Three Ways to Build Value In Your Staffing and Recruiting Business by Doing More with Less
Posted: Tuesday, February 17, 2009
by Phil McCutchen
VCG, Inc.
The drumbeat from the media thunders economic turmoil. Housing on the rocks, credit markets tightening, unemployment creeping up, and the stock market gyrating up and down all contribute to wide-spread anxiety. The truth is that it is not the economic situation but your attitude, preparation and action that determine your ability to succeed. While attitude arguably plays the most important role in your success, in this article we'll focus on three key areas for preparation and action that are almost sure to help you regardless of what the economy is doing. In our thirty-plus years of providing the staffing and recruiting industry with software tools for success, we've seen these axioms consistently applied lead to continued success and profitability.
When times are good, business practices and workflows that deliver only marginal profitability are sometimes easily tolerated. But when orders slow to a trickle, those practices can come back to haunt you.
The time to build efficiency into your organization is, of course, right from the beginning. But a regular re-appraisal of your operations and how you might be able to tighten up your practices can help wring more profit out of every transaction.
Begin by making it an action item to get your team together on a recurring basis to review the steps of successful sales and order fulfillment transactions.
Your sales process is probably the first place to look for inefficiencies. Dave Stein, CEO and Founder, ES Research Group, Inc. a sales training selection firm, says, "When we ask sales leaders, general managers and CEOs whether they have a sales methodology and if sales people are compliant in its use, the answer is often disappointing. Many respond saying they have no methodology; but that's really not the case. Their situation is, in fact, far worse. What they have is possibly the same number of methodologies in place as the number of sales people." If your staffing and recruiting firm has similar inefficiencies, you can almost certainly figure out how to cut a step or two out of the sales process or execute faster or with better service to the customer. That means you'll close more deals, fill more orders and put more money into the bank.
Another area where saving time equals more profit is in your recruitment processes. For example, Tom Porter, CEO and Founder of Marquee Staffing was able to reduce the time it took his recruiters to qualify candidates by 75 percent by having every candidate apply through a Web portal integrated to their staffing software. A computer kiosk in every branch office serves the same purpose for walk-in candidates. The time saved goes to revenue generation, not data entry.
Similarly, a staffing-specific integrated payroll/billing system can reduce or eliminate back office workflow inefficiencies and save you both time and money. John Porrello, CEO of Priority Business Services, put such a system into service and said, "It will enable us to double our growth without having to hire a new back office employee." For Porrello's firm, that translated into a projected salary savings of $60,000.
Finally, and perhaps most importantly, become a believer in running your business "by the numbers." Your key performance indicators on your operations and your staff should be measurable. Having information at hand that you can act upon is the difference between so-so and stellar performance. For instance, Steve Sullivan, President of the Cambridge Group, knows that having near real-time reporting through a business intelligence dashboard is vital to success. "Finding performance issues and dealing with them before they become a problem is invaluable" Sullivan says. "Instead of seeing a report of the business metrics which are a week old due to a manual, time-intensive process, we see what is happening right now."
TWO: Build Long-Term Value
Building a staffing or recruiting company is somewhat like building a well-performing stock portfolio for your retirement. Strategically speaking, you don't focus on next month or next quarter, you focus on highly consistent performance over a much longer period of time. If you make your portfolio choices based on that consideration, odds are that you can rest easy in its long-term performance.
Likewise, your staffing and recruiting "portfolio" should focus on delivering similar long-term performance and value. Jim Childs, Partner of Childs Company, a 13 year veteran of the staffing industry as a CEO and investment banker, says, "There are no silver bullets. However, there are some strategic ideas that may provide you with a framework to help build even greater value in your business." Childs' five strategies for value building are:
1. Develop niche leadership. "Niche companies are always more valuable than generalist companies," Childs says. Niche leadership means that your business is perceived to be the "go-to" business in its service area or specialty.
2. Focus on specialties and higher gross margins. Childs points out that, "The specialty players can have gross margins well over 30 percent due to their specialty focus and their mix of permanent placement revenue." In any market, the need for specific talents will always be in demand, and the payoff is almost certainly higher.
3. Avoid customer concentration. The old adage, "Don't put all your eggs in one basket," is well-applied here. Childs notes that having a big account can be "a high-class problem to have. The trick is to create urgency in the organization to build around this anchor account."
4. Build a deep management team. Customer decisions should be driven as far down the chain-of-command as possible by a team you can delegate responsibility to. Childs says, "It's vital to build a deep management team that can drive the business so that it is not overly dependent on one or two people, including the owner."
5. Keep building real client relationships. Childs suggests that you avoid indirect business such as being a second-source supplier. "You should realize that indirect business represents no future equity value in the company," Childs states. "Over time, your model needs to have deep, long-term client relationships to really get a premium in the marketplace."
THREE: Stick to Your Business and Invest in Your Staff
What, exactly, is your business? How, exactly, do you differentiate yourself from every other recruiting and staffing firm out there? Does every member of your staff understand and believe in the answers to these two questions? You must clearly define the very specific core competencies that are at the heart of why you're in business.
If you haven't done so already, write down your business purpose your mission. Analyze what it means and what it takes to support your mission successfully.
Let's say that your mission statement is: "We find and place financially trained and skilled employees into temporary contract assignments and direct-hire placements with Fortune 1000-level businesses." If this were your mission, you would list everything you must do to support the success of the mission. Things like recruiting financial talent through the best college and university accounting programs and related business and social networks. Then you'd make a second list that includes everything else you have to do that doesn't really support the mission; like cleaning the office or doing data backups.
You must focus on your core competencies stick to your business. That means that everything that is not central to the success of your business those things on that second list are things that you should consider eliminating, streamlining or outsourcing.
For example, it can be strategically useful for you to outsource areas of your business operations not central to your mission such as your information technology infrastructure. This concept is gaining wide acceptance with the growing use of Software as a Service subscription-based applications. Jena Satchell, Vice President and Partner, Resource One Staffing, remarked on her own SaaS software deployment, saying, "The cost savings have been great -- I don't have to worry about an IT staff while I continue to focus on growing my business."
Similarly, it can also be effective to outsource such operational activities as payroll processing and W2 forms processing. While every strategic initiative may not be right for your business, it pays to be flexible and look at the potential opportunities to reduce your operating costs while maintaining or improving service delivery.
Finally, and most importantly, recognize that your own staff members are looking to you for leadership and reasons to out-perform the norm.
According to surveys by the American Staffing Association, the average turn-over of staffing firm staff personnel is nearly 50 percent. Yet it's been proven that reducing your own staff turnover and increasing their level of satisfaction can generate big returns. A survey conducted by the Gallup organization on the Impact of Employee Attitudes on Business Outcomes found that organizations where employees have high satisfaction deliver 38% higher customer satisfaction scores, 22% higher productivity, and 27% higher profits.
What can you do to improve your own staff's satisfaction-based performance? First and foremost, develop a strong staff employee retention program around continuous training and other tactics that should be geared to eliciting one response from your employees, "The pay ain't bad, and they treat me great!"
In surveys, good wages ranked only at number five on the top-ten list of employee needs factors. Appreciation for their work and feeling that their work and role was important ranked number one and two respectively. The training and retention program you put into practice reveals the value you place on your own staff. Your investment in their careers and development creates a sense of appreciation, motivation, loyalty, and understanding of their importance to the success of the firm that delivers huge paybacks.
CONCLUSION
Continuous improvement at both the organizational and personal level is the key to efficient profitability. To building value by doing more with less. W. Edwards Deming, the numbers-driven statistician credited for significantly helping Japanese businesses become the powerhouses of quality, performance and profitability that they are, once said that "Long-term commitment to new learning and new philosophy is required of any management that seeks transformation. The timid and the fainthearted, and the people that expect quick results, are doomed to disappointment." Savvy staffing and recruiting business owners and managers will take those words to heart and reap the rewards.
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About the Author:
Phil McCutchen is the Marketing Manager for VCG LLC (www.vcgsoftware.com and www.pointwing.com), a leading supplier of fully-integrated staffing and recruiting software since 1976. With an extensive background in B2B marketing, Phil has been with VCG for more than 16 years. He can be reached at pmccutchen@vcgsoftware.com or 770-246-2319.
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