Meridian’s mission is possible

04-Feb-2009 | By Christopher Goodfellow

Mission is possible: the phrase emblazoned in the entrance of Meridian Business Support’s offices. And the mission? Increasing the turnover of a multi-sector recruiter, heavily reliant on demand for temporary staff and exposed to the recession-worn sectors of the economy.

Project £200m is Meridian’s goal of doubling its turnover between 2007 and 2010, and Mark Mitchell, the company’s chief executive, is confident it can still be achieved.

The first year of the project saw it hit its initial target, achieving a turnover of £126m. However, the company’s exposure to redundancy-hit sectors meant turnover dropped to £111m last year, missing the £145m goal.

The current economic environment has cost the company turnover and when facing the threat of further falls in sales, it has had to react and evolve to a “hostile” trading environment. In August 2008 the company cut its workforce by 25%, making around 100 staff redundant
and dropping from its peak of 400 permanent staff.

“The greatest part of any recruitment business’ cost is labour. We have shaped the company to fit the amount of business that we have got and are likely to get,” says Mitchell, in the office where the company was formed 20 years ago. “It’s as simple as saying you shouldn’t be losing money; if you are losing money in a branch you have got to deal with it quickly. It usually means changing the people and doing a feasibility study on the town — if it’s a dead duck you have to stop banging your head against a brick wall.”

According to Mitchell, Meridian’s growth has been reliant on its presence in regional business centres as diverse as Caerphilly, Cambridge, Doncaster, Gloucester and beyond, and the leverage this gave it to win clients.

Of the seven markets Meridian works in, the highstreet, generalist market has been hardest hit, according to Mitchell. “There is a shrinking market due to the economic pressures. We are balancing that against lots of public sector work in healthcare and education.”

Meridian’s construction division tripled its profits in 2007 and is responsible for £80m of the company’s £200m target — in 2008 its temporary sales dropped by 7%. However, a significant number of regional branches’ profits increased including Altrincham, Middlesbrough and Brighton Construction, according to Rob Lewis, managing director of Meridian Construction.

The company currently recruits to the commercial, construction, education, health, industrial, onsite and industrial areas.

The staff have been openly informed about the prospects and what needs to be done to keep the different regions and divisions of the business working, Mitchell explains.

“We have given them the plan. There is a degree of nervousness, but they know the numbers they have got to hit and I’m sure they will do that,” he says, adding that the company has to be flexible with its employees KPIs.

The company has had to restrict its culture of personal empowerment enjoyed in “more gentle times”, as business decisions become crucial and risks increase. “There’s much tighter control being taken over the business, its management and its decisions — we still
talk to people on the ground, but we are guiding decisions a lot more,” Mitchell explains.

Mitchell is proud of the regional expertise of its staff spread out across its large geographical footprint and the commercial advantage which this brings to the company. To continue to take advantage of this, the strategy is to resist branch closures wherever possible.
“We are keeping the lights on and hoping business will come our way when competitors move out of the town or the market,” says Mitchell, adding that any new business wins had only allowed the business to “stand still, rather than going back any further”.

The branches which are performing well are not making cold calls, but are relying on quality of service, Mitchell says. “Our best branches do the fewest cold calls. They use referral sell, proven delivery sell, rather than just thrashing around saying ‘do you need anyone?’ Those days are gone and that way of doing business is annoying to clients.”

Crucial to this approach is constantly improving efficiency to aide the customer and increase profits. Meridian offers clients bespoke billing options and statistical analysis about staff retention and value.

“We can measure the effects of the people we are supplying; if things are happening to our workforce we look behind that to see what might be going on. It’s not just giving them the data, but giving them the analysis behind that data,” says Mitchell.

As the market tightens, maintaining cash flow is essential. Banks have changed the approach they take to recruitment agencies and Mitchell says uncertainty over the long-term sustainability of funding mean cash has become even more critical. “We don’t know how the banking world is going to react and move — all we can do is make as much profit as efficiently as we can and keep that money in the business.”

A crucial element in doing that is having a resilient debt collection process in place. Even as the company’s recruitment divisions cut back staff, it increased the number of personnel in credit control. Mitchell describes Meridian’s control of clients debts as “market leading”
and continues to capitalise on the processes it has developed by offering them to external customers.

“It’s a spin-off from Meridian’s credit control. We have long had a good level of credit control here, and to provide opportunity for the senior managers in the business we opened another company called PCS Credit Management,” says Mitchell.

An increase in concern over debt recovery in the economy has meant the company is growing exponentially, planning to double its staff in 2009.

The key to maintaining control over cash flow is constantly measuring clients’ payments to ensure they are not straying from the terms and conditions of the contract, according to Mitchell.

“We measure our basket of [recruitment] clients every week. We know the terms and if the debtor days are going away from that, it’s because things are moving into a legal position or it’s a dispute that delayed a payment.” However, he warned the company is experiencing higher levels of bad debt than ever before, as previously sound customers get caught out by the extent and ferocity of the downturn.

The company has positioned itself as an international broker of labour. When the UK was attracting a high level of staff from Eastern Europe, it set up branches to facilitate the process and currently has offices in Poland and Holland, as well as a presence in New Zealand,
Australia, the Gulf of Mexico and Canada.

“We were importing a lot of people at the start of 2004, that stopped at a high rate in 2007 so we went to those countries and talked about exporting people [from the UK],” says Mitchell, adding international sales grew tenfold in 2008 and is expecting a five-fold increase in 2009. To capitalise on the presence it has abroad it trained Polish branch managers by putting them on six-month placements in UK offices.

With potential for international growth, positive gains in sectors such as healthcare and a realistic approach to keeping resources in check, Meridian is in good stead to ride out the downturn.

Mitchell intends to continue recruiting and spending money on training to ensure his staff are well placed to deal with the current trading conditions. The company will have an opportunity to capitalise and increase its marketshare when the market recovers, if its geographical spread and specialist, local knowledge is preserved, in the long term.

However, in the short term the company is designing budgets on a month-to-month basis, rather than planning at the start of the year.

“Normally you have decide where you going at the start of the year and stick to it, but the years are getting shorter and you really have to decide where you are at the start of every month,” he says. And for the moment that means the company keeps the lights on, battens
down the hatches and weathers the storm.