ManpowerGroup 2012 Annual Report Download - page 28

Our leadership position also allows us to be a center for quality employment opportunities for people at all points in their
career paths. In 2012, we connected 3.4 million people to opportunities and purpose, who worked to help our more than
400,000 clients meet their business objectives. Seasoned professionals, temporary to permanent, skilled laborers, mothers
returning to work, elderly persons wanting to supplement pensions and disabled individuals — all turn to the ManpowerGroup
companies for employment possibilities. Similarly, governments of the nations in which we operate look to us to help
reduce unemployment and train the unemployed with the skills they need to enter the workforce. We provide a bridge to
experience and employment, building more sustainable communities. We have a unique ability to connect our deep
understanding of human potential to the ambition of business so that organizations and individuals can capitalize on
unseen opportunities and achieve more than they imagined.
Our industry is large and fragmented, comprised of thousands of firms employing millions of people and generating billions
of United States dollars in annual revenues. It is also a highly competitive industry, reflecting several trends in the global
marketplace, notably increasing demand for skilled people and consolidation among clients in the employment services
industry itself.
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 workforce solutions and services is dependent on the overall strength of the labor market and secular
trends toward greater workforce flexibility within each of the countries and territories in which we operate. Improving
economic growth typically results in increasing demand for labor, resulting in greater demand for our staffing services.
During periods of increasing demand, we are able to improve our profitability and operating leverage as our current cost
base can support some increase in business without a similar increase in selling and administrative expenses.
Correspondingly, during periods of weak economic growth or economic contraction, the demand for our staffing services
typically declines. When demand drops as we experienced in 2012, our operating profit is typically impacted unfavorably as
we experience a deleveraging of our selling and administrative expense base as expenses may not decline at the same
pace as revenues. In periods of economic contraction, we may have more significant expense deleveraging, as we believe
it is prudent not to reduce selling and administrative expenses to levels that could negatively impacting the long-term
potential of our branch network and brands.
The nature of our operations is such that our most significant current asset is accounts receivable, with an average days
sales outstanding of approximately 55 days based on the markets where we do business. Our most significant current
liabilities are payroll related costs, which are paid either weekly or monthly. As the demand for our services increases,
we generally see an increase in our working capital needs, as we continue to pay our associates on a weekly or monthly
basis, while the related accounts receivable increase as they are outstanding for much longer, which may result in a decline
in operating cash flows. Conversely, as the demand for our services declines, we generally see a decrease in our working
capital needs, as the existing accounts receivable are collected and not replaced at the same level, resulting in a decline of
our accounts receivable balance, with less of an effect on current liabilities due to the shorter cycle time of the payroll
related items. This may result in an increase in our operating cash flows, however any such increase would not be
sustainable in the event that the economic downturn continued for an extended period.
Our career management services are countercyclical to our staffing services, which helps to minimize the impact of an
economic downturn on our overall financial results.
Due to our industry’s sensitivity to 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
absolute certainty. As a result, we monitor a number of economic indicators, as well as recent business trends, to predict
future revenue trends for each of our reportable segments. Based upon these anticipated trends, we determine what level
of personnel and office investments are necessary to take full advantage of growth opportunities.
Our business is organized and managed primarily on a geographic basis, with Right Management currently operating as a
separate global business unit. Each country and business unit generally has its own distinct operations and management
team, providing services under our global brands. We have an executive sponsor for each global brand who is responsible
for ensuring the integrity and consistency of delivery locally. We develop and implement global workforce solutions for our
clients that deliver the outcomes that help them achieve their business strategy. Each operation reports directly or indirectly
MANAGEMENT’S DISCUSSION & ANALYSIS
of financial condition and results of operations
ManpowerGroup 2012 Annual Report Management’s Discussion & Analysis
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