HR recruiting industry sees slump with economy

In the first 10 days of September, Roswell-based BrokerHunter.com LLC experienced record revenues and strong traffic on its Web site, said President Steve Testerman. Then Sept. 11 hit, and everything came to a screeching halt.

The ripple effect of that slowdown continued into November and December in a business where hiring lags 60 to 90 days after Web usage, said Testerman, president of BrokerHunter.com LLC. The Atlanta-based Internet national recruiting site was designed to "bring securities professionals and securities firms together."

Happy New Year

However, the new year has brought a steady flow of new inquiries.

"It's a tremendous difference, and we're already way above where we were in August and September," Testerman said.

While human resources recruitment firms took a hard hit in 2001 before Sept. 11, industry insiders predict a comeback this year as layoffs ease due to an anticipated third-quarter economic improvement.

"The [2001] market was probably one of the softest that I can recall in the last 10 to 15 years," said Craig Dunlevie, regional managing director of the Southeast region for Korn/Ferry International (NYSE: KFY), one of the world's largest recruitment firms.

Although final figures are not yet available, the executive search industry likely declined by 30 percent in 2001, according to market research firm Hunt-Scanlon Advisors.

"Regarding 2002, we don't expect an industry rebound until at least the third quarter, so for the first half of 2002 we would expect flat to moderate growth, which means zero to 5 percent year-over-year growth in the first six months," said Brian Lee, chief market strategist for Hunt-Scanlon.

Such optimism is founded on the expectation that companies will retain search firms several months in advance of an economic recovery to be well-positioned, Dunlevie said.

"I would look to the executive search industry as a leading indicator for an economic rebound," he said. "We'll know more in 30 or 60 days than we know now, but we're getting the feeling that things are picking up."

However, 2001 declines should be viewed in the context of record years for executive search in 1999 and 2000, Dunlevie said.

Korn/Ferry reported revenues were down 35.7 percent to $223.4 million year-to-date at the end of October 2001, compared with $347.2 million for the corresponding period in 2000.

More with less

"While the unit count number of searches we did was decreased last year, the average search fee and the level of search actually increased," Dunlevie said. "We ended up doing much more higher, board-level searches."

Not all market sectors have been hit equally by the recession, he said.

Areas where Korn/Ferry sees strong business include health care/life sciences, not for profit, education, government and the assets/investment management part of financial services, Dunlevie said.

Professional services and large management consulting firms are doing a little better, while industrial services remain flat but stable, he said.

"Advanced technology is probably the most dramatically hit in Atlanta and the Southeast region," he said. "Capital market investment services are also very slow."

Slow go

Although recruitment in Atlanta remains on par with most major cities and the city benefits from a diversified market, New York, Chicago and Washington, D.C., are likely to rebound faster, Dunlevie said.

"We're doing a little slower because Atlanta is still more of a regional headquarters as opposed to a corporate headquarters market," he said.

A number of large publicly traded recruitment firms also slashed overhead in 2000, including Heidrick & Struggles International Inc. (Nasdaq: HSII), which announced a 13 percent reduction in its work force in June 2001, and Korn/Ferry, which cut jobs by 20 percent in August.

Another factor that has affected traditional recruiters is the advent of recruitment Web sites, which cost less to use in an uncertain economy, as well as companies launching their own job sites, said Peter Weddle, CEO of Weddle Newsletters, Guides & Directories LLC.

Of the Global 500 largest corporations based on gross revenue, 88 percent used the Internet for recruiting purposes in 2001, a sharp increase from 29 percent in 1998, according to iLogos Research.

"Interestingly enough, it's the recession that caused this cultural shift," Weddle said. "Niche and specialty sites seem to be faring pretty well in the recession."

BrokerHunter.com has had consistent growth overall despite specializing in an industry directly affected by stock market ups and downs, Testerman said.

"Since this is a commission type of job, certainly the adding of a broker is the thing to do instead of adding an overhead or salary type of position," he said.

But because companies have reduced recruitment spending across the board, most online recruiters may not be faring much better than their traditional competitors, Lee said.

"Monster.com, however, is really the only publicly traded online recruiter that has consistently hit their quarterly earning targets," he said.

Indeed, anecdotal data indicates that large nonspecialty sites are not doing so well, partly due to the large advertising budgets needed to achieve brand recognition, Weddle said.

However, the personal touch will re-main essential for higher-level searches, said Emory Mulling, chairman of The Mulling Cos.

"We have seen a little softening of the market, but because of our loyal customers, we are maintaining our business," he said.

"The art form in our business is always having the best access to the world's best talent," Dunlevie said. "That's not just a name on the Internet. That person may be actively engaged to another company."

Indeed, catering to second-tier professionals may be the secret to the success of BrokerHunter.com, Testerman said.

"Another advantage is that traditional recruiters for the most part would concentrate on the top 10 percent of brokers, who make a half-million or higher," he said. "What we do is, for the 80 percent down below, provide a medium and mechanism for them to find a job."

Copyright 2002 American City Business Journals Inc.