A Year of Consolidation and Transformation
By Michael Switow
Unfazed by stock market volatility and forecasts of slower economic growth, Asia’s RPO providers are condent with their industry’s prospects for the year ahead.
Recruitment professionals point to several major trends. These include the application of new technologies, corporate belt-tightening, and a transformation of the human resources space as a result of recent mergers and acquisitions designed to strengthen and grow the Recruitment Process Outsourcing sector.
“Even though a lot of of people are not optimistic, personally from the RPO and HR industry perspective, I think this is going to be a great year for staffing, recruitment, and human resources outsourcing,” says PeopleScout’s Danny Zhang, the company’s Asia Pacic senior director of operations.
Many observers, particularly those from outside the region, may find Zhang’s optimism to be surprising. After all, sharp drops on the Shanghai and Shenzhen stock exchanges at the beginning of the year helped trigger sell-offs from Frankfurt to Sydney to New York. The Dow Jones Industrial Average Global suffered its worst annual start in percentage terms since record-keeping began in 1897. More than US $2.4 trillion in market capitalisation also disappeared from global markets during the first week of trading.
A burgeoning interest rate hike cycle in the US, plummeting demand for commodities, and slowdowns in several of the world’s largest emerging economies have also led economists to cut their 2016 predictions. The World Bank recently shaved 0.4 percentage points from the previous 2016 forecast it made last June, leaving it at just 2.9 percent.
What’s missing from some of the headlines, though, is that the World Bank still expects the global economy to grow more this year than it did in 2015. Plus the world’s fastest growing economies are in Asia.
For the second year running, India is expected to be the world’s best performing economy. In 2015, India’s economy is estimated to have grown 7.3 percent; the World Bank forecasts 7.8 percent growth for the country this year. Despite all indications that China is struggling— many businesses will confirm that consumer demand is sluggish—the Chinese economy is still expected to be the second fastest growing this year with 6.7 percent growth (down from 6.9 percent in 2015). Other top performers include Bangladesh, Iran, Pakistan, and Indonesia, all of which are expected to enjoy growth of more than 5 percent.
But are companies hiring?
Before we get carried away with growth euphoria, it is important to note that Asia is not immune to the rest of the world. Corporate hiring in many sectors has slowed down or come to a standstill. Barclays, Deutsche Bank, and Standard Chartered are all cutting jobs globally, including in many Asian offices. Reports of factory closures are becoming more frequent in China’s Pearl River Delta. With the price of crude oil at its lowest level in more than a decade, it’s no surprise that oil and gas companies are shedding workers; at least 10 Malaysian oil sector companies, including Shell Malaysia and ExxonMobile Malaysia, are reducing headcount.
“Companies are more cautious across most of the region,” says Randstad Sourceright Managing Director Doug Edmonds, who moved to Singapore five years ago to set up his company’s Asia Pacic headquarters. “It’s going to be a challenging year because of the relative uncertainty. The rst things that people are going to watch out for are their hiring patterns. They’re going to be a little more careful about when they go out and hire.”
“Hiring volumes might come down,” agrees Futurestep’s Managing Director for Asia, Sue Campbell, “but RPO can be counter-cyclical because companies want to reduce their fixed costs. Outsourcing is compelling to a company under financial margin pressure.”
Edmonds sees another silver lining as well. While requisitions may go down, particularly during the first quarter, he expects there will be more clients ‘kicking the tires’ to find out how RPO can make hiring more efficient and less expensive.
“When we went through a similar period of uncertainty in 2009, people were looking for alternatives to having in-house teams. Full-time recruitment staff were sitting there basically doing nothing, because there were no job vacancies. So awareness grew, and after we came out of the period of uncertainty, we saw immense growth almost immediately.”
While the job market might appear tight across most of the region, companies should not confuse economic uncertainty with a green light to offer lower salaries. Real wages are expected to rise 4.2 percent in Asia— faster than in any other region according to Korn Ferry’s Hay Group.
“It’s still a candidate’s market in Asia Pacic for skilled workers,” notes Edmonds.
“Despite economic conditions being tougher, good candidates in Asia, particularly those with niche skills, will still be in high demand,” adds Campbell. “They’ll still be able to name their price and will have multiple opportunities. Companies shouldn’t think that the balance of power has changed. When things are tough, you need better people anyway.”
Big Data and Mobile Technologies
Since they moved to Singapore five years ago to set up Randstad Sourceright’s Asia Pacific headquarters, Edmonds has presided over a steady expansion of the firm’s business. In 2015, the company filled some 7,000 roles across the region. “We’ve grown about 30 percent year over year, and we have this (same) expectation for the year ahead.”
PeopleScout’s Zhang is also looking at a ‘hiring surge’ this year. He notes that his clients in the areas of aviation, health care, retail, and professional services had a ‘spike in hires’ last year and that he expects this trend to continue.
One factor that is going to drive growth is new technology, particularly tools that make sourcing and retention easier.
“People are looking for ways to be more efficient without a huge overhead of staff,” explains Edmonds. Companies are turning to mobile apps like Anthology (formerly Poachable), which has been described as the ‘swipe left, swipe right, Tinder of headhunting’. Anthology is also popular with applicants, because it allows them to remain anonymous; in other words, they can check out opportunities without alerting their boss. The adoption of mobile technology is “partly generational, but it’s also market driven,” says Edmonds. “It could save companies a lot of money.”
Another growing trend is the adoption of predictive analytics, which build on a client’s existing datasets to shorten recruiting times and make better hires. Randstad Sourceright launched a data aggregator in the United States last year and is now bringing it to Asia.
“The market for RPO is getting a lot more sophisticated,” says Edmonds. “What I’ve seen in the five years I’ve been here is that the knowledge base of our buying community has increased dramatically. We haven’t gone through the generational growth of the U.S. and Europe. We’ve jumped from Gen 1 to Gen 3 in a short period of time. Our buying community is getting very sophisticated; they want additional service lines like recruitment marketing, employer branding, and employee assessment. So RPO has moved away from just recruitment and is moving into a broader HRO environment.”
A Transformational Year for Asian RPO
Reinforcing the move of RPO firms into the broader HR space has been a wave of corporate consolidation that started two years ago as large American companies acquired smaller Asian players that have better knowledge of the local markets.
Examples include Allegis’ acquisition of Talent 2, Adecco’s decision to combine its two RPO and MSP (Managed Service Provider) units, and a merger between RGF Executive Search and China’s Bo Le Associates. PeopleScout’s parent company purchased Australia’s HrX in 2014, thereby making Sydney its APAC RPO headquarters, and then expanded further this January with an acquisition of Aon Hewitt’s RPO division.
“This will strengthen our position in Asia because we are going to have 200 new staff in India,” says Zhang in reference to the latest move. “We’ll have a better sourcing base and a quicker turnaround time. Aon Hewitt and our parent company, TrueBlue, are also entering a strategic alliance that will enable them to offer not just RPO, but also other HRO services. It should dramatically increase our cross-selling opportunities.”
Industry-watchers expect further consolidation in the months ahead and note that it should be clearer which companies are merging by the second half of the year. The moves by American and European firms are partially fueled by a need to follow their clients as they expand overseas.
“This year will be a transformative year for the RPO industry. It will be a year of integration,” Zhang concludes. “It’s exciting for RPO professionals in Asia. They are probably being targeted by larger firms. From a broader perspective, if acquired, [companies] will probably get more funds and larger clients. If the acquisition works really well, it means broader career development for Asian RPO professionals—a chance to step up and take bigger roles and even work on other continents.”