Nick Cox / Hays | Structurally, there’s a great opportunity to set up shop here

Nick Cox / Hays | Structurally, there’s a great opportunity to set up shop here

The largest UK-listed specialist recruitment and human resource services firm, Hays Plc., is starting its India operations in January and is unfazed by the current slowdown. “Our entry into India is part of our structural growth strategy... We are just going ahead with our expansion plans," says Nick Cox, managing director, continental Europe and the rest of the world (excluding the UK, Ireland, Australia, New Zealand and countries in Asia) of the £2.5 billion, or Rs18,250 crore (market capitalization as of the year ended 30 June), recruitment firm. Net fees for the year ended June stood at £786.8 million.

Accepting that India has some catching up to do with the developed economies in specialized recruitment, Cox, who is responsible for the development of Hays’ new businesses, says the company plans to focus on the permanent staffing business in India.

Hays, which was founded in London in 1968, has about 400 offices and at least 8,800 staff members in 27 countries. India is going to be the 28th country where Hays will have a presence. In the year ended June, Hays placed 80,000 candidates in permanent jobs and found temporary assignments for approximately 300,000 people.

In an interview, Cox speaks about his plans for India, the impact of a slowing economy on them and Hays’ long-term strategy here. Edited excerpts:

What is your reading of the Indian recruitment market? Where does it stand compared to other markets in the world?

India is well-developed in generalist recruitment, like many other emerging economies, but it’s a relatively immature market in specialized recruitment. Compared to other Western mature markets, India is some years behind Europe, and even more years behind the US and the UK. There is a little bit of catching up to do for India.

In buoyant, emerging economies, we see a need for companies to acquire talent and therefore, there is (a) great demand for success-based contingent recruitment. Recruitment in India is still largely driven by companies’ in-house recruiters, which typically happens in an underdeveloped market.

This would, however, change as companies choose to spend more time on core functions, become more quality-conscious and leave hiring matters to professionals.

You are planning to enter India at a time when job markets in the world are witnessing a decline. Tell us about your entry into India and your long-term strategy here.

Our entry into India is part of our structural growth strategy and for us, India and Russia are the markets that we were planning to enter in 2009. We are just going ahead with our expansion plans.

In India, as part of our expansion policy, we are looking at the permanent staffing business only, which is our core offering. Our services will be targeted at professionals in the middle management level, such as accountants, lawyers, IT specialists and human resource professionals.

Structurally, there is a great growth opportunity to open shop in India because of the long-term growth prospects of all emerging economies. We will have offices in all the Bric (Brazil, Russia, India and China) nations by early 2009. We are starting our India operations in January with an office in Mumbai. A senior executive from our operations in the UK will be heading our India team, initially comprising 10 people.

Are you looking at any acquisitions?

Currently, we plan to grow organically and we are not looking at acquisitions as of now. We will be recruiting more people and have plans of adding offices in New Delhi in the next few months and will closely look at opportunities in other cities as well. The long-term strategy is to be among the top three players in the country.

Hays has seen its fees for the UK and Ireland market go down by 8% in the first quarter of 2008 because of the slowing UK job market.

Yes, our fees from UK and Ireland declined in the July-September quarter (Hays’ first quarter). Interestingly, our international business, which represents 49% of the total net fees, grew by 32% in the first quarter. So, we are not so exposed to one market. It has been our strategy to build a balanced international business. In fact, a little less than half of our net fees comes from our businesses outside the UK.

All markets apart from the UK are growing. Although our overall permanent placement fees rose just 1% in the three months ending September, which is not that bad given that permanent placements typically take a hit during slowdown, income from temporary positions rose by 8% in the first quarter, boosted by a strong demand in Germany. Last year, net fees from permanent staffing was up by 14% in the first quarter, while temporary (staffing) business grew by 30% in the same period.

Is there an overall increase in temporary staffing because of the slowdown? In addition to Germany, which other market has shown growth in fees from temporary staffing? Which are the sectors performing strongly in major markets?

We have had a strong demand for information technology and engineering professionals on short-term contracts in Germany. The buoyancy in Germany has made it favourable for our temporary staffing business. The temporary staffing business grew 32% in the first quarter of our current fiscal year compared to the year-ago period, while the permanent staffing business grew 103% compared to the same quarter in the year-ago period. The second biggest market (by net fees), Australia, has just started to show a decline in growth. Temporary staffing is declining in the UK because of a slowdown in the property and construction business.

In the UK, education, health care, retail and purchasing continue to perform well. The public sector in the UK is pretty strong. In Australia, the performing sectors include information technology (IT), resources and mining. In Europe, there is good growth in IT, engineering and sales and marketing.

Hays cut its own staff by a further 5% in the first quarter, having already contracted it by 7% in the second half of the last financial year (July 2007-June 2008) Are there more job cuts in the offing?

Reduction in staff numbers sometimes becomes necessary, especially when one needs to control costs and improve efficiency in a slowing market. Though we have had to let people go, we have redeployed some people from the UK and Australia businesses who now work for our Dubai operations. If the market continues to decline and if we have to cut jobs, we will. It all depends on the local market conditions. Basically, we would continue to mirror the market because recruitment companies, unlike other businesses, don’t have long business cycles.

How are you dealing with the impact of the slowdown and the decline in revenues?

It’s a fact that (the) slowdown is impacting us like many others. Though there is an overall decline, sectors such as health care and education look positive since the government continues to hire. In addition to supplying candidates for education and health care institutions, the newer businesses, including retail, continue to grow rapidly even in a downturn. We are very much focused on cash generation and reacting quickly to market changes. We have a good balance in terms of (a) diversified service offering and internationalization of our business. Hays is a financially strong company.