiring.”

On the other hand, pharmaceuticals and technology firms are hiring, he says, but convincing talent to change jobs is getting harder. “We’ve seen an increase in the reject rates,” Terhark says, adding, “In a tough economy, people tend to hunker down and stay in their jobs if they are stable.”

Although Terhark says AIRS, which The RightThing acquired earlier this year, “has performed exceptionally,” and demand for the AIRS software hasn’t slowed, other vendors haven’t been so lucky. Taleo (profile; site), which beat Wall Street’s quarterly earnings expectations this week said it expected lower revenue for the 4th quarter.

Kenexa (profile; site), which competes with Taleo in the human capital technology area, reported that its  third-quarter profit dropped by 23 percent over the third-quarter in 2007 this week then saw its stock price plummet to 52 week lows. It reduced its earnings expectations for the fourth-quarter.

Rick Fletcher, founder and president of consulting firm HRchitect (profile; site), speaking with us two weeks ago, predicted that the technology vendors were in for some tough times in the coming months. “We’re going through a contraction,” Fletcher told us, pointing to the acquisition of Vurv by Taleo and other deals.

“The smaller vendors, those that aren’t as well capitalized, are going to have the most trouble,” he says, “But there’s enough pain to go around.”

His counsel for recruiters and HR professionals is to talk regularly with their vendors and look at the financials of the publicly held companies. The private companies, he says, should provide numbers as well, since most clients sign a non-disclosure agreement. “Ask for them,” he suggests. If the company drags its heels or doesn’t provide complete numbers, consider it a warning sign.

He also recommends that every HR department document how it uses the technology products it has, especially noting customization and configuration. And that HR participate in the company’s IT strategy committee, or push to start one. The purpose, he says, is to share vendor concerns with IT, develop a backup plan in case the worst happens and also help other departments and IT understand that HRIS is part of the overall business strategy of the company.

HRchitect is offering a series of webinars to help HR departments assess vendors generally and a series specifically for Vurv customers who have to make decisions about replacing their systems. To register for the Vurv customer series go here. Here’s where you’ll find more information on the entire webinar series. ERE also has an archived webinar on talent acquisition systems.

This article is part of a series called News & Trends.
Get articles like this
in your inbox
Subscribe to our mailing list and get interesting articles about talent acquisition emailed weekly!