MAY 8, 2001
EMPLOYMENT TRENDS
The Best of Times for Outplacement Firms | What downturn? Career-counseling outfits are busier than ever doling out advice to the legions of laid-off
| The economic downturn is giving heartburn -- and worse -- to many an executive but not to the folks in the countercyclical business known as outplacement. When it's the worst of times for the rest of us, it's the best of times for the outfits hired by job-shedding employers to give career counseling to the newly unemployed. "Everybody nationwide I know is busy as all get-out now," says Rudolph A. Dew, president of Rudolph Dew & Associates, a Los Angeles-based outplacement company that has enjoyed a 20% to 30% jump in clients so far this year.
Indeed, companies big and small that sell outplacement services are reporting stepped-up demand these days. On Apr. 23, Right Management Consultants, one of the few companies that's both publicly traded and devoted largely to outplacement, turned in rosy first-quarter earnings: profits of $3.2 million, a 34% increase over the same period last year.
BIG PROFITS. Likewise, executives at some major players -- Lee Hecht Harrison (a division of Adecco, a staffing company in Zurich, Switzerland), Drake Beam Morin (a unit of publisher Harcourt General), and Spherion (a staffing company) -- all say their outplacement business is humming. For example, at Lee Hecht, which has about 150 offices worldwide, profits in the first three months this year are up 60% over the same period in 2000, in part because of layoffs, according to a company spokesman.
The soured economy, which has seen at least 500,000 pink-slipped U.S. employees since the beginning of this year, has been good for the smaller players, too. Laurence J. Stybel, president of Stybel Peabody Lincolnshire Associates, with two offices in the Boston area, reports a 15% spike in revenues so far this year over the same period last year. Stybel, who also serves as president of Lincolnshire International, a company owned by boutique outplacement firms that refer business to each other, says the other companies in the network are experiencing similar increases. "It began for us in January," Stybel says of the business uptick. "It wasn't subtle at all."
Outplacement firms -- or "career-transition advisers," as some prefer to be called -- are a small niche in the world of human-resource management. In its latest directory of outplacement companies, Kennedy Information, a publisher of data about professional services, lists about 1,000 such firms. Michael Giuffrida, executive director of the Association of Career Management Consulting Firms International, a trade group in Washington, D.C., estimates annual industry sales of about $2 billion.
PARTING GIFT. Some companies date back at least to the mid-1970s, but outplacement really began to register on the corporate radar screen with the massive "downsizings" of the late 1980s and early 1990s. Now career counseling is a standard parting gift for axed employees at "most of your more enlightened companies in the U.S.," says Tom Urban, director of the graduate program in human-resource management at Houston Baptist University.
Organizations offer outplacement for two main reasons. One is concern for -- the cynical would say guilt over -- their suddenly-ex employees. The second is to send a morale-boosting message to layoff survivors at the company. "The employers are giving a strong signal to the people who remain that 'we will take care of you,'" Urban says.
How effective these services are at helping people find new jobs is difficult to measure. John Hollenbeck, professor of management at Michigan State University and editor of Personnel Psychology journal, says academic research to answer the question is scarce.
ROOM FOR IMPROVEMENT. But one recent study found that 75% of 517 senior managers who had used the services of a large, unidentified outplacement company were satisfied or very satisfied with the help they got (see BW Online, 5/8/01/, "How Laid-Off Execs Land"). Still, the managers, who were polled in 1999, clearly thought there was some room for improvement.
When asked to rank seven aspects of outplacement for usefulness, for example, the managers put "meetings with [placement] consultants" last. (Psychological counseling, they said, was the most helpful, followed by word-processing support and access to office equipment.) Some respondents said their job counselors lacked the expertise to handle senior-level searches or give the right guidance to those with highly specialized skills, notes Daniel C. Feldman, a management professor at the University of South Carolina and co-author of the study.
In some cases, says executive recruiter Mark A. Jaffe, outplacement services can even offer bad advice, recommending, for instance, resume styles that are inappropriate for the job sought. "You can smell these resumes a mile away," says Jaffe, a partner at Wyatt & Jaffe in Minneapolis. "It's like these guys are all wearing identical polyester suits."
HAPPY CUSTOMER. Still, supporters of outplacement say the services can boost a person's chances of getting a better job sooner. Just ask satisfied customer Margaret Leimkuhler of Paoli, Pa., who received outplacement counseling early this year after being laid off during a bank merger.
Leimkuhler hadn't looked for a job in 15 years. She says the one-on-one counseling she received from outplacement firm Career Concepts, based outside Philadelphia, not only gave her needed encouragement during a trying time but helped her in such key endeavors as crafting an eye-catching resume. One example: Her original resume included an easily overlooked mention of a project in which she had "centralized administrative processes to allow more sales focus."
Her counselor urged her to be more specific and calculate what the project had meant for the bank's bottom line. In the rewrite, the resume contained the more attention-grabbing information that her work had saved the bank $225 million a year and 50,000 hours of work. Leimkuhler says several recruiters complimented her on the final product. "It was very, very useful," she says of the assistance, noting that after about a three-month hunt, she received five job offers. She began a new job at First Financial Bank in Chester County, Pa., in early May.
FIVE-STAR TREATMENT. Not all ex-employees receive the personal attention that Leimkuhler did. Outplacement for lower-level staffers often entails little more than a few days of group workshops on job-hunting basics. The higher up the corporate ladder, the more tailored the service. Managers and executives often snag months' worth of individual counseling to help them plot a strategy for laying siege to likely employers. They're also given the keys to fully equipped offices -- with phone, fax, and computer -- from which to mount their job hunt. The five-star treatment is reflected in the fees: Former employers typically shell out between 15% and 20% of an executive's salary and bonus to the outplacement firm, according to Stybel.
With the mass layoffs today, these outfits are hustling to bring their services to employees at all levels. Dew says his California business has seen a surge in requests for Spanish-speaking counselors to conduct job-hunting workshops for Latino factory workers. To meet the demand, he shipped in two counselors from his Albuquerque office.
Meanwhile, Career Concepts is doling out job advice to all 500 employees -- from unionized workers to top managers -- of the soon-to-be-closed plant of a large Midwestern manufacturer, according to President Russell Dunn. (He declined to name the client.) To carry out that work and other projects, Dunn has added to his full-time counseling staff and is looking to open another office -- his seventh.
Right Management, too, has responded to the business spurt -- by asking part-time contract employees to put in extra hours, says Geoffrey Boole, the company's executive vice-president for career-transition services. "Now everyone is working virtually full-time," he says. Everyone, that is, in the outplacement business.
By Pamela Mendels in New York
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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