Larger businesses in the services industry may be in trouble, experts are warning, sparked by an announcement from KPMG that it will offer thousands of staff alternative employment options including voluntary redundancies and part paid leave, similar to the benefits offered at the height of the global financial crisis.
KPMG told SmartCompany this morning the move is a precautionary measure due to what it sees as a slowdown in some areas of its business, although notes that revenue has grown year-on-year.
“Parts of our business are outperforming…however, some parts of our business are experiencing a softening,” a spokesperson said.
“We are taking a number of precautionary measures aimed at providing the firm with greater flexibility.”
The options invlude a voluntary part paid leave program, and a voluntary redundancy program. The voluntary part paid leave will see staff paid 30% of their salary for an agreed period of time, while voluntary redundancies will see severance packages given to people who decide to “depart the firm voluntarily”.
The company also says current conditions are different to the global financial crisis, when accounting firms offered staff alterantive employment options as well.
But the announcement comes alongside a slew of disappointing figures for the services industry, which is only managing to grow just slightly as activity wanes. Earlier this month, the Australian Industry Group Performance of Services Index found the industry recorded an index of 50.3 – only 0.3 points above the 50 point level that separates expansion from contraction.
Just this morning, MYOB released new data in its business report that found that in both personal and business services categories, 27% of businesses surveyed said they expect an economic recovery in the next 12 months – but chief executive Tim Reed warned that isn’t as good as it sounds.
“That response is higher than in other sectors, but still half of what it was a year ago. Services businesses are seeing their expectations of an economic recovery fall just like any other industry.”
“The performance is a little better than in other sectors, but not by much. Services businesses have a little more work than usual compared to other businesses, but the industry overall is still very subdued.”
Reed says services are perfroming well, but “the increases aren’t that much”.
But Rob Nixon, chief executive of Nixon Advantage, says his company’s new benchmark report, (which is due out tomorrow), found there is a disconnect between smaller and larger firms – SMEs in the services businesses are actually performing well.
“Our survey of 540 firms found that the average revenue of firms grew by 15% over 2010, while profit per partner grew by 5.5% to $323,000.”
“Smaller firms are doing okay. We talk to them every day, and they have a lot of opportunity.”
Nixon says the difference between these firms and the big four is that while larger firms are geared towards going out and hunting for work, smaller services businesses don’t have those opportunities available to them, and instead wait for the work to come in.
“Bigger companies are more adept to sales and marketing than smaller firms. They’re pitching to businesses, requesting tenders and so on. They’ve always done that.”
“So they tap out a marketplace, and it can dry up. Whereas smaller firms have smaller clients, and can wait for the work.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
