ManpowerGroup 2008 Annual Report Download - page 20

18 Management’s Discussion & Analysis Manpower Annual Report 2008
Management’s Discussion & Analysis
of financial condition and results of operations
We manage these trends by leveraging established strengths, including one of the employment services industry’s most
recognized and respected brands; geographic diversification; size and service scope; an innovative product mix; and a
strong client base. While staffing is an important aspect of our business, our strategy is focused on providing both the skilled
employees our clients need and high-value workforce management, outsourcing and consulting solutions.
Client demand for employment services is dependent on the overall strength of the labor market and secular trends toward
greater workforce flexibility within each of the countries in which we operate. Improving economic growth typically results in
increasing demand for labor, resulting in greater demand for our staffing services. Correspondingly, during periods of weak
economic growth or economic contraction, the demand for our staffing services typically declines, while demand for our
outplacement services typically accelerates.
During the last several years, secular trends toward greater workforce flexibility have had a favorable impact on demand for
our staffing services in several markets. As companies attempt to increase the variability of their cost base, contemporary
work solutions help them to effectively address the fluctuating demand for their products or services. Due to our industry’s
dependence on economic factors, the inherent difficulty in forecasting the direction and strength of the economy and the
short-term nature of staffing assignments, it is difficult to forecast future demand for our services with any certainty. As a
result, we monitor a number of economic indicators, as well as recent business trends, to predict future revenue trends.
Based upon these anticipated trends, we determine what level of personnel and office investments are necessary to take full
advantage of growth opportunities.
Our staffing business is organized and managed primarily on a geographic basis, with Jefferson Wells and Right Management
operating as separate global business units. Each country and business unit generally has its own distinct operations, and is
managed locally by its own management team. Each operation reports directly or indirectly through a regional manager, to a
member of executive management. Given this reporting structure, all of our operations have been segregated into the
following reporting segments: United States; France; Other EMEA (Europe, Middle East and Africa, excluding France and
Italy); Italy; Jefferson Wells; Right Management; and Other Operations.
The United States, France, Other EMEA, Italy and Other Operations segments derive a significant majority of their revenues
from the placement of contingent workers. The remaining revenues within these segments are derived from other human
resource services, including permanent employee recruitment, temporary and permanent employee testing, selection, and
training and Recruitment Process Outsourcing. Jefferson Wells’ revenues are derived from services related to internal
controls, tax, technology risk management, and finance and accounting. Right Management’s revenues are derived from
outplacement and consulting services. Segment revenues represent sales to external clients. Due to the nature of our
business, we generally do not have export or intersegment sales. We provide services to a wide variety of clients, none of
which individually comprises a significant portion of revenue for us as a whole or for any segment.
Financial Measures – Constant Currency And Organic Constant Currency
Changes in our financial results include the impact of changes in foreign currency exchange rates and acquisitions. We
provide “constant currency” and “organic constant currency” calculations in this report to remove the impact of these items. We
express year-over-year variances that are calculated in constant currency and organic constant currency as a percentage.
When we use the term “constant currency,” it means that we have translated financial data for a period into U.S. Dollars using
the same foreign currency exchange rates that we used to translate financial data for the previous period. We believe that this
calculation is a useful measure, indicating the actual growth of our operations. We use constant currency results in our
analysis of subsidiary or segment performance. We also use constant currency when analyzing our performance against that
of our competitors. Substantially all of our subsidiaries derive revenues and incur expenses within a single country and,
consequently, do not generally incur currency risks in connection with the conduct of their normal business operations.
Changes in foreign currency exchange rates primarily impact reported earnings and not our actual cash flow unless earnings
are repatriated.