A significant number of agencies are risking their future business by failing to take a long-term view it has been claimed.
According to research by Plimsoll, 141 companies in the recruitment industry can be defined as having ‘reckless management’.
Typically these companies are focused entirely on market share said Plimsoll. Although they deliver tremendous annual growth rates of 27.7 per cent per year, they return an abysmal margin of just 0.3 per cent on average. In addition, 60 of these companies are loss-makers.
Senior analyst at Plimsoll David Pattison said: “Recent corporate collapses like Enron and WorldCom were blatant examples of reckless management driven by over ambitious managers opting to take on great risk from high debts.
“It's not the quality of information available but knowing what to look for. Business leaders need to understand the whole company to make an informed opinion, not just single numbers thrown around.”
The report also highlighted 135 companies that enjoy profitability but suffer from the opposite syndrome, 'cautious management'.
Despite 48 companies now making more profit than they were two years ago, they have accepted a lesser share of the market, a factor said Plimsoll that could affect their survival over the long term.