ManpowerGroup 2013 Annual Report Download - page 28

26 ManpowerGroup 2013 Annual Report Management’s Discussion & Analysis
MANAGEMENT’S DISCUSSION & ANALYSIS
of financial condition and results of operations
Our leadership position allows us to be a center for quality employment opportunities for people at all points in their career
paths. In 2013, the 3.4 million people we connected to opportunities and purpose worked to help more than 400,000 of our
clients meet their business objectives. Seasoned professionals, skilled laborers, temporary to permanent, parents returning
to work, seniors wanting to supplement pensions, previously unemployed youth and disabled individuals all turn to the
ManpowerGroup companies for employment possibilities. Similarly, governments in the nations in which we operate look to
us to help provide employment opportunities and training to assist the unemployed in gaining the skills they need to enter
the workforce. We provide a bridge to experience and employment, and help to build more sustainable communities.
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 and 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, 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 impact 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 generally 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 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 counter-cyclical to our staffing services, which helps to offset 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 have their 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. 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: Americas, which includes United States and Other Americas; Southern Europe,
which includes France, Italy and Other Southern Europe; Northern Europe; APME (Asia Pacific Middle East); and
Right Management.