Manpower (MAN)

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Although the company does some skilled labor placements, 66% of the company's 2007 revenue from low skilled labor staffing in construction, industrial, and manufacturing.^[2]. The company's focus on low skilled labor and its lack of specialization in any one field translates into lower fees per placement and lower overall profitability. The company's 2007 net income margin was approximately 2% versus 3-5% for its major competitors.

The staffing industry is dependent on demand for labor which in turn is sensitive to changes in general economic conditions. However, MAN's 4,498 offices across 80 different countries^[3] provide an effective buffer against adverse economic conditions in any one geographical market. For example, even given the housing decline and signs of a recession in the US, MAN's Q1 2008 revenue and profits grew 19% and 29%, respectively, versus the same quarter a year ago.^[4]

MAN gets almost 90% of its business from outside the US, and about 50% of its revenue comes from Europe. ^[5] As a result, MAN is very sensitive to fluctuations in foreign exchange rates. In 2007, MAN's revenue grew 17% (+$3B), but 8% (+$1.4B) of that growth came from currency appreciation. ^[6] MAN's geographic diversity also means that the company is subject to regulations in each of the 80 different countries that in which it operates.^[7] France is MAN’s largest market with 34% of the company’s revenues, and also happens to have some of the strictest labor laws. France's government is very involved with the labor laws and, as an example, even stepped in to stop Alcatel Lucent from cutting too many jobs in company's French offices after the merger in 2006.

Over the past few years, the company has benefited from the growth of flexible staffing in its core markets, as well as its newer emerging markets. MANs core business, temporary staffing, grew 17% in 2007^[8] due to flexible labor strategies being implemented in countries like Germany and the U.S. In a 2006 American Staffing Association survey of human resource managers, 91% of the managers said that flexibility in staffing was important and 95% of those managers said that this flexibility was coming from temporary and contract workers.^[9] The managers also cited three reasons the flexibility was so important: 1)To fill in for absent or temporarily vacant employees, 2)To provide extra support during busy times, and 3)To staff special short-term projects.^[10]

[edit] Company Segments

^[11]

• MAN has five brands: Manpower, Manpower Professional, Elan, Jefferson Wells, and Right Management. Jefferson Wells and Right managment are seperate business segments that together only account for 4% of revenues. Manpower and Manpower Professional make up the vast majority of the remaining 96%.

Manpower/Manpower Professional: This segment controls temporary and permanent staffing, employment assessment, and training. Assessment and selection has to do with evaluating the skills of a candidate and finding them the best job fit based on those skills. The Manpower brand provides the majority of the low skill staffing that makes up most of MAN's revenues. These are MAN's largest brands and together account for about 90% of company revenues. Five million people were placed in permanent, temporary, and contract positions in 2007.^[12] Of that, only 127,000 people were placed into permanent positions in 2007. ^[13] MAN is able to generate revenue by charging a fee from client companies for finding, assessing, training, and placing people into the client company.

Jefferson Wells: This segment offers high skill project workers for the following business lines: internal controls, tax, technology risk management, and finance/accounting.

Right Management: This segment is the largest outplacement and consulting services firm in the world. ^[14]

Elan: This brand provides information technology (IT) staffing to Europe. The Elan brand grew 35% in 2007, bringing it's sales over $1B for the first time.

^[15]Jefferson Wells and Right Management are seperate business segments that have sales in these geographic regions, but that are not included to those regions in this graph

^[16]

[edit] Trends and Forces

[edit] Moving Towards Specialization

Although the company, offers some skilled labor placements, 66% of the company's 2007 revenue from the placement of low skilled labor in staffing in construction, industrial, and manufacturing.^[17]. The company's focus on low skilled labor and its lack of specialization in any one field, translates into lower fees per placement and lower overall profitability. The company's 2007 net income margin was approximately 2% vs. 3-5% for its major competitors. The most profitable firm in the staffing industry, Robert Half International (RHI), is a very specialized firm that can offer highly skilled labor at a premium. In response, MAN is trying to make a push towards some more specialized offerings. By offering specialized services, MAN would be able to charge a premium and get higher profit margins. From 1997 to 2007, MAN has increased their specialty services by five fold. ^[18] An example of one of the more successful specialization services for MAN is the Organizational Consulting Service in leadership development, assessment and coaching. This service, which is under the Right Management Brand, increased its revenue by 16% in 2007. ^[19]

[edit] Emerging Markets - Small but Growing Rapidly

In 2007, emerging markets grew 61% to reach total revenue of $222.6M. ^[20] At this point that only makes up about 1% of MAN’s total revenues, but the growth rates in these markets are substantial. In 2007, India grew 119%, China grew 49% and Eastern Europe was up 52%.^[21] Increased outsourcing has raised demand for workers in many countries, most notably in India's case, and this has driven a lot of growth in the staffing industry. Emerging economies are also prime markets for MAN’s temporary staffing business because of the flexibility and uncertainty that is present in these up and coming businesses.

[edit] Restricted by Foreign Labor Regulations

Other than the US and Canada, MAN is highly regulated in almost every other market that it operates. Some restrictions have to do with job length, type of work, and even when to work. One of the strictest countries is France, which also happens to be MAN’s largest revenue segment at 34%. France's government is very involved with the labor laws and, as an example, even stepped in to stop Alcatel Lucent from cutting too many jobs at the French offices after the merger in 2006.

[edit] More Flexibility Means More Demand for Temporary Workers

Labor markets as well as laborers, are demanding flexibility more and more. This means that temporary workers are in high demand. In a 2006 survey, American Staffing Association (ASA) survey, 2/3 of the people polled said that flexible work time was an important reason for becoming a temporary or contract employee. ^[22] In comparison, only half of the people said that more family time was important. The ASA has also shown a correlation between falling unemployment rates and a growth in temporary workers over the past 20 years. ^[23] Employers like temporary workers because it gives the company for flexibility in its employment options and it is a good way to find quality permanent employees down the road. In a 2006 American Staffing Association survey of human resource managers, 91% of the managers said that flexibility in staffing was important and 95% of those managers said that this flexibility was coming from temporary and contract workers.^[24] The managers also cited three reasons the flexibility was so important: 1)To fill in for absent or temporarily vacant employees, 2)To provide extra support during busy times, and 3)To staff special short-term projects.^[25] MAN’s core business is in temporary laborers due to this growing demand. Germany has recently become a more important market for MAN because they shifted to a more flexible labor market strategy and is beginning to hire more temporary workers. However, the growth in the labor market is most strongly tied to economic health, and MAN is still subject to fluctuations in that area.

[edit] Foreign Exchange Rates - 90% of Revenues Outside the US

Almost 90% of MAN's revenues come from outside the US, making foreign exchange rates a large factor for MAN. In 2007, MAN's revenues grew 17% (+$3B), but 8% (+$1.4B) of that growth came from appreciating currency.^[26]

[edit] Competitors

MAN is the second largest staffing company in the world behind Switzerland based, Adecco. MAN is a less specialized staffing company. Robert Half is one the most profitable staffing companies due to the fact that they are more specialized and can charge a premium on their highly skilled professional laborers.

[edit] References

1. ↑ 2007 Annual Report pg. 28
2. ↑ Morningstar
3. ↑ 2007 Annual Report pg. 1
4. ↑ MAN Q1 2008 Earnings Report
5. ↑ 2007 Annual Report pg. 28
6. ↑ 2007 Annual Report pg. 61
7. ↑ [1]
8. ↑ 2007 Annual Report pg. 28
9. ↑ American Staffing Association
10. ↑ American Staffing Association
11. ↑ 2007 Annual Report pg. 1
12. ↑ 2007 Annual Report pg. 2
13. ↑ 2007 Annual Report pg. 8
14. ↑ 2007 Annual Report pg. 23
15. ↑ 2007 Annual Report pg. 1
16. ↑ 2007 Annual Report pg. 1
17. ↑ Morningstar
18. ↑ 2007 Annual Report pg. 6
19. ↑ 2007 Annual Report pg. 6
20. ↑ 2007 Annual Report pg. 9
21. ↑ 2007 Annual Report pg. 9
22. ↑ American Staffing Association
23. ↑ American Staffing Association
24. ↑ American Staffing Association
25. ↑ American Staffing Association
26. ↑ 2007 Annual Report pg. 5
27. ↑ Google Finance MAN