Outplacement firms gear up for rising redundancies

In the City of London one of the biggest firms, Penna Meridian, has expanded to 130 outplacement consultants from 30 last year. Fairplace Consulting has 1,000 redundant employees on its books, twice as many as two years ago, while BG Careers has taken on 40% more capacity since January.

Outplacement firms are doing brisk business because they have carved out a role as social workers to the rich. As with social workers on council estates, rising unemployment pushes more clients through their door.

Many senior bankers are receiving six months or more of practical and emotional support when they lose their jobs, ranging from meetings with a psychologist to advice on making job applications and detailed research into the job market.

Mid-level staff typically get help for three months, at a cost to the banks of 3,500 (E5,530) or more. Junior staff might get a month, a week, or nothing.

But though outplacement is booming, it is not necessarily the money-spinner that its practitioners might hope. Alfie Noakes, managing director of Mark to Market, which mainly looks after front office staff, says banks have been pushing for lower fees for outplacement in a drive to cut costs.

Linda Jackson, managing consultant at Penna Meridian, says: "We certainly get banks asking for discounts, on the basis that last time they gave us 10 staff and now it might be 50."

She says banks this year have become more reluctant to bring outplacement consultants on to their premises, to be present when staff are first told they are being fired. If no consultant is in the room, a sacked employee is less likely to ask for their services later, thus saving the bank money.

Both Penna and Fairplace have suffered steep falls in their share price in the past two years - by more than 85% and more than 40%, respectively.

Penna issued a profits warning in September. However, the firm is affected by its struggling headhunting arm and outplacement offices across the UK that are unrelated to the City. Jackson said its City outplacement operation was profitable.

At Fairplace, Mark Allsup, the chairman, pointed to an increase in annual profits announced in September, as well as an 18% jump in turnover. He said that in a worried market investors could find it hard to distinguish between an outplacement firm and recruitment company stocks.

BG Careers is also undaunted by any downward pressure on fees. Its managers bought out the firm in September from the headhunter Whitehead Mann, using venture capital. Philip Beddows, a director of BG Careers, says: "This is a good opportunity. We've been expanding carefully this year, but if you go too fast you risk dropping your standards. If banks choose a bucket-shop firm, their former staff will notice."

Outplacement firms say that dealing with emotional trauma is one of the most important services they provide, especially at the moment. In their haste to cut costs, some banks are not going about redundancy in the most sensitive way.

Allsup says: "A lot of people are not worried about the money as they have enough put by. But redundancy can leave them emotionally jangled, dislocated and bruised. Meetings with our consultants help them cope with that."

One consultant recalls how a senior manager at a bank had chosen a date the following week to tell an employee he was fired. He then realised that it was the man's birthday and the day after that was his wedding anniversary.

The consultant said: "I advised the manager to think again whether he needed to sack the employee on that particular day, so he thought about it. Then he did it anyway."

The average time taken to find another job has been rising inexorably this year, consultants say. Jackson at Penna puts it at 18 to 20 weeks, up from 12 to 13 weeks a year ago. Many people can only get back into financial services by taking a lesser job and many others are failing to get back in at all. Jackson said about 45% of people are changing career direction altogether.

Beddows says: "More people are looking at alternatives. People are going to business school, they're working for local councils, or if they're from overseas they might be going back home.

"One person became a gardener, one wants to be a teacher, one has taken an editing job in South America."

Many others are going into the industries they dealt with as bankers. Someone who worked on brewing mergers might join a brewer, for example.

Outplacement has plenty of critics. One head of human resources at a UK bank said it was useful mainly for people who wanted to change career; those wanting to get back into the City stood little chance at the moment, outplacement or no outplacement.

Some job seekers like to rely on the internet at home to do their job-hunting.

But Allsup counters: "That can be like looking for a needle in a haystack. We have trained researchers. They can produce a list of, for example, all firms in a particular sector within 10 miles of Guildford. You can't find that on your own."

A director of one outplacement firm believes that human resources staff in banks are in no doubt about the value of his services. "I've noticed that when they are made redundant themselves, they give themselves generous outplacement packages," he says.