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Tuesday, May 17, 2022

Recruiting Firms’ Revenues Dive for Second Consecutive Year

Recruiting Firms’ Revenues Dive for Second Consecutive Year


Staff Reporter

Still reeling from the economic downturn, Los Angeles executive search firms as a group reported a steep decline in revenues for the second consecutive year.

Revenues last year at retained search firms fell by 16 percent from 2001, which in turn were 14 percent lower than reported in 2000.

At contingency firms, 2002 revenues were off 18 percent from the year earlier. In 2001, contingency firms’ revenues were off 16 percent from those reported in 2000.

Retained executive search firms are paid whether or not the position is filled; contingency firms are compensated only if a position is filled.

Hardest hit were those firms serving the technology and entertainment industries, which have continued to consolidate. The “bottoming out” being seen in Los Angeles mirrors the national trend, said Brian Lee, chief market strategist at Hunt-Scanlon Advisors.

Hunt-Scanlon, a research firm that tracks the executive search industry, found that the nation’s 25 largest companies reported an 18 percent decline in revenues, compared to a 30 percent drop in 2001.

Sprague & Associates, the largest contingency search firm last year, saw work generated by the entertainment industry decline by two thirds, although overall revenues were actually up slightly, according to Tom Sprague.

“Entertainment did a lot of belt tightening and there were a lot of layoffs,” he said. “But what we lost in entertainment we picked up in other areas.”

Perhaps hardest hit has been the technology-reliant local office of Tampa, Fla.-based Kforce, which had local retained search revenues decline to $1.1 million in 2002 from $6.1 million in 2000, when it was the third largest firm in the county. Kforce, which has slipped off the list of 10 largest firms, suffered from a sharp reduction in its recruiting ranks, seeing both the voluntary exit of recruiters and layoffs due to operations consolidation.

The company, which reported 32 recruiters in 2001, is now down to eight. Among the departures was a group of five recruiters who left to form Search Finance Group in January 2002.

Joseph Biolsi, one of the five, said the group was not daunted by the downturn. “We knew there were quite a few jobs out there,” he said. “We knew the market had bottomed out and was going to get better.”

Officials at Kforce declined comment.

Still, there were signs of hope. Beyond a general expectation of an economic uptick later this year, some firms reported that recent federal legislation had created demand in certain sectors.

“We started the first quarter with a noticeable up-tick in hiring,” said Mike O’Connell, a partner at Ryan Miller & Associates, whose company focuses on accounting and finance.

Sprague, too, said business was showing signs of a rebound. “We noticed things really pick up in the fourth quarter,” he said. “Everyone in the (accounting and finance) business is feeling it.”

Search professionals around town pointed to the Sarbanes-Oxley Act, which mandated stricter reporting requirements for public companies as the cause of some of the activity.

“Renewed emphasis on corporate governance and internal controls has created increased demand for (accounting) professionals, especially those in SEC reporting and internal audit,” said O’Connell.

With many local companies project some growth, it appears entertainment will remain a dark spot in 2003.

“Entertainment is motoring along slowly,” said Bruce Waxman, partner at Ryan Miller & Associates, who noted that 2003 was shaping up as a “wait and see” year.

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