Demand for HR services dips; firms refocus on recruting
Ernst & Young sliced nearly a third of its human resources department at the end of March. With one exception, the 17 people who lost their jobs worked in offices outside the capital, said Krzysztof Kwiecien, partner in charge of human resource consulting at Ernst & Young. Similarly, SMG/KRC Poland fired an undisclosed number of people at the beginning of the year, mostly in administration, the company said.
"We downsized up to a certain level due to smaller demand for business on a regional level," said Kwiecien, who is also president of the Polish Association of Human Resource Consultants. "We had (our) structure prepared for a bigger market, but decided to reduce (it) because no direct business was generated for the level of employment (we) had."
Business outside of Warsaw was hurt by the Russian crisis, Kwiecien said, as companies scaled back operations to accommodate for shrinking markets. Adding to the slowdown, however, was the fact that many clients have decided to move at least part of their human resource activities - such as recruiting middle managers and training - in-house, human resource executives said.
Kwiecien stressed that Ernst & Young still would have staff based outside the capital, and that the company had not lost any clients. He declined, however, to give any further information on the downsizing.
To further squeeze human resource firms, smaller competitors have appeared on the market in the last year or so, stepping up competition in the industry. Clients are also becoming more discriminating, executives said, asking human resource companies to provide a certain level of knowledge about their particular industry or company. That knowledge becomes crucial when human resource firms tout their ability to find the best man or woman for the job, executives said.
To meet those needs, many human resource companies have spent the last year or so putting together teams of consultants to work with growth industries such as manufacturing, information technology, sales and marketing and financial services, industry executives said.
That competitive and more professional approach means that the market here has begun to look like that of Western Europe or the United States, Kwiecien said. Companies that deliver less than satisfactory service will quickly see themselves drummed out of the market.
"The HR industry is in a process of stabilizing and specializing," he said.
The consolidation follows years of heady growth, when revenue grew 30-40% a year at some firms. From 1998-1999, however, that expansion tapered off to 20-30%, executives estimated.
The heyday of human resources has come and gone, said Joanna Czarnocka-Tworzynska, director of the executive search department at SMG/KRC. However, she said she expected the currently depressed business to bounce back slightly by the end of the year as Poland's economy stabilizes.
"We used to live in an unusual and atypical reality for a few years due to the economic boom," she said. "This was not a situation that could stay forever but a question of when the stabilization would start."
Kwiecien said that while the future might be slightly brighter than the present, it hardly meant that human resource firms would be rolling in orders.
"The rate of growth will be smaller and slower in the year to come, and companies that didn't specialize in sectors might well have difficulties in the future," he said.
The one area of business that has remained strong is executive search, or finding people to fill positions, most often at an organization's highest levels. Czarnocka-Tworzynska described that area of the business as "resistant to almost any crisis." In that domain, Czarnocka-Tworzynska said that the Russian crisis had actually helped, because it dumped a number of qualified executives on the market.
Finding the right people for the top job is often beyond the scope of in-house human resource departments, executives said, which also protects that area of business for outside, international firms. What the firms have lost, however, are orders for middle managers and sales executives, which many companies now recruit, interview and place in-house. In addition to that, many companies have scaled back what they used to spend on outside training and development programs.
"There are definitely signs that the HR industry is not as important and not as invested in by employers as before," Czarnocka-Tworzynska said.
To compensate, firms have adopted more aggressive tactics to pursue potential clients, touting their expertise in fast-developing sectors, said Andrzej Maciejewski, managing director of German firm Kienbaum. Many firms either specialize in working with a specific industry or in placing a particular type of employee - such as financial or accounting positions.
"It's a matter of selling a process rather than a ready-made product," Maciejewski said.
Not everybody, though, thinks that growth in the industry will trail off completely. New areas of business are springing up daily, executives said, such as the newly created pension funds which invest a portion of individuals' social security contributions into privately managed funds. Those funds, which began receiving contributions this month, will need armies of salespeople to go out and round up clients. Those staffs, in turn, need to be trained, and many human resource firms see this new area as a potential boom.
"The industry is still growing," said Maciej Grzegrzolka, managing partner at Boyden International.
Industry executives estimated that there are around 50 "quality" human resource firms working in Poland, while in Paris alone there are around 1,000. Newcomers continue to enter this market, although many of the well-known international firms are already here.
The bulk of the business also stems from international corporations working here, although executives said that they were beginning to see more demand from Polish clients. Polish companies are realizing that along with a financial and legal adviser, it typically helps to have a human resource partner handy, said Piotr Wielgomas, chairman of Bigram Personnel Consulting.
That potential market of Polish firms has Wielgomas convinced that the industry still has years of expansion ahead of it, despite a dip in business this year.
"The boom is still in front of us," he said.
"We downsized up to a certain level due to smaller demand for business on a regional level," said Kwiecien, who is also president of the Polish Association of Human Resource Consultants. "We had (our) structure prepared for a bigger market, but decided to reduce (it) because no direct business was generated for the level of employment (we) had."
Business outside of Warsaw was hurt by the Russian crisis, Kwiecien said, as companies scaled back operations to accommodate for shrinking markets. Adding to the slowdown, however, was the fact that many clients have decided to move at least part of their human resource activities - such as recruiting middle managers and training - in-house, human resource executives said.
Kwiecien stressed that Ernst & Young still would have staff based outside the capital, and that the company had not lost any clients. He declined, however, to give any further information on the downsizing.
To further squeeze human resource firms, smaller competitors have appeared on the market in the last year or so, stepping up competition in the industry. Clients are also becoming more discriminating, executives said, asking human resource companies to provide a certain level of knowledge about their particular industry or company. That knowledge becomes crucial when human resource firms tout their ability to find the best man or woman for the job, executives said.
To meet those needs, many human resource companies have spent the last year or so putting together teams of consultants to work with growth industries such as manufacturing, information technology, sales and marketing and financial services, industry executives said.
That competitive and more professional approach means that the market here has begun to look like that of Western Europe or the United States, Kwiecien said. Companies that deliver less than satisfactory service will quickly see themselves drummed out of the market.
"The HR industry is in a process of stabilizing and specializing," he said.
The consolidation follows years of heady growth, when revenue grew 30-40% a year at some firms. From 1998-1999, however, that expansion tapered off to 20-30%, executives estimated.
The heyday of human resources has come and gone, said Joanna Czarnocka-Tworzynska, director of the executive search department at SMG/KRC. However, she said she expected the currently depressed business to bounce back slightly by the end of the year as Poland's economy stabilizes.
"We used to live in an unusual and atypical reality for a few years due to the economic boom," she said. "This was not a situation that could stay forever but a question of when the stabilization would start."
Kwiecien said that while the future might be slightly brighter than the present, it hardly meant that human resource firms would be rolling in orders.
"The rate of growth will be smaller and slower in the year to come, and companies that didn't specialize in sectors might well have difficulties in the future," he said.
The one area of business that has remained strong is executive search, or finding people to fill positions, most often at an organization's highest levels. Czarnocka-Tworzynska described that area of the business as "resistant to almost any crisis." In that domain, Czarnocka-Tworzynska said that the Russian crisis had actually helped, because it dumped a number of qualified executives on the market.
Finding the right people for the top job is often beyond the scope of in-house human resource departments, executives said, which also protects that area of business for outside, international firms. What the firms have lost, however, are orders for middle managers and sales executives, which many companies now recruit, interview and place in-house. In addition to that, many companies have scaled back what they used to spend on outside training and development programs.
"There are definitely signs that the HR industry is not as important and not as invested in by employers as before," Czarnocka-Tworzynska said.
To compensate, firms have adopted more aggressive tactics to pursue potential clients, touting their expertise in fast-developing sectors, said Andrzej Maciejewski, managing director of German firm Kienbaum. Many firms either specialize in working with a specific industry or in placing a particular type of employee - such as financial or accounting positions.
"It's a matter of selling a process rather than a ready-made product," Maciejewski said.
Not everybody, though, thinks that growth in the industry will trail off completely. New areas of business are springing up daily, executives said, such as the newly created pension funds which invest a portion of individuals' social security contributions into privately managed funds. Those funds, which began receiving contributions this month, will need armies of salespeople to go out and round up clients. Those staffs, in turn, need to be trained, and many human resource firms see this new area as a potential boom.
"The industry is still growing," said Maciej Grzegrzolka, managing partner at Boyden International.
Industry executives estimated that there are around 50 "quality" human resource firms working in Poland, while in Paris alone there are around 1,000. Newcomers continue to enter this market, although many of the well-known international firms are already here.
The bulk of the business also stems from international corporations working here, although executives said that they were beginning to see more demand from Polish clients. Polish companies are realizing that along with a financial and legal adviser, it typically helps to have a human resource partner handy, said Piotr Wielgomas, chairman of Bigram Personnel Consulting.
That potential market of Polish firms has Wielgomas convinced that the industry still has years of expansion ahead of it, despite a dip in business this year.
"The boom is still in front of us," he said.
