Outsource Your Way Through | BTalk Australia

Tom Christopoul, CEO of consulting firm Resources Global Professionals, says his Australian clients are seeing the economy starting to bottom out, although he admits that it’s difficult to really see the short term future.

On today’s BTalk Australia he tells Phil Dobbie how his firm has traditionally been a good indicator of economic cycles as companies gear-up to move out of the downturn. There’s also a discussion about how the current global recession might change the future of how we manage our workforce and other items of expenditure.

Add your comments in the Talkback section at the end of this post.

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• Transcripts

Phil Dobbie: Hello, I’m Phil Dobbie and welcome to BTalk Australia. Today the global economy: can a consulting firm help you right now? We find out from the CEO of one of the big ones.

So how can your business navigate through the financial downturn and will some outside assistance help you? I think I already know the answer to that question is going to be yes from today’s guest. He is Tom Christopoul he’s the CEO of Resources Global Professionals, which is a NASDAQ listed consulting firm with a market cap of more than $1 billion which is a lot of money but just to clarify what billion are we talking about here Tom? Are we talking about US dollars or Aussie dollars?

Tom Christopoul: Well, it kind of depends on when you pick the time to look at our stock price, but we’re just above $700 million US at our current trading range.

Dobbie: It’s a good thing about Aussie dollars everything sounds so much wealthier over here don’t you?

Christopoul: Doing good now.

Dobbie: The US, of course, we know is in a recession. We keep on kidding ourselves and saying well, maybe not yet here in Australia, but no one denies the US situation. What about here in Australia and the rest of the Asia Pacific? Are you seeing the economy looking as bad over here as it is over there?

Christopoul: No, we’re not we’re not seeing it as bad nor are our clients seeing it as bad, although it’s, as you say, it’s very evident and quite obvious that there is an economic contraction. We’re well into it; our clients are well into it here in Australia. But it appears at least to us at the moment that the depth and duration of the cycle seem to be, perhaps, hopefully, a little less deep, a little shallower and also, hopefully a little less long. And certainly one of the things that we’ve seen is in the financial services space, again, not immune to the global turndown in either the economy or in terms of the credit markets, but it does appear that the Australian financial institutions and insurance organisations that we serve and who are our clients are sort of fairing better than the United States and candidly some of the European institutions as well.

Dobbie: And still not great though. I mean in the financial services sector there’s still been a huge slashing of jobs over here.

Christopoul: Yes, no question. And it may continue in part because it’s very, very difficult to obtain any visibility in today’s market that’s the thing that I think most people are missing and we would say is characteristic of lots of our clients. Irrespective of how the impact of the economy is to them. The thing that they lack most about their business’ visibility and to where it’s going and I think that’s as true here as it is everywhere else that we operate.

Dobbie: Sure, none of us have a crystal ball. Recessions though have got to be good for your business I would have thought. You know you’re putting staff into projects and I should imagine that’s what companies that just want to do that right now don’t they? They only want to pay for the staff they need, so you’re in a good situation aren’t you?

Christopoul: We are in general and our business tends to lag, a down cycle which we saw, our business stayed strong as an example in the United States through really our Christmas time and really started to get impacted in early January. And then we’re also a good leading indicator or at least in past cycles we’ve been of when the cycle comes back. So right now our business is impacted and is going to be down quarter on quarter for the year as we reported in our most recent quarter, but we do expect, as you pointed out, some of the head count reductions and infrastructure cuts as they cycle through many of these businesses but businesses need to continue to progress and move forward and respond to their clients and their customer’s needs, that we tend to see that impact earlier when those companies call us and ask us to help them either on an interim staffing basis or to gear up on an interim basis before they have complete clarity on how they’re going to cycle out of the current contraction.

Dobbie: Now, do you think we’ve been through cycles maybe not quite as bad as the one we’re going through now? It’s sort of almost every 10 years we go through some sort of downturn. And people lay off staff and go to employing contract labour for a while. Do we see that people go back up to the same level or do businesses actually use it as a way of almost weeding out the business and getting the mix more towards contract staff and less full-time? Is that happening as a trend?

Christopoul: It’s difficult to say because of the fact that the way the global employment market evolves along lines that are very, very different from just say the distinction between, in the example you’re using, full-time staff and interim staff. Let me give you an example: as businesses get more global, as they continue to evolve and they expand their business propositions around the world what we find with our clients is that they’ll call us and help them deploy against projects that they’re maybe implementing not just in a specific area where they operate but globally in terms of being coordinated. And in that regard if the work is oriented towards project work and that’s really the area that our consultants concentrate on that project work can be interim work, it can be defined as interim work for a period of time or it can be defined as extended depending upon how that business is looking at expanding and extending their business proposition. Now that’s an ordinary cycle.

In today’s cycle, I think it’s difficult to say part because none of us has seen this sort of significant drop off that we have here, how it will impact whether a company might make a different decision around bringing a full-time staff back it’s hard to say within this cycle. Having said that, across the sort of overall profile or let’s call it landscape with how businesses approach labour in their organisations there is no question that the overall trend has been and will continue to be toward flexibility. Sometimes that flexibility obviously manifests itself in additional work for our resources and our consultants. Sometimes though organisations will approach their full-time workers with let’s call it flexible types of work arrangements so it can depend on the specific industry, obviously, in a specific geography. But there’s no question that over the not only last several cycles but certainly over the last several decades the trend in labour in general is towards more flexibility and not less.

Dobbie: Well at times like this the companies that really suffer are, obviously, the ones that have got very high fixed costs. And businesses like yours I guess, you’ve got a much greater degree of variable costs. So businesses aside from the labour issue, what can businesses that are in that high fixed cost cycle, how can they get out of that because they are very, very vulnerable at times like this aren’t they?

Christopoul: Yes, and many of them are, let’s just go back a little bit to your previous question, many of them are using this cycle as a way to potentially divest themselves of certain amounts of infrastructure. We’ve seen many of our clients go to deconsolidating certain subsidiaries. And so there’s lots of both consolidation and displacement in the market and many businesses are trying to sort of hone their core businesses and divest themselves of others. No question though that across the board if your cost model isn’t variable today or isn’t substantially variable you’re trying to find every way possible to make it so and absolutely keeping that in mind as the cycle returns. One of the things that we’ve noticed though is that, again, with most of our clients it’s gone beyond just a fixed versus variable cost structure, again, because the impact is so great. The thing that we see impacting our clients probably more than anything right now is those that are required or need to ultimately access the capital markets either for operations or for growth are the most significantly restricted and impacted today simply because those markets appear to be closed until further notice.

Dobbie: Yes, a lot of companies now are selling off assets and then renting them back again like Virgin, he’s a great example of that. So companies are being forced into that. Shouldn’t they learn from that you think and say well maybe don’t buy those assets back, maybe you are better off not owning as much as you did before.

Christopoul: You know that’s very funny we were having that discussion actually with one of our clients in the energy industry today, and it seems like as these cycles come in and out. The strategic decision is that those organisations make about owning certain components of their operations also cycle through so we we’re making the point actually earlier this morning that in some cases the concern around control and quality for sort of vertical integration in some industries and so there’s this orientation to buy back and own as much of that infrastructure as possible so that they can feel quite confident about the level of quality and control that ultimately gets executed or delivered to their ultimate end consumer. And then, of course, where someone will come through and cycle and say, well, you know, that isn’t really our core business we should divest ourselves of those operations. And irrespective of the industry that you choose to look at they come back and forth in some cases in connection with these economic cycles.

In other cases simply because the strategy of the organisation changes and adapts with the times and with the changes in the marketplace or what they believe to be a competitive advantage is. Irrespective really of how a business looks at that they look to us to try to help them through that project of either disintegration or devolvement, if you will, or reintegration and acquisition. And I think what we’ll see through this consolidation cycle and what our clients are asking us to help them with is thinking through how they might take advantage of the current marketplace or in addition to divesting themselves of certain assets there are many other clients who are looking at this opportunity as a very unique one to go and acquire other businesses because among other things prices have come down.

Dobbie: That same argument as well it applies to, for example, production resources and that includes human resources. We were mentioning having contract positions rather than full-time positions. I guess there’s advantages but there are disadvantages of doing that as well aren’t there? For example, how do you keep all your intellectual property protected if it’s held by people who ultimately don’t work for you?

Christopoul: It’s a great question. It’s actually one of the things that we point out is different about Resources Global say vis-a-vis some of our more traditional competitors or other folks who you might say are traditional interim staffer companies, right, because they are consultants differ from those organisations in two important ways. One, our consultants on average have about 20 years of experience globally, so these are folks who have really been around, managed large departments, large amounts of infrastructure, they’re quite mature and quite well along in their career so their judgment is based on experience and experiences that they’ve had as opposed to conjecture so these are folks that are not being say recruited from campuses around colleges and universities, the first aspect.

The second aspect which is different for resources, again, vis-a-vis our traditional competitors is that all of our consultants when engaged by our clients work directly for our clients. So they are actually directing the individuals that we second to our clients in order to do work. And that does differ from some of the larger outsources systems, outsources and other traditional consultants where there’s an engagement partner and the many, many consulting resources that might be at a client work for the consulting company. Every single one of our consultants is directed by a vice president or a director an executive officer of the clients. And so in that regard that’s actually, you pointed out Phil quite an interesting component of our value proposition, our clients actually are retaining intellectual capital in their organisations and ultimately are able to direct those resources as they see fit. We tend not to approach those clients to tell them the way they should do their business rather when they tell us what their needs are we supply them the intellectual, let’s call it capability on demand, that they need they would otherwise have a hard time getting.

Dobbie: I’m glad I mentioned it to you to allow you to get the plug in there in that case.

Christopoul: Yes, no worries.

Dobbie: Now, you’re in Australia for two days. I don’t know how well you know this part of the world but here’s a question based on your two days in the country. We talked about the global economy a little bit earlier, but what part do you think for global corporations that Australia can play? Often we’re the sales and marketing arm for our local market and little else, are we missing a big opportunity here? What should Australian businesses or Australian people be saying to the large multi-nationals and putting a hand up and saying, hey, we can do that here in Oz?

Christopoul: Yes, it’s a great point and one of the things that, although I’ve only been here for a couple of days this time, I’ve been travelling back and forth on business to Australia now for probably in excess of 10 years.

Dobbie: Alright, now you can give a much more considered opinion then.

Christopoul: One of the things that I’ve always found here is that this is a real market of entrepreneurialism and real innovation. And one of the things that I found over my business career and we find too here is that there is a tremendous amount of let’s call it non-traditional thinking and real sort of openness to innovation and this is a great market to really use in some cases, we think, as a laboratory. So I would say that that’s something that I think the country does a good job of articulating that and demonstrating to global businesses that this is a market that just because it might be far away from other developed economies isn’t one that should either be forgotten as a market or as a source of intellectual capital for innovation.

Dobbie: That’s good to hear. I’m glad you’re spending a lot of time down here and it’s been a pleasure sharing some of your insights today. Thanks so much for your time Tom.

Christopoul: Yes Phil I appreciate it, thank you very much.