Recessions end (Note, this article was written in June 2020. Think what you were doing and feeling then!)

This one will too. It will be a long, hard road, but we will recover.

As a species. Economically. And the recruitment industry will bounce back too.

I have been through five recessions. While I have no unique insights about how this COVID – created one may play out, I can tell you what happens typically. And it’s a sad story with a happy ending, so bring it in tight.

From a pre-recession boom-time high (remember that?), where both Temp/Contract and Perm GP are at record levels, you usually see Perm start to soften first as a downturn takes hold (Phase 1 in the chart below). Meanwhile, Temp and Contract continue to motor along.

Then in Phase 2, Perm collapses. As much as an 80% decline. Temp weakens profoundly too, maybe 30% to 40%. This is what I have been through multiple times! The start of the COVID recession was different in that the market collapsed without warning, and much faster than anything seen before. Also, WFH has distorted the Temp model because if you are sending your staff home, by law, finishing up a temp is the easiest thing to do. As a result, some excellent recruitment businesses, particularly in white-collar ‘office’ sectors, with great Temp books, have suffered more this time than previously. Their temp business has not been as resilient as we would see normally. So we are near the bottom, of Phase 2 now, just lower than anything I have seen in 40 years. And it may last a while yet.

But then, sunlight peeps through the clouds!

Typically, Temp and Contract will take off first. (Phase 3).Totally logical. Clients are tentative. Just retrenched many people. Cash is limited. Any sign of increased workload is best handled by a flexible workforce. That is the logic. You can grow a substantial Temp business while technically still in recession as we climb out the other side. I have done it more than once. (When I say “I”, it’s obviously “we”, and when I say “we” it was mostly other people doing the actual work, but I take the credit you understand. Obviously.)

Ultimately full confidence returns, skills shortages emerge, and employers rush to secure the best talent by offering Perm jobs, and we are back at the peak – Phase 4. That’s how it ‘normally’ is, but who knows this time around? I think it will follow a similar pattern, although whether Perm ever gets fully back on the table is a moot point.

Now let’s look at some facts from previous recoveries.

Here is the data (Chart below) from Recruitment Solutions, a company I founded in 1987 with two others. We did well. Three years later we had $13 M in revenue, 75 staff and five offices. Then the recession hit (Read the full story and the ensuring recovery in my book The Savage Truth). Revenues collapse by $4.5M in a year. The next year we got no change as you can see in the chart. Three years after the collapse we still had not reached our 1990 numbers! A long cold winter! Heed this when you think about our current situation, won’t you? Don’t anticipate an economic ‘snap back’. It won’t happen. This is a marathon, and we are at the 5 – kilometre mark.

But then look at the most beautiful bar chart in the history of recruitment, above. (Well, ok, slight exaggeration. I love it anyway)

A big leap to $17 M (That’s 70% growth in a year!) then into the $30 Millions, then $50 Million, and beyond. That outstanding growth was driven by temporary sales (Perm was juicy sweet too) and was so profitable, Recruitment Solutions could list on The Australian Stock Exchange in 1998, and a year later had a value of over $60M and remains a business I am immensely proud of. But we were made in the recession! That’s the point. We got lean, we got tough, we got innovative, we focused on market share growth, our recruiters were hungry and built relationships. We got our strategy right (Temp, great marketing, technology, right bonus structure, hired smart)

Now, let’s fast forward.

Now I was the International CEO of Aquent. And yes, there was a downturn. The ‘Tech Wreck‘ we called it. Have a look at the chart below of the temporary hours billed by the Sydney office of Aquent. Pottering along till the downturn, and then a significant drop of 30 to 40% as the recession hit. It was tough, but we got our house in order. The market picked up and temps in digital and creative were in demand. Look at those temp hours! That’s got to be a fivefold increase! In less than three years! Yes, we were a better business, we hired great recruiters, but again we rode the recovery wave and not everyone else did.

Recruitment Solutions was a public company, and those numbers are from the prospectus for the listing, so public information, and accurate. Aquent generously allowed me to reprint their numbers in my book, The Savage Truth, and the CFO signed off on the data from his audited records. So these are historical facts.

And I repeat them here for you because there are some simple concepts we need to remember in these dark days.

Goal One is to survive. As a company or as an individual. That will require operational, financial and emotional resilience.

Goal Two is to configure your future to take advantage of the opportunities that will occur in the upturn.

These are tough days. Lots of pain for many. It breaks my heart speaking to owners and also recruiters struggling now and in deep shock. And I am doing it all day, every day. It’s hard to see the light.

But trust me, the recovery will come. You see the evidence above. Our services will be needed.

And the sun will shine on recruitment again.

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