If you’re leading an independent staffing company today, you need to focus on three critical things: differentiation, efficiency and growth.
 
Without real and meaningful differentiation, unable to demonstrate that you can make a tangible, bottom-line difference for your customers, you don’t stand much of a chance. Over the long term, you will be unable to protect your company’s margins. You will ultimately be forced to match the lowest rates available in a hyper-competitive, over-served marketplace. It’s a non-strategy and an unsustainable service model.
 
No matter what business you’re in today, you’re in an efficiency race. To win, you not only have to be faster, but cheaper and better too. Refined processes and systems, a skilled and well-trained staff, and effective technology are all essential. But the real payoff comes only when they are all properly focused and deployed to produce the result your customer wants on a timely and cost effective basis.
 
Even the best performing staffing firms will have a very hard time building and sustaining enterprise value if they cannot grow. The smaller the business, the more fragile and vulnerable it is. The less the volume, the more difficult it is to compete and the less value the company has, even as a multiple on earnings. To ensure the future you want, you have to show that your business can keep growing.
 
It’s not hard to see that the challenges of staffing today require leaders to bring sharp focus to their organizations, and to focus their personal role in a way that leverages their time and skills in the most effective manner possible. Usually that means putting greater focus on strategic planning, staff development and sales-building activities.
 
Other demands of the business that take time from those efforts and detract from that focus are just that: detractions. And they are costing your business dearly—perhaps more than you know. To the extent non-core functions can be reliably delegated and outsourced, you can achieve an exponential ROI. That’s exactly what People 2.0 solutions are designed to do.
 

Q: Is there an industry standard base comp for a new account sales rep that is selling technology staffing?  Is it the same for FT staffing services vs. consulting services?

A: In a word-no.  Sales compensation varies greatly by area, previous experience of the candidate and competition in the local market for sales people.  The standard base comp is also affected by the level of incentive comp.  As we saw in the webinar, companies can have a wide range of variance regarding the percentage of pay at risk.  As unscientific as it was, I found that as long as I was regularly talking to sales rep candidates, I could stay pretty close to the market.  And you should be talking to sales rep candidates all the time!

Q: Both the rate-based and quota-based plans seem to be misaligned with the true outcomes we, as business owners, seek.  Shouldn't we incent based on the value to the company (margin, client recognition, credibility in the market, etc.) of the business the salesperson drives?

A: Certainly, we absolutely need to be sure that what we choose to incent is aligned with the goals and strategy we have set for the business.  We should also consider what the sales person can impact.  As the saying goes: “Nothing happens until someone sells something”.  I think I could make a good argument that incenting based upon gross margin dollars in the door is a quite relevant measure for a sales person.  Bringing in high value new clients, it seems, would also be something the rep should accomplish and the management should value.  Creating client recognition and credibility in the market are also critical outcomes for the business.  I am not sure how I would measure and reward a sales person for those outcomes and I believe that those outcomes are a result of the entire organization’s strategy, marketing, execution at the service level and competitive differentiation.  In other words, they are a result of the entire organization’s efforts and the leader’s particularly.  As my Director of Sales always said, sales people tend to be coin operated.  Give them a direction and a straightforward way to measure the financial reward they will earn and the good ones will drive toward the goal.

Q: If you have a plan that is not optimal-how do you change it without losing your people because they are spoiled?  Do you grandfather in those reps and then change the plan for any new people?

A: First, I guess I am not sure how badly I would feel losing people who are spoiled.  As was mentioned several times in the webinar, it is important to distinguish performance management issues from incentive/reward issues.  The best designed incentive or commission plans can only accomplish certain objectives.  They can reward for desired outcomes, they can communicate the sales priorities of senior management and they can further motivate already motivated people.

I have not run across an incentive plan that will motivate unmotivated people, will cause untrained reps to succeed or will cause individuals not suited to sales to be successful.  As you look toward changing your compensation plan, you may also want to review your sales performance management process.  As an example, you might have an incentive program that rewards based upon a percentage of gross margin dollars earned.  You would also have performance measures that would have to be met.  Some of these could be that the sales person must bring in a certain amount of new clients per month, or you may have activity goals for number of sales calls, face-to-face meetings or other activities.  There may be a requirement around the size of a certain number of client, or a targeted amount of onsites.  These goals, of course, would be derived out of the sales plan developed through the Revenue Roadmap process.  I had several sales reps that were making some decent money based upon their existing book of business yet, they still ended up being let go because their activity and new client acquisition results were below the established goals.

In response to your specific question, it is difficult to provide an answer, not knowing what the old and new plans look like.  I would suggest that first; you determine which reps you want to keep.  Then, if the new, desired plan will make it more challenging for the reps to make the same level of income for the same level of effort and results, you may want to phase it in.  For example, if the old plan paid on existing business and the new one did not, you could agree to phase out the existing business at an ongoing reduced percentage for 3-6 months.  This would allow the existing reps to replace the existing business commissions with new business commissions.  If you have determined that the old plan is not optimal, I would suggest that you design a transition that gets everyone off that plan, rather than grandfather them.  You can always do something special for a high performing rep that might go beyond what you would be willing to do for an average one.

Q: If a selling Branch Manager is compensated for his selling, how do you make the transistion where they are just managing and there is no incentive?

A: We spoke to this question briefly in the webinar.  I can’t imagine any significant position in a staffing company that does not have some form of incentive.  It might change from a “commission” type plan to an objectives based plan, or a combination but no incentive for a Branch Manager doesn’t sound like a very good idea.

Before the incentive program can be designed, of course, the role, purpose and responsibilities of the position need to be defined.  Do sales reps report to this position?  Is the Branch Manager responsible for profits for the branch?  Does the Branch Manager have specific goals associated with the operation of the branch?

It may be that, in order to keep the Branch Manager whole, financially, that they may need a combination of a higher salary, an override on sales rep commissions and/or an objectives-based incentive plan.  If the selling Branch Manager was earning a significant amount of income through the commission side of income, it may be that the individual will have to make a decision about the direction of their career.  If they want to rise through management, they can typically end up earning more than most sales reps.  They usually have a lower percentage of their pay at risk and sales people sometimes want to move on to other roles.  The one point I would re-emphasize is that I do not think that Branch Managers should be without some of their pay being at risk and tied to the growth and success of the branch.

Q: Are there any stats that can give some insight on how to compensate sales people on new vs. retained business?

A: I do not have statistics on this other than to say that many companies pay on existing as well as new business and many do not.  Again, the beginning point is the role and purpose of the position and the underlying strategy of the business.  For my company, as an example, one of our Guiding Principles was that we were going to obtain 100% market share of any company we did business with.  Once we were able to get our foot in the door of key major client opportunities, I not only paid commissions for the new business, but I also had performance measurement incentives around increasing market share of those existing clients.  I think it is safe to say that if you have any expectations for the sales rep to do anything related to existing business, you will likely have to reward for it.  Otherwise, the rep won’t spend time on non-commissioned activities. 

One of the co-founders of People 2.0, Chuck Miller, really wanted his sales people to focus on new business in the staffing firm he owned.  He was involved almost exclusively in large onsite business.  He felt that the onsite staff and branch service team should be the ones to maintain and retain this business.  Therefore, he did not pay commissions to any sales rep for growth within any existing business.  New business was defined as clients, brought in by the sales rep and the business from the client remained “new” for 12 months after which, commissions stopped.   My approach or Chuck’s were perfectly valid because they supported the strategy of our companies but if I had adopted Chuck’s incentive plan for my strategy, I would have had some confused sales reps.

I hope the take away from this series of webinars is that that success in your business is derived from the strategy, mission and particular solution your company chooses to pursue.  Mark Donnolo’s Revenue Roadmap is just that: a roadmap for defining all aspects of the sales effort in a hierarchy where each decision affects the next.  Compensation plays a critical part in directing sales people in the right direction, motivating and rewarding them.  However, the compensation plan is a result of all the other elements in the Revenue Roadmap.  The plan should be developed once the rest of the Roadmap has been defined. 
 

Managing the Growing Complexity of Healthcare Staffing

The U.S. Staffing industry sends nearly two million people to work each day through thousands of individual staffing firms.  To continue to grow and to gain market share, staffing firms must develop more sophisticated systems, processes and support service models.   When you add on the unique requirements of healthcare staffing, the model becomes increasingly complex.  To meet those requirements—and to survive on today’s razor thin margins—effective, integrated technological tools and outside professional services are nearly essential.

Whether your healthcare staffing firm is a small, mid-sized or larger, multi-regional independent, the time, costs and technical challenges associated with developing and maintaining efficient and scalable infrastructure are daunting.  (Infrastructure being the basic, underlying framework or components of the system and organization needed to support the company’s core functions and activities.)  When you add the burdens unique to healthcare staffing, (i.e. medical malpractice insurance, state licensing, special screening, testing and credentialing), costs increase exponentially.

Most of the best applications and service providers available offer narrowly focused solutions that address only one aspect of a staffing firm’s operational model.  Often, they do not integrate into complementing and essential legacy systems easily or at all.   As a result, most staffing companies still manage manual, labor intensive processes, duplicate data sources and cumbersome import/export processes to move data from one system to another.  In the process the same information is handled over and over again, increasing the opportunity for error, corruption or failure, consuming valuable time and draining efficiency from the organization and its P&L. 

Large staffing firms know that highly effective infrastructure optimizes their ability to provide high quality service at a scale that allows a lower price point, making it tough for firms of lesser size to compete.  At the same time, more and more independent staffing firms are discovering that the investment of time and money that is required to build and maintain competitive infrastructure may not produce a great return for them.  This is especially true when the owners’ ultimate exit strategy involves selling or merging with a larger competitor that already has this infrastructure in place. 

In a merger or acquisition, there is rarely a situation where it makes strategic sense for the combined companies to maintain two separate systems.  It is not uncommon for a staffing firm to invest hundreds of thousands of dollars or more in infrastructure only to learn it has no value to a buyer whatsoever.

So how does a small or mid-sized staffing firm create and maintain the scalable infrastructure needed to remain competitive and to efficiently manage the increasing complexity of healthcare staffing, yet still make money?

More and more are partnering with a solutions provider that can offer a broader spectrum of integrated systems and services, and even end-to-end solutions addressing all the business needs illustrated in the sidebar, including the applications, systems, and human resources to support both front and back office requirements.

Staffing industry executives understand the value of outsourced services and SaaS (Software as a Service) better than most, but still, pulling it all together strategically and logistically is far easier said than done.  Aside from the obvious, when integrating key systems and processes, they must take into consideration operational efficiencies and critical performance measures, statutory and contractual compliance requirements, customer service, communication and satisfaction. And then there is the implementation itself.

It only makes sense for staffing firms to leverage the resources, knowledge and technical capabilities of experienced industry-specialized solution providers.  Staffing companies should partner with those providers who can tie both essential front and back office systems together, achieve greater productivity, and help contain  infrastructure costs.  The right provider partners bring highly scalable service models that relieve non-core workload, maximize ROI, and allow staffing firms to focus on client partnerships and strategic, business-building activities.

Winning requires more than a front office solution

Technology and its role in the staffing business is evolving and growing at an incredible pace. As one of those people who can still remember using white boards, index cards and mechanical check writers, it is amazing to see the technology available to a staffing business today. Now technology can make a staffing company what every customer wants their agency to be: faster, better and cheaper.

In talking with staffing business owners, we find a consistently high level of interest in technology, and great attraction to all the “latest and greatest.” That’s easy to understand, but what surprises me is the nearly exclusive focus on front office “bells and whistles.”

Don’t get me wrong. I recognize that there are significant efficiencies to be gained from one-click job board posting, integrated email and texting, direct resume parsing, and Boolean search tools with ranked results and highlighted key words. I’m in favor of all those things.

We’re right around the corner from the day when it will be common for staffing companies to manage the entire recruitment, interviewing, screening, testing and on-boarding process in an online environment, paperless and touch-free. I just hope that when we get there, we’re not still keying in hours from faxed timecards, exporting data files to separate payroll processing systems, and printing invoices from QuickBooks.

Many staffing companies—including some sizable, well regarded firms—still operate with fragmented systems and labor intensive processes in the back office, while robust, state-of-the-art tools support front office operations. Some even think it’s perfectly fine to use three or more disconnected systems and processors in the back office. “Nobody ever made money in the back office,” they say. But a whole lot of money can be lost there. Every week.

Pricing pressures affect nearly every business today, and we’re all part of a big efficiency race and productivity contest. Can a staffing firm afford to have a core employee calling clients for time approval and manually keying in hours if the competition is capturing time through an online facility that automatically emails clients and links directly to the payroll system? Can they afford to have someone attaching paper timecards to paper invoices, stuffing envelopes and running a postage machine while a competitor delivers invoices through an automated email system with links to approved, online time reports?

When margins are thin and shrinking, how can staffing business managers assure consistent profitably without visibility to true costs and gross profits (with actual payroll burden) at a granular, client and employee level? When hours and even minutes count for the customer, how can a staffing manager be effective if he/she has to wait a month or even a week to see financial and operational metrics in spreadsheets that are manually compiled from three different systems?

The staffing companies that win the race will be those that can leverage technology to optimize efficiency and performance “from req. to check,” from job order to receipt of payment. They will have fully integrated systems that accelerate workflows while minimizing errors and duplication. With real time visibility to the performance of the entire business their managers will make better decisions that lead to improved outcomes for the staffing firm and its clients alike.

Fully integrated workforce and financial management systems are key to balancing increased customer demand with the delivery of cost effective staffing services. To maximize the benefits of advanced technology, staffing firms need to implement technological strategies that encompass and effectively link the front and the back office.

Unfortunately, there is no true enterprise solution affordable to the typical staffing company—no one out-of-the-box application to manage everything from job posting and applicant tracking to order management, payroll processing, billing and general ledger. Even a basic software “platform” system for staffing business management will consist of at least two different applications.

Key to optimizing technology are:

•  approaching decision making with the entire business and all its interconnected process in mind,
• evaluating technological tools primarily on the basis of the ROI they can produce, the time, manual workload and expense they can eliminate,
• minimizing the number of different applications or systems required to support daily operations, and
• getting all the systems linked and “talking to” each other efficiently.

Of course, most staffing people are not technologists—nor should they be. Most of us struggle to understand exactly how a comprehensive information system would work, much less how to create one from several disconnected pieces.

With the pace of change in technology, and its growing criticality to competitive success, it makes total sense for staffing companies to partner with a qualified, specialized firm for the development and management of IT solutions, and even for management of the back office business processes themselves. With someone else focused on the technology and back office execution every day, you can better utilize your own resources, human, intellectual and financial, to grow the staffing business.

This year, the demand for the temporary employees has picked up considerably.  Your business is growing and you have come to the conclusion that you need some additional help to keep the momentum going.  If you currently do not have a full sales team in place, you’ll definitely want to hire some strong business development professionals who will help make your staffing firm more visible, bring new prospects into your pipeline and close opportunities.

But what is the proper way to motivate and compensate them to ensure you are driving their performance in the direction you desire?  The design of an effective sales compensation plan is a process that matches the expectations for the sales position to the results and activities of the sales representative.  The best compensation plans focus an individual’s drive to succeed toward the specific results desired from the position.  One of the great skills any sales person possesses is the ability to figure out what the compensation plan is rewarding and, maybe as important, what the plan is dis-incenting.

Over my career, I’ve had the opportunity to work with many staffing organizations as well as managing sales people in my own staffing business and know the many questions and expectations that a talented sales professional will need answered —compensation always being one of them. Some of the most common concerns a true sales professional should hold are:

• What is the message and differentiated competitive advantage thesales team should be delivering to our target market?
• What is the game plan or strategy the company employs to reach the target market?
• What types of guidance, training and tools will I receive?
• And lastly, how will my total compensation be structured and what can I reasonably expect to make if I am successful?

Since these are questions that come up frequently, the People 2.0 team invited a leader in the sales arena, Mark Donnolo, managing partner of SalesGlobe and The Sales Leadership Forum to take part in a 4-part webinar series titled, “The CEO’s Keys to Increasing Sales Productivity” which will further explore the topics mentioned above.  Together, Mark and I will share our experience, powerful strategies and insight on creating differentiation, developing effective sales strategies, developing a team, and driving sales performance.

You may recognize Mark from the 2011 Staffing Industry Analyst’s Executive Forum where he was a speaker, and most recently, a guest author in the SI Review in which he outlined how to properly compensate your sales organization.  I invite you to read Mark’s latest article, “Beyond Numbers” and be sure to register for the first webinar in the series, “Differentiate Your Firm with a Clear Value Proposition” on May 18th at 2PM EST.

During my business career, I have been involved in the restructuring of a few organizations, both large and small.  It is virtually always due to a company’s need to change as the world around it changes. 

Just think about the last couple of years as we all experienced a worldwide recession.  Most companies were forced to recognize a new reality and make appropriate changes in order to be in a position to compete effectively in the future.  On the other hand, as history has taught us, those companies that resist change or are complacent will ultimately struggle or fail.  A telling statistic was published the other day in the WSJ, 40% of companies in the S&P 500 index weren't there 10 years ago.  That is an amazing amount of change.

There is an axiom in business that is so true: Great managers do things right but great leaders do the right thing.  In my opinion, it is a leader’s responsibility to be aware of the world around him/her, have a vision, and chart the right course for the company to grow and prosper.  Many decisions have to be made along the way, some of them difficult ones.  But in the end, a healthy and thriving company creates many more opportunities for its stakeholders.  And that in turn will strengthen the company.

The staffing industry is changing at a rapid pace, as is the business world in general.  It becomes more sophisticated and complex every day.  The companies that will thrive in the future are the ones with the right vision, strong leadership, and a laser like focus on their core business.

Three weeks ago, President Obama extended the deadline for the Federal government budget, allowing all Federal agencies to continue operating.   At midnight tonight, the extension expires. 

Although Congress is trying to work through budget issues and provide funding for the federal government to continue operating, the Department of Homeland Security has confirmed that in the event of a government shutdown, E-Verify will be impacted and will not operate until the budget issue is resolved.
 
It should be noted that the shutdown of E-Verify will not change your I-9 responsibilities. If a shutdown occurs and E-Verify becomes unavailable, employers must continue to complete Form I-9s in compliance with the law.  The required information will need to be submitted to E-Verify when the system is operational again.

To stay compliant, People 2.0 recommends that any independent staffing company that uses E-Verify should keep the I-9s of newly hired employees in a separate folder from their other I-9 files (but still kept in a locked cabinet or office) until E-Verify becomes available again.

For more information regarding the government shutdown, a good source is: http://www.washingtonpost.com/blogs/federal-eye/post/government-shutdown-2011-will-i-get-paid-what-will-be-open-what-can-i-expect/2011/04/06/AFfMK2oC_blog.html
 

Workers’ compensation—good for employees, potentially bad for business.

Even a minor injury to a temporary employee can thrust a staffing company into a legal and financial whirlwind. Be proactive, not reactive. Instead of preparing for the worst, plan for the best. Create a strong safety culture, train your temporary employees to work safely, and establish an aggressive return-to-work program.  Over time, your workers’ compensation costs will fall.

Being proactive is one of the best practices for any business, especially in the staffing industry. To be proactive, you must start in the initial stages of the hiring process, during employee selection and screening. Many staffing firms are not sufficiently diligent at this stage. If you are not currently screening the temporary employees you are placing with your clients, you are already missing an excellent opportunity to reduce your exposure to liability.  Screening can include drug testing and background checks, but should always include weeding out predatory applicants by looking for “red” flags in work history, education, attitudes and overall demeanor.

Also, it is even more important to be proactive in your client selection, and the types of industries in which you choose to place temporary employees. If it sounds like a bad idea, it probably is! Reduce the exposure now instead of paying the price down the road. Even with the best safety programs in place, over time it’s probably inevitable that some injury to an employee will occur. When that happens, you won’t panic if you have put policies and procedures in place to guide you through the process.  Know what to do, where to go and who to call.  Take control of the situation until you can hand it off to a professional.

Train your temporary employee so they understand the process too.  Provide a list of medical treatment providers and let your clients understand what to do in the event of an injury.  Emphasize prompt reporting and make sure your staffing employees understand the importance of communication with the injured employee, the medical treatment provider and the claims adjuster.

What’s next?  The most important part!  Return Them To Work.   To control your long term costs, it’s crucial that workers’ compensation claimants return to work as soon as possible. Find ways to accommodate any work restrictions a doctor stipulates.  Help the injured employee feel good about the situation—and help them recover as quickly as possible.  The last thing any staffing firm wants is a temporary employee who learns to enjoy a lifestyle where he/she gets paid to stay home. Remain proactive and prevent that from occurring.

The more control you have over your workers’ compensation costs, the more profitable and competitive your staffing firm will be, now and in the future. 

Times have been tough in the staffing industry for the last couple of years and most of us hunkered down to make it through the storm.    With reduced revenue, staff reductions were inevitable and some internal initiatives may have been put on hold.  

Are you ready to make this your company’s best year ever?  A friend of mine once told me: “To predict the future, you must create it.”  If you haven’t already, one of the best ways to get started is to first visualize what it is you want to achieve.

The first step is to create the perfect year in your mind.  Find a quiet time when you can let your thoughts flow uninterrupted, then picture exactly what you want to achieve over the next 12 months.  This technique is called visualization.  Once you have pictured the perfect year in your mind, put it on paper.  By doing so, you’ll be drafting your goals for 2011.

With clear goals in mind, you and your organization can develop a plan to create the future you have predicted.  Now, all you have to do is execute.  Simple, right?

Most companies have plans, but without effective leadership, many fail to achieve their goals and realize their long term potential.  Of course, there are different levels of effectiveness and multiple leadership styles.  But the one constant that I believe produces the best results is leadership that is principle centered.

Renowned trainer and consultant Stephen Covey, the author of The Seven Habits of Highly Effective People, describes principle centered leadership this way: 

• Succeeding in a world of change, competition, and information overload is challenging.  Fortunately, new technology and services emerge daily to assist individuals and organizations in meeting such challenges.
  

• Always before technology, however, comes leadership.  Leadership provides the insight to create products and services that meet changing circumstances and needs.  Leadership provides the critical advantage between those who succeed and those who do not.
  

• Principled Centered Leadership focuses on timeless principles, paradigms, and processes that have enabled effective people to achieve lasting and meaningful contributions.
   

• Principles are fundamental, timeless and self-evident natural laws that govern human effectiveness, growth and happiness.  Principles are related to the concept of true north.  Throughout history, the compass has been used to help navigators stay the course.  With the discovery of the compass came a sense of direction and security.  Navigators could count on the constancy of true north.  In the same manner, principles provide stability to a world of change.
  

• Just as explorers and navigators first aligned themselves with true north prior to beginning their journey, principle-centered leaders align their paradigms with principles prior to embarking on their leadership trek.  They then implement processes to effectively complete their journey.
  

• The more leaders align their paradigms with principles, the more effective they will be.  The Seven Habits are founded on such principles of effectiveness.

Your core principles along with your company’s vision, mission, and inter-related strategies, should be in writing and reviewed with every member of your team.  They will form the parameters within which your organization will operate and succeed.

May 2011 be your best year yet!!!
 

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Principle Centered Leadership, Covey Leadership Center, Inc. 1986-1996.