Executive Recruiters May Feel Pinch
Job Cuts, Hiring Freezes Will Cut Into Revenues
By Jennifer Parsons© Pasadena Star-News. Wednesday, May 9, 2001.
Southern California companies are not the only ones being caught in the national’s current economic slump.
While layoffs and buyouts are stealing most of the spotlight, the underlying effects could also cause the once-booming executive recruitment field to take some direct financial hits, according to industry experts.
“There’s always going to be a need for talented executives, but as corporate profits start to decline, companies will start looking at combining departments or promoting people internally,” said Gary Kaplan, president and chief executive officer of Gary Kaplan & Associates, a Pasadena-based retained executive search firm.
“It’s not gloom and doom, but if it keeps up it’s going to have an adverse impact on our business and it will affect our revenue,” he said.
In April, the company’s gross revenues were 19 percent above last year’s and 50 percent above April 1999, according to Kaplan.
“Those of us in the human capital management business have been extremely busy,” he said. “We’ve been operating at maximum capacity for at least the last three to five years.”
But industrywide, activity has suddenly decreased, said Kaplan.
“Until very recently, our biggest problem was finding people to fill jobs,” he said. “There was an incredible demand for executives and a lot of that was fueled by the creation of all of these new e-commerce companies.”
With an “incredible increase” in company job freezes and hiring within, the number of new assignments at his company in April dropped by about 30 percent from last year, said Kaplan.
Thousand Oaks-based Search Excellence has also seen a 10 percent to 20 percent drop in business in the past six months, according to a company official.
“As capital budgets are being lowered…companies are delaying some hiring until they see how the economy is affecting their customers,” said Andy Smith, president of the executive recruitment firm.
But business should pick up since his client companies have said they are planning to hire within the next few months, said Smith.
Having been in Pasadena for the past 16 years, Kaplan remembers his company’s gross revenue dropping by 30 percent during the last recession.
“We were profitable, we didn’t have to lay anyone off, but those three years were not a lot of fun.”
But Kaplan is optimistic that this time it is not a recession.
Factors such as the aging of the baby boomers, which causes a “critical shortage of skilled professionals,” and the “blame-finding syndrome” that companies use to change out their managers in difficult times will continue to increase demand for executive recruiting companies, he said.
