Tom Kosnik, President of Visus Group and Founder of Presidents' RoundTable, says he got into the staffing industry because he drew the shortest straw. Now, he will be the first to laugh and tell you that this was the best thing for him. Tune in as he and Lisa discuss the intersection of community and entrepreneurship, as well as the importance of examining your blind spots for business growth.
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Get ready to explore the shifting dynamics of staffing in today's job market. Tom's insights offer a roadmap for companies to adapt, thrive, and excel.
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Todd Bavol, CEO and Co-Founder of Integrity Staffing Solution, shared a few tips in building a great culture.
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Let’s face it. Over the past few years, the Marketing function has become more critical to the success of a staffing company than sales. This is a bold statement, I know. A staffing company is, essentially, a sales organization so how is it that marketing has become more critical to the growth plan? Well, we’ve been hearing buzzwords like “digital transformation”, “automation”, and “social recruiting” for years now. Plus, more marketing technologies are emerging and the need to both understand and manage these platforms is becoming more important as people want to be communicated to on their terms. Throw in the pandemic accelerating all of this and now the entire selling and recruiting landscape has completely changed, not just for the staffing industry, but for all the clients as well.
The entire sales methodology has shifted. When we look at the outbound sales function, it is a state of the art website that is being recognized by the search engines that must be aligned with the sales efforts. Remember, “sales” is outbound or push-orientated and “marketing” is inbound or rather pull-orientated. It’s no doubt you have your salespeople making phone calls not really to get anyone on the phone that minute, but rather to leave a compelling commercial that will intrigue a hiring authority to explore the company further, most often driving them to their website. Once that is reviewed and the value proposition is clearly communicated, then and only then will the hiring authority reach back out to the salesperson (hopefully!). A good majority of a salesperson’s activities are now social media-related tasks whether it’s direct outreach on platforms like LinkedIn or it’s keeping in front of them via a posting schedule. And should be responsible for the execution of this sales work? The marketing leader, namely the VP of Marketing or CMO.
When we look at the recruiting function, where do I start? A marketing leader should play a huge role in the recruitment strategy in their staffing company. The marketing leader should be working with Recruiters to have a certain persona on LinkedIn and other social media platforms. Marketing should be assisting recruiters with writing job board ads to make the ads more attractive, thus acquiring a higher percentage of candidates. Marketing leaders should be working Operational leaders and IT to ensure the quality of the information in the ATS is high and work with Recruiters to more fully utilize the database for more efficient sourcing. Most importantly, marketing leadership should be managing the marketing campaigns, including candidate engagement platforms, like Sense and Herefish, and texting programs to ensure that staffing firms are getting the utilization and conversion rates from their investments.
I am just touching the surface here with the responsibilities of this VP of Marketing or CMO. I have not even addressed all the senior level executive responsibilities. Think through the sales & recruiting functions and work tasks. This marketing leader should be touching all of those responsibilities. We are even seeing our clients, who are small owner-operator businesses, hiring full-time marketing leaders to lead and manage a bulk of this work.
Guess who is managing and advising the entire company on job boards and job board usage? You guessed it, the CMO. Specific to job boards, all bets are off. First, the job board metrics are way off due to all the craziness that has been going on in the economy and the job market. Any when I say “the job board metrics are way off”, I mean that the price keeps going up and up and up and the results continue to go down and down and down. A staffing firm cannot solve this issue by thinking about and utilizing job boards the way job boards were utilized pre-pandemic. The smarter staffing firms are using programmatic advertising. And guess who on the team is figuring that all out? Again, it’s the CMO.
I have been blogging here about the Chief Marketing Officer. This title is going to be different depending upon the size of your staffing organization. It may be a Direct of Marketing or a Vice President of Marketing or a Marketing Manager. Regardless of the title, I really believe this role has become more critical to the success of a staffing firm than the Vice President of Sales. At the Visus Group, we help staffing firms figure out these functions and roles and responsibilities and work tasks to adequately respond to the rapidly changing world of selling and recruiting. Marketing has rapidly become a very critical function in most firms, but finding the right leader to take the helm can be a challenge. We can help. The last thing you want to do is find yourself behind the competition. If you’re thinking about this role or hiring a marketing leader, contact us.
As a business owner, it is common practice to eventually need to seek outside legal counsel or hire a law firm to represent your organization. The staffing and recruitment industry is no different. In fact, I might argue based on my nearly 30 years in the industry, that finding the right legal fit for your business is even more important given all the nuances with regards to employment law…after all, we are in the ‘people’ business. After a couple of recent experiences with my clients, I thought it would be timely to offer some advice to avoid common pitfalls when hiring legal representation.
Let’s start with a few examples where my clients were given legal advice from attorneys that did not have experience in the staffing industry.
Case Study #1
An owner of a staffing business had a solid B player that took a job with a competitor. The business owner’s attorney advised to take legal action against the employee and the competitor. I suggested going to the competitor and asking for a fee to buyout the non-compete. The non-solicitation could remain but make some money on a buyout. The pursuant owner of the staffing business spent more than $100k and lost on all counts. I don’t know if this is true, but I heard that 9 out 10 non-compete litigations go in favor of the employee. Very difficult to stop someone from making a living as a recruiter or sales executive.
Case Study #2
An owner of a staffing firm generating $8 million in annual revenue was selling the firm. The owner had a very solid offer from a very ethical staffing business that was north of $100 million in annual revenue. The structure of the deal was 70% cash at closing and 30% in an earnout. The person that was selling had an attorney that had never assisted in the sale of a staffing firm. The attorney was adamant about a “personal guarantee” from the owner of the buying firm, a staffing firm north of $100 million in annual revenue, let me remind you. There are so many other ways to guarantee such a transaction. The deal went sideways. (and then what)? Perhaps we come up with it went sideways and the buyers pulled their offer?
Paying for outside support is not usually the top choice for any business owner, however, the cost avoidance when hiring an expert, is worth it in the long run and can actually save you money in many cases. I have seen many smaller firms where they will have their CFO or HR resource review legal matters, however you have to ask yourself depending on the matter, is the risk worth it? When matters get more serious and with ever changing laws in the employment world, it is smart to engage legal support. When hiring an attorney or contracting for legal services here are a few things to consider in order to find the right fit for your business.
At the Visus Group we have a few alliance relationships with attorneys that have multiple years of staffing industry experience. If this is an area of concern for you or your staffing firm, feel free to reach out to us. We work with many staffing firms through our RoundTable programs who spend time addressing and discussing legal issues they are facing as well as use our program to share their networks with our members.
Technology in the staffing industry sure has evolved over the last few years. Right now, there are over 400 hundred technologies that are currently supporting the staffing industry. That’s right, 400+ technologies! How do you know which ones are new? How do you know where to start? How do you know which ones are the best ones for your staffing firm?
What I frequently hear from my clients and members is this: “I’m a business owner of a staffing firm, someone with a sales background. How can I possibly know how to make the right decision on technology?” It’s a valid question and one that has a variety of answers. The first step is to really analyze where you currently are on the technology spectrum ranging from low-technology firms, a smaller firm or one that doesn’t use too many products, to an enlightened staffing firm, one that has built out their tech stack and understands how to leverage their IT department for greater efficiency. The reality is that many are on the former side.
The good news is that we are in a unique position, through our Presidents RoundTable, to get exposure to all the IT challenges that staffing firms of all sizes face on a weekly basis. Through all of these stories and consulting moments, we’ve identified five critical areas that staffing firms need to address within their IT strategy:
Align your technology stack to your business model.
What is your business model? Define it. Know it. Map it out. And then determine what is the best technology to help you implement that business model in the marketplace. The number one error we see staffing business owners make is that they get enamored with shiny new technology. Or, they hear from their Sales Reps & Recruiters, “We have to have this new technology! This new technology will be a game changer for us!”
The worst mistake you can make (as it relates to IT) is fitting the technology to your process. The replicable business model is the anchor (the key criteria) in which all decisions on technologies are judged against. It is that simple. A simple decision-making tree will help any staffing firm make far better IT decisions. And knowing what specific business model is being implemented.
Decide who will manage your technology.
The makeup of your IT department can have an enormous effect on how fast or slow you are to new technologies. There are essentially two structures – in-house IT or Outsourced.
Outsourcing: If you are a small Owner/Operator staffing business you really have no choice, but to outsource as your payroll is best served for recruiters and salespeople. In this model, you will be paying for work done, some monitoring, but you may not see the dedication this company may have to building an IT roadmap as they will be in maintenance mode for you. The key here is to find an IT Support firm that aligns with the size of your firm and has your firm’s best interest at heart.
In-house: If your firm is midsize to enterprise, then you will most likely have IT personnel on your staff. The biggest challenge here is having the right person in the right seat. When you do, they are truly your IT QB owning the roadmap, procuring powerful vendor relationships, and getting themselves involved in your business to help make your processes better through automation. On the other hand, we have seen staffing firms held hostage by in-house IT personnel that “had all the magic passwords” or were unwilling to think critically. There are a lot of fantastic IT professionals working in companies. You just want to make sure you have someone that does not put job security over the company’s best interest.
Think about your integration strategy.
Let’s be honest, there is no staffing firm 100% happy with the ATS they are currently utilizing. Every ATS has challenges, wonky processes, or lack of wish list items. Also, every ATS has challenges customizing to an individual staffing firm’s specific business model. Your business could be part of the problem. How? Let’s think about three things. (1) Not fully vetting the capabilities of the ATS to the business need. We know of several staffing firms that implemented an ATS and in less than 18 months later switched to another ATS. Why? Because they didn’t stick to their business model. Define it, know it, then go out and find the best ATS that helps you implement that business model in the marketplace. (2) No ATS will be perfect. Just accept this fact. There is a front office, middle office, and back office. The reality is that most of the ATS’ in the market are for front office needs – recruiting and sales. It is no surprise that the middleware and back office can be suspect in many ATS platforms due to their focus on candidates and placements. (3) Integrated System Versus Separate Systems: this is a very big decision. Do I have one system where my entire process is integrated or do I find a fantastic front office and then find a separate middleware technology and back-office technology that becomes semi-integrated into that fantastic front office technology? There are pros and cons to both strategies and it just matters how this works with your business model. Also, a final consideration here is identifying your subject matter experts or those super-users who will help ensure the technology is running and all are abiding by the process.
Acquire a true technology leader.
As many of you know, we sponsor peer RoundTables through the Visus Group. Over the last several years, we have been asked to start a CIO RoundTable on many occasions, but we failed to get traction from this type of RoundTable. This RoundTable was meant to provide an outlet and community for IT leaders to discuss tech stack, current trends, and product roadmaps. Why did this fail to attract a following and what information did we gather from this? Outside of a lack of demand, it told us that many staffing firms really do not have a “true” technology leader on their staff. Rather, these staffing firms had “director-level” personnel on staff focused less on strategy and more on infrastructure and tech support. Instead, the technology strategy and roadmap responsibilities fell under the COO. In my opinion, this is not the right approach for larger staffing firms. Regional and national staffing firms need a true CIO on staff because technology is transforming the staffing industry at a record pace. Having an experienced technology leader on your leadership team ensures you have someone who understands how to evaluate new technology and translate it into current processes and overall roadmap.
Secure your technology budget.
The most important part of the equation – a technology budget. When you add up your tech stack costs between servers, ATS, phone, hardware and software to run your business, it all adds up quickly! Yes, this is all part of your IT budget, but is this a true representation of your entire IT spend? And can you calculate any cost savings or ROI? Many of our clients don’t know where to start or end with budgeting and determining the true ROI (return on investment) on technology investments. Our rule of thumb is this, if you invest in innovative technology and it does not increase the average gross profit production per internal production personnel, then it must not be the right technology for your business.
Technology has become an enormous area for staffing firms to conquer with the onset of new players and the pandemic increasing the need for digital transformation. As mentioned, these are the five areas I would circulate to my leadership team if I were in your shoes at your staffing firm. How can you correctly identify the technology that will work best for your firm without sacrificing wasted investment, additional processes or underutilized platforms? This is where the Visus Group comes in. We assist staffing firms by assessing their existing tech stack and make prudent decisions which align with your business model. Don’t get caught making the wrong decision – let’s chat!
With over 20,000 staffing and recruitment firms in the industry, there are always mergers and acquisitions that occur. According to Duff and Phelps research 115 staffing industry M&A transactions were completed by 96 unique buyers in 2020. This was a 20% decrease from the 143 transactions completed in 2019. Strategic buyers accounted for 85% of the staffing industry acquisitions in 2020, with private equity funds (financial buyers) investing in new platform acquisitions accounting for the other 15% of transactions.
Of the 115 transactions reported in the 2020, 44 involved companies whose predominant service offering was IT staffing and/or IT consulting. Healthcare staffing is another historically attractive sector, with 16 transactions completed in 2020.
We’re seeing that in this post-Covid era, a lot of staffing firms are in the market to acquire, but unfortunately, few do it well. Buying a small competitor or acquiring in a new market to get into that market sounds fun and sexy. The fact of the matter is that there are tons of places to make mistakes, whether it be wrong fit, not enough education of the financial indicators, or just being a novice to the valuation process.
In this short blog, I am going to outline some of the common errors I see buyers making in their attempts at acquiring a small to midsize staffing firm.
Here are just seven points here where buyers make common mistakes when acquiring companies, but there are many more. I will tell you, if you want to lose a lot of money, go do an acquisition without the appropriate assistance.
Here at the Visus Group we have 75+ staffing firms in our RoundTable program and over half of these members are actively seeking acquisitions. If you are looking to get orientated into doing acquisitions, think about our advisory services or joining a RoundTable and learning from staffing firms that have a track record of successfully getting deals done.
Don’t get me wrong, I love strategy. The big decisions. The army generals in the war room, looming maps, deep thought discussions on sweeping moves. But where the rubber meets the road, where execution is had, where battles are won, is at the culture level. “Culture eats strategy for lunch” is a very famous comment made by Peter Drucker that drives to the very point of this article – culture is key. What this means is that a company can have the most well thought out strategy in the world, but if the company lacks an engaging culture or does not truly align to a common purpose, the results could be disastrous. With my staffing clients, I see a wide range of companies with strong cultures and those with ever-changing cultures or lack identity. The degree of growth among these various firms is eye-popping.
Building an engaging culture is a very challenging task regardless of the size of the business. It is likely more difficult in small firms versus middle market or enterprise firms. In small firms, the culture is driven 100% by the owner / operator of the business. Venturous decision making versus prudent decision making, autocratic management versus collaborative management, highly standardized sales methodologies versus non-standardized sales methodologies, etc., it all falls on the back of the owner / operator. How can this problem be solved and how can a firm of any size build an engaging culture?
It all starts with a compelling vision and core values. A VISION is not “we want to grow to $100M in revenue”. Vision is not “we want to open offices in 25 States”. Vision answers the question, “What difference in the lives of our clients, candidates and internal employees does our organization make?” It is unchanging. Deeper than and far more reaching than a revenue goal or a strategy. Core VALUES are the principles in which we live by. The gas that fuels the engine. The guideposts that direct our behaviors with clients, candidates and internal employees. These values are mentors that coach us through decision making. If a company has no vision and no core values then it is dead in the water. The company will never have an engaging culture where execution and positive results will always be an issue.
Once vision and core values are established, management can build out what we call a “culture team”. What is this? It is a team of internal employees selected by leadership that is both cross functional and cross generational that meets or exceeds the newly discovered core values. If a company is serious about creating an engaging culture then members from sales, operations, back office and management need to all be represented on a culture team. Representation just from one or two departments and the culture team’s efforts will not only become meaningless but likely that the team will experience group think. Cross generational representation is also critical. Generational gaps are real. A lot of companies never address it. “Oh, that’s just John, he is long in the tooth”. “Oh, that’s just Ashley, she is a millennial”. This type of thinking and speaking in a company is a culture killer.
Once this team is established, they conduct a series of interactive dialogues on some challenging questions. Notice I did not say “a series of meetings”. These engagements are not meetings, rather they are spaces where members of the organization can speak from their hearts about what matters most to them about being a sales executive, about being a recruiter, or about being a back office support person to the organization. They are spaces where members share where they find purpose and meaning in careers and in their working relationships with their colleagues. Creating these spaces is crucial in building a sense of purpose and accountability among the entire members of your team. When we typically engage in a cultural assessment with our clients, one easy way to test whether a staffing firm does indeed have a strong and engaging culture is through a brief, informal focus group. Why do I say focus group? Because it’s an easy way to see whether your teams are rowing in the same direction (by aligning to a common culture or purpose) or spending their time complaining and pointing fingers. It’s unfortunate, but it happens more often than not. And, most importantly, it’s best to get everything out on the table in order to build a true and honest culture within your group.
A culture team will dig deep and respond to questions about the specific behaviors that tie back into the values of the organization. What specifically does it mean to be a culture of integrity? What are the specific behaviors that exude living out a value of integrity? Take any of the common values we see posted on a company’s website such as, Honesty, Integrity, Community. Someone, the culture team, or better yet, leadership has to articulate the specific behaviors that live out the values or short list of values. There is a reason why a sizable number of employees cannot recite the company’s core values. It has nothing to do with their memory. They simply have never been asked to enroll in the company’s values or they have never been shared. The behaviors are not articulated, modeled nor discussed in any corporate gatherings by leadership and most often, the founder / owner.
Culture work is not for the faint of heart. It is risky. It is work. Here at the Visus Group, this is the kind of work we help owners and leadership teams walk through. The war for talent is a real thing. Sure, we can certainly work with your staffing on creating a sound strategy, or building a growth plan, but having an innate, engaging culture goes a long way toward achieving results and beating the competition.
Happy 2021! As we move into this new year, here are a few predictions (or maybe not predictions as much as obvious statements!) about where we are headed as an industry. Let’s get started. The staffing industry is going to experience double digit growth in 2021. Borrowing money is not only going to be accessible, but interest rates are going to remain low. The rollout of the COVID-19 vaccine will increase consumer confidence and hopefully will allow us to open more doors to dining, schools, and back to the office.
These are all great signs for us in the staffing industry. But, how do we take advantage of these opportunities? What key initiatives should we be focusing on to put us on a path for growth? And finally, how do we avoid our past mistakes we’ve made as it relates to our business planning? Trust me, these are common questions all staffing owners and leaders ask themselves each year. Here are my top recommendations to avoid perennial pitfalls:
Many staffing firms struggle hiring new employees. Staffing firms that succeed in this area execute on several components:
Faulty hires cost staffing firms millions in lost revenue through poor culture fits or lack of production. Refine your hiring methodology to a science to take advantage of the pending growth opportunity.
It is not uncommon to see 20% of a staffing firm’s sales reps generating 80% of the revenue. What if a staffing business owner or manager can figure out how to hire “A” players? You can! This is where cultural awareness and matching come into play. Your company has a very specific “culture”. For example, collaborative versus independent, or entrepreneurial versus highly structured, or authoritative decision making versus collaborative decision making. These are just a few cultural preferences. There is a way to understand your firm’s cultural preferences and then discover the cultural preferences of candidates your firm is recruiting and interviewing. This is the secret sauce to hiring “A” players that fit and thrive in your organization. But remember, Sticking to a great hiring process and a culture match is one thing – but also ensuring we have a rock solid training program in place that is scalable and knows it works is critical. As leaders / managers of an organization, we have to ‘create the opening’ and provide all the necessary resources to set our people up for success. That all said, getting them in the door is one thing, ensuring we set them on a proper development path is critical as well versus the ‘sink or swim’ mentality.
There is a lot of talk in the industry about staffing firms retaining a 80% virtual business model. The data is starting to come in. Sales teams that are working in an office environment where they can easily collaborate are more successful over sales teams that are working remotely meeting on zoom a couple of times of week. Ethan Mollick, Associate Professor at Wharton, recently conducted a study on the productivity of remote working versus in the office working. Mollick states, “A downside of remote work is that we can’t casually learn from each other the way we can in an office. The effects of such interactions are huge: Lunch meetings between two salespeople where they discussed sales approach boosted revenues for both by 24% four months after”!
The fact of the matter is that most people cannot reach their full potential working remotely. Throughout this COVID-19 pandemic, it has been easier working from home with restaurants and bars and a lot of other venues closed. Once the economy really opens, we are going to see how effective the work from home model works. The organizational behaviorists suggest the 80/20 rule. 80% working from the office and 20% working remote.
This is a big one for staffing firms that will succeed as the economy comes back. You can hire great employees, but if your sales strategy is lacking or non-existent the probability of success will decrease radically. What is included in a strong well-functioning sales strategy? A well-defined ideal client profile for one. A client profile that not only outlines the demographic characteristics of a great client, but the psychographics and geographic characteristics as well. Account planning that has names of decision makers, total contingent spend, percentage your firm has, action steps and such that is the tactical steps your staffing firms needs to execute upon to obtain high quality business and develop sustainable relationships.
As mentioned, we just outlined a few key initiatives to focus on in this year to take advantage of the projected industry growth, but there are many more. The Visus Group has become the Resource Hub to the staffing industry from an organizational development and growth strategy perspective. Whether it is business planning, financial planning and analysis, compensation analysis and design, sales execution, leadership development and much more the Visus Group is here to help. And our Presidents RoundTable has become a fantastic resource for many business owners in the staffing industry. At the end of the day, success is all about forging ahead, not looking back.
Check us out at www.visusgroup.com. I wish you all the best of success in 2021.
By Dr. Jeff Elias, Ph.D.
Due to Covid 19, working remotely is becoming more popular than ever. There are many benefits for both the employer and the employee1. A mutual benefit is lower cost and expenses for both the employer and the employee. How can these cost reductions translate into employee compensation strategies? Let us start with a brief background regarding these benefits. For the employer, benefits include:
For the employee, the benefits include:
The Hard Dollar Benefits equals $17,000+ per employee per year. According to the Global Initiative Organization, working remotely saves an employee, on average $6,000/year. These savings are from gas, car maintenance, transportation, parking fees, a professional wardrobe, lunches bought out, and possible day care expenses. The typical employer can save, on average, $11,000/year. These savings come from overhead costs, real estate costs, transit subsidies, and continuity of operations. Together, remote working saves an average of $17,000 per year per employee.
There are other financial benefits such as lower turnover, lower recruiting costs, lower absentee rates, and more satisfied employees. These cost reductions are harder to financially quantify but are of substantial value.
So, how can this $17,000 cost savings translate into a compensation strategy? Can it be leveraged into providing higher salaries, contributing to lower SGA expense, and increasing GM dollars which may affect bonus/commission payouts, or used as a competitive advantage in recruiting key talent? Many of our Staffing clients are choosing to leverage remote work as a recruiting competitive advantage. Firms need to understand how competitive their current salaries for new hire and tenured employees are. Does the staffing firm pay the same as their competitors, do they pay more, or do they pay less than the competition? In compensation speak, if the firm pays better than 50% of the competition, they pay at the 50th percentile. If the firm pay at the 25th percentile, then 75% of the competition pays better. At what level does your company pay?
To be a player in the most competitive markets, the staffing firm should pay at the 75th percentile. This means they would be paying better than 75% of the competition.
Maybe the $17,000 per person per year (remote work cost savings) could be used to pay higher starting salaries or create a more lucrative commission plan. Also, offering remote work, either part time or full time, by itself could offer a significant competitive advantage in recruiting top talent. There are 3 issues the Staffing Firm should tackle:
If you’re interested in exploring these cost savings, we can help you. The Visus Group can help you determine how competitive your salaries and commission plans are – are you underpaying or overpaying for the needed talent? Also, we can help determine if remote work is a viable option for your business, and if it is, we can help you design an effective remote work program. Additionally, we can help you decide how to reinvest your $17,000/person/year cost savings.
1 How to Cultivate Effective ‘Remote Work’ Programs, Gartner Research, May 14, 2019
