Unusually relaxed and undemonstrative for a business leader, Ben Noteboom insists that he’s not obsessed with work. But the chairman and CEO of staffing giant Randstad Holding keeps charging ahead in a fiercely competitive industry.
Since Noteboom took over in 2003, Randstad has nearly tripled its annual revenue, to €14.2 billion ($19.7 billion) last year. It’s now the world’s second-biggest human resources provider after Switzerland-based Adecco. Much of this expansion has come from mergers and acquisitions, especially the 2008 takeover of Dutch rival Vedior — then the No. 4 player globally — in a €3.3 billion deal.
But Noteboom, 53, also excels at driving organic growth, almost single-handedly at times. In 1997 he set up Randstad Inhouse Services from scratch to provide on-site human resources services. At first, sitting in an eerily quiet office with only a secretary reporting to him, Noteboom wondered if he’d made a big mistake. But the unit delivered more than €2 billion in revenue last year.
To offset economic cycles in what is often a low-margin business, Amsterdam-based Randstad’s broadly successful strategy has been to push up volumes. During the first six months of 2011, revenue jumped 17 percent over the same period last year, to €7.6 billion. The earnings before interest, taxes, depreciation and amortization margin was only 3.4 percent, compared with 3 percent in the first half of 2010.
Founded in 1960 by Ger Daleboudt and Frits Goldschmeding — the latter is still its top shareholder, with a 30 percent stake — Randstad has some 27,500 employees and roughly 4,200 offices. Temporary staffing across most sectors, about 40 percent of it blue-collar, makes up the bulk of its business; on any given day it deploys half a million workers under the brands Randstad, Rowlands International and Tempo-Team. But fees for permanent placements yield an outsize share of profits: 10 percent, compared with less than 2 percent of revenue.
Picking up Vedior gave the group much more clout in the higher-margin professionals market, as did September’s acquisition of Fort Lauderdale, Florida–based SFN Group, which specializes in sectors such as finance and information technology.
Noteboom points to four trends that will help keep Randstad’s business thriving. First, employers want more flexibility in their staffing. Second, as the number of working-age people in Europe declines, companies will be chasing a smaller pool of workers, whom they can entice into changing jobs more often. Third, deregulation is gaining momentum throughout the European Union and should increase demand for temporary employment. Last, employers are looking for one-stop staffing solutions.
Randstad is the biggest staffing company by revenue in several parts of Europe, notably Germany and the Benelux countries, and the third largest in the U.S. Listed on Euronext in Amsterdam, it has a €4.4 billion market capitalization. Although the company’s stock has been climbing recently, it closed at €26.30 on October 21, down 39 percent from a two-year high of €43.10 in February.
Noteboom, who studied law at Erasmus University in his native Rotterdam, spent his early career with Dow Chemical Co.’s Netherlands branch as a sales and logistics manager. In 1993 he joined Randstad to work on two small M&A deals.
Back then annual revenue was less than $2 billion. But Noteboom was so bullish about Randstad’s prospects that he came on board without an official job title — simply an understanding that he would soon rise to senior management. A few years later he launched the division that would make his reputation and propel him on to the board in 2001.
Today, Noteboom, who spends 40 percent of his time traveling across the 43 countries where his company operates, is perfectly poised to read the employment market. In July and again last month, he spoke with Staff Writer Neil Sen about Randstad’s growth prospects in a rapidly changing labor environment.
Institutional Investor: Judging by the state of your business, is the employment market slowing?
Noteboom: No, not as far as we can see. Globally, there has been an upturn since September 2009, when our blue-collar business in the southeast of the United States started to recover. As we had found before, if that market improves, the rest of the employment market in the U.S. and much of the rest of the world tends to follow. Not all countries or sectors are booming, by any means. The U.K., for instance, where our business is predominantly white-collar and much of it public sector, is slow overall. Some countries, like Germany, where we have a more comprehensive view of the market as the biggest staffing company, are doing much better.
You’re in a very cyclical industry. How confident are you about Randstad’s resilience?
We had our worst year in 2009, with a 27 percent decline in revenue. That’s quite something for any business. All sectors were affected, especially automotives. Yet we still reduced debt from €2.4 billion to €800 million over the two years following the acquisition of Vedior, and we still made a profit last year, when our revenue grew 14 percent. We’re very diverse now, and we’re not dependent on a small number of clients. No single client represents more than 1 percent of our business. I’m also proud of the resilience shown by our employees on the ground, notably in our Japanese business, which expanded when we bought FujiStaff Holdings in 2010. We have several branches in Sendai, an area that was badly affected by March’s earthquake and tsunami. We were very fortunate that none of our employees was harmed, but it was still a big achievement to get everything up and running again in ten days. We project there will be a minimal impact, with only a few million euros of lost revenues in Japan out of a total of around €500 million.
Is yours a good business to be in?
Yes, staffing is a growing business. In the public and the private sectors, people see that temporary staff can improve efficiency. To take an obvious example, supermarkets know that they need more people on certain days, or certain times of day, than others. Accordingly, legislation is moving our way. In Europe, for instance, the market is opening up thanks to the EU Temporary and Agency Workers Directive of 2008. Countries such as Spain and Italy will have to allow temporary staff to work in the public sector, and France opened up its public sector to staffing firms last year. Other countries, notably Japan, are also beginning to recognize temporary staffing in legislation. The potential growth in continental Europe can be seen in the relatively low penetration so far of flexible labor. The average stands at about 2 percent, compared with 4.5 percent in the U.K., where labor laws are more liberal.
Do you think labor is becoming more mobile?
Yes, and the demographics suggest there will be more mobility in the future. According to a study by the University of Amsterdam in cooperation with us, the European Union will be short some 32 million people of working age by 2050. That’s about 10 to 15 percent short of the total demand for labor and is likely to make those engaged in employment much more mobile.
How well has the integration with Vedior gone?
The merger went better than I dreamed it would. It was a sizable acquisition, and the company was only 10 percent smaller than we were by number of employees. First, we have kept the key people in senior management levels below the board and appointed two Vedior board members to the executive board. Second, we’ve coped well with the big challenge of rebranding. Vedior had 180 brands across 53 countries, whereas Randstad had only three in 20 countries. What’s more, Vedior had separate companies attached to those brands, so that in Australia, for instance, it had 27 brands with 27 managing directors and 27 COOs. We’ve had 125 rebrandings in the last two years, and we will have done more than 130 by the end of the year. Now 95 percent of our business is branded Randstad, and we have simplified the management structure. Vedior had a bigger professional business than us, so it was very complementary, and our combined revenues were €14 billion in 2010, compared with €9 billion for Randstad before the merger.
Are you in the market for another big merger?
We couldn’t pull off another deal like that now; there is no one of ?Vedior’s size available. I always want the company to be bigger, but for us priorities one, two and three are organic growth. However, I’ve said we will look out for potential additional acquisitions, and we have made a number of smaller acquisitions since the Vedior deal. In the summer we bought SFN Group, which has complementary strengths in staffing and professionals, for $771 million. This doubles Randstad’s U.S. revenues, to $4.6 billion, and makes us the third-biggest human resources provider in North America, behind Adecco and Manpower.
Chief executives are often very focused on share prices. How worried are you about the decline of Randstad’s stock during the past 12 months?
I’m actually more focused on the overall performance of the business than simply the share price. But the shares of the other global recruitment companies have also declined, and the driver has been the very volatile macroeconomic environment. Our stock performance does not reflect company performance, however, which has been very positive. We have seen five consecutive quarters of double-digit growth.
How do Randstad’s businesses in China, India and other emerging markets figure in the group’s strategy?
Emerging markets are very important for Randstad. We’re the market leader in India and Brazil and have top-three positions in Argentina, Chile and Mexico. In 2010 the rest of the world outside Europe and North America, including China and India, contributed 7.6 percent of the company’s total revenue, up from 5 percent in 2009. In China our core businesses are search and selection and payroll for fast-moving consumer goods, technology and manufacturing. Although flexible staffing represents a relatively new service to Chinese companies, we are building our presence, and demand is increasing. In India, Ma Foi Randstad provides permanent placement, staffing, payroll and consulting.
Does your work allow much time for outside interests?
I’m definitely not a workaholic, and I try to make time for my family — I have three children — and other interests, especially sailing. I very seldom work on weekends, perhaps taking the occasional call, and travel for business might mean I’m away for three or four weekends a year. It’s my belief that if you end up working on weekends, you’re inefficient. If you work an extreme number of hours, you’re not productive. With a balanced life, you perform better. Even during the week I usually get about seven to eight hours’ sleep every night. It helps, of course, that I’m not a control freak, that I am comfortable delegating. I take the view that if I can’t do it better myself, it’s not something I have to do. • •
