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April 27th, 2009
I love serving the staffing community, as an active member of the community for 11 years, it is no surprise that today’s market is obviously the most challenging any of us have ever faced. Most firms I speak with are down 25-40% from their peaks. Everyone has made as many cuts as possible which means the activities that staffing companies engage in today must be focused and must represent the best chance to contribute to your clients and produce the best return on investment for your time.
This laser-like focus will help you today and when the market returns, it is great practice for only working on top tier positions. Here are some tips to identify “Red Flag Orders”, those that may cause you to waste your time, while the competition remains focused and increases market share.
You know it when you are engaging in an appropriate sales process. There is open communication, there is a need that you can satisfy, and there is an understanding about the job and the terms. Simply stated – it just feels right. Conversely, it is also easy to identify “Red Flags” – it simply does not feel right. Here are some pointers:
• If the prospect has told you that they are unhappy about service they receive from a competitor you will offer creative solutions to address the needs. If after this process they continue to stall and will not make a change, they may not feel comfortable telling you no.
• You may also be selling to the wrong person. If the prospect is unable to make a decision and consistently needs approval or feedback, you may not be speaking with the appropriate person.
• If the process takes too long and needs are “always” on the horizon, you are probably stalled in the process and you will want to re-evaluate your approach.
• If you cannot receive orders that are within your core competencies but do receive orders outside of your parameters, you run the risk of over promising and under delivering. If you only get difficult to fill orders which are shared with five other firms, you need to evaluate your potential success and the time it will take to deliver.
• If the prospect refuses to sign terms and conditions and complete credit (never more important than today) – there is probably an issue.
• If communication issues arise like misunderstandings, misquotes, slow or no response, missed appointments, etc., you probably have not addressed their needs or they are keeping you on the back burner. You should ask them for feedback.
• If you are concerned about safety (or other legal/financial issues) – do not work with the client.
• If the client wants a proposal or rates before you have even met – they are only concerned with price or it is a polite way to say no. You should weigh the pros and cons of exposing pricing without understanding the positions.
Engaging in the discipline of working only on the opportunities that you have a great chance of success will ensure ROI for your time today, and enable you to focus on the right opportunities when the market comes back.
Posted in Best Practices | 1 Comment »
April 21st, 2009
“There is a sense of exhilaration that comes from facing head-on the hard truths and saying, ‘We will never give up. We will never capitulate. It might take a long time, but we will find a way to prevail.’” – Jim Collins
This quote was passed along to me this week. I cannot think of a more appropriate quote for these unique economic conditions. The quote reminded me of an article that I had the good fortune of reading recently. The article is an interview with Jim Collins who wrote Good to Great – http://money.cnn.com/2009/01/15/news/companies/Jim_Collins_Crisis.fortune/index.htm
There are some key “ah ha” moments that I wanted to comment on relating to business today:
• When asked what companies did during the great depression to get through tough times, Collins says that the great companies had an incredible set of values that explained why it was important the companies existed. At Eplica, our purpose is to help independent staffing companies reach their full potential. We do this through our values of excellence, commitment, creativity, integrity and communication. Our reason for existing is clear and drives action throughout the company.
• Collins says that great companies understood that it was the caliber of their people that would get them through unprecedented economic circumstances. Bottom line is you need to ask yourself – who can I NOT afford to lose. Then, develop an action plan to engage and enrich them.
• “The right people don’t need to be managed,” Collins says. I am confident that as an employee, manager, or owner, you know what Collins is referring to. During these times, nobody should have the time to manage or be managed – we all have responsibilities and need to step up and deliver our best.
• Finally, Collins says that while people may be worried, we all need to ask, “What can we do not just to survive, but to turn this into a defining point in history.” Back to the quote – it may take a long time but those that have a purpose and values, those that work with the best people, those that step up given more work for potentially less reward today, and those that act and never give up, will be stronger in the end.
I welcome any comments and thoughts on how you and your firm are becoming a great company during these “unprecedented” times.
Posted in Strategies for Staffing Companies | 2 Comments »
April 16th, 2009
As I consult with staffing companies and users of staffing services, I have been asked several times recently about co-employment. This issue was hot after the “Microsoft Case” http://www.bizjournals.com/houston/stories/2003/03/17/focus5.html but after a few years, this has seemed to be put on the back burner. I believe this issue is back because companies that have been using a contingent workforce have not been hiring these employees given the economic conditions. As a result, we have seen the length of assignments rise, with little or no temp-to-hire opportunities. So, temporary employees who may have regularly been on assignment for 1000 hours, have now been on assignment 2000 hours, with no end in sight.
Rightfully so, users of contingent labor are assessing the risk of longer term assignments. Here is what we typically share with staffing companies and their clients:
Co-employment, aka joint employment, is when a person works for a staffing company on assignment at another company, where both the end user and recruitment service benefit from the professional services of this person.
While the idea behind co-employment is a win-win situation for all parties involved, it poses a risk of liability for companies who are not careful to manage the situation. If managed correctly, contractors working on assignment through a staffing company should always be considered employees of the staffing agency, not that of the client of the staffing agency.
With co-employment, both the staffing company and the client company exercise different levels of supervision over the contractor. When the agency hires employees for contract jobs, they pay their wages, make decisions regarding discipline and discharge, and communicate with the contractor as the employer.
Clients of the staffing firm supervise the contractor’s day-to-day work, determining pay rates and making decisions about ending the assignment or converting the contractor to the client company’s own payroll. But because contractors are not regular full-time employees of the client company, client companies must be cautious of how they treat contractors obtained through a staffing agency, by ensuring that the treatment of the staffing company’s contractor is not identical to the treatment of the client company’s own employees.
Staffing Company Responsibilities
Some areas are solely a staffing firm’s responsibility and minimize the amount of risk to their client companies:
· Payment of wages / compliance with wage and hour laws
· Workers’ compensation insurance
· Unemployment insurance
· I-9 contract employment verification
· Federal, State and Local Tax Withholdings
Responsibilities Staffing Firms Share with Client Companies
Sometimes, there is a fine line as to who is responsible for certain circumstances or conduct. Depending on particular circumstances, responsibility can fall on both, the staffing agency and/or the client company in the following areas:
· Liability for unsafe working conditions
· Discrimination
· Sexual harassment
· Family and medical leave
· Invasion of privacy
· Contract employment benefits
Game Plan for Reducing Risk in Co-Employment Settings
Minimize your risk by making clear distinctions between your staff employees and contractors working through an agency. Specific strategies include:
· Using separate forms for your employees and contractors. Redesign forms like acknowledgements and confidentiality agreements to reflect the agency as the employer.
· Considering the extent contractors can share in the types of activities regular, full-time employees participate in, if any. Consider how much those working in contract jobs through an agency should participate in work functions, employee discounts and bonus programs, if at all, as well as whether they should have any access to purchase order sign-offs, petty cash and facility keys. In order to limit risk, contractors obtained through a staffing agency should not be allowed to participate in the same types of benefits or perks as your own employees.
· Be clear in the expectations of full-time employment. Don’t lead those in contract positions through an agency to believe they’ll be offered a position with your company if they do a good job. Ensure that contractors obtained through staffing agencies sign an agreement that indicates there is no guarantee of employment with the client company. Agencies may want to use similar language in applications and agreements.
· Allow the staffing firm to do its job as the employer. Inform the agency about contractor attendance, performance or company policy violation issues. The staffing firm should address issues directly with the contractor. Likewise, inform the staffing agency about transfers/reassignments, assignment extensions, pay rate changes, fall off, or conversions to full-time employment, so they can act accordingly.
Posted in Best Practices | 1 Comment »
April 13th, 2009
My recent entries have answered the number one question in the staffing space today – how does a staffing firm expand and grow in this economic climate? I am sure you have noticed that my answers have little to do with staffing and a lot to do with using creativity and leveraging your existing relationships.
I decided to write about this topic because I recently read an article in the WSJ http://online.wsj.com/article/SB123863039800180655.html that highlights the importance of a service offering from an affiliate of Eplica – Secure Talent (www.securetalent.com). The issue in the article was about FedEx. The courts are determining if FedEx illegally misclassified drivers as independent contractors. If the drivers should have been classified as regular, full-time employees, they would be entitled to overtime and reimbursement of other expenses. Additionally, if it is determined that there was a misclassification of the employees, there would be Federal and State penalties including liability for back taxes, fines, etc.
Another example that highlights this important issue is the State of Ohio, who is becoming super aggressive on this issue. The Attorney General’s office released the following statement last month:
Attorney General Richard Cordray today announced the unprecedented collaboration of state agencies to combat the misclassification of workers. Employee misclassification is part of an “underground economy” in which an employer improperly classifies individuals as independent contractors or pays them “off the books” to avoid taxes and other required payments. As a result, the state and local governments lose hundreds of millions of dollars annually.
This is a problem that affects everyone, but most people don’t know about it,” said Cordray. “By cutting corners, some employers are in effect stealing from the rest of us. Through unemployment compensation, Bureau of Workers’ Compensation premiums, and state income tax revenues, state and local governments in Ohio are losing hundreds of millions of dollars each year. This is inexcusable in any economic environment, but absolutely unforgivable today. It is time to level the playing field for those businesses that play by the rules.
A report compiled by the Attorney General’s Office estimates that the extent of annual costs from worker misclassification may be $100 million for unemployment compensation, more than $510 million in BWC premiums and almost $180 million in forgone state income tax revenues. Additionally, misclassification is estimated to have cost Ohio cities and villages more than $100 million in local income tax revenues in 2006, and cost school districts $7.8 million in 2008.
Secure Talent offers 1099 Risk Assessment and Evaluation. Our clients use us in one of two ways. First, they introduce Secure Talent as a business partner, and our client receives a percentage of the gross profit margin. Second, you can offer this product as your own, and use Secure Talent’s propriety technology and service solutions to administer the classification evaluation.
If you partner with Secure Talent on this service offering you will be able to add value to your clients as a rebound occurs. Why? Well, as history has indicated, the first sector to come back will be 1099 employees – those that might have had their contracts ended during the downturn or former regular staff, brought back as contractors – often classified as ICs.
Most of your clients are probably unaware of the pitfalls associated with independent contractors. While the use of these workers could provide greater flexibility and economic value for companies, it will create tremendous scrutiny by federal and state agencies. An astonishing 38 percent of employers have misclassified workers, according to the U.S. Government Accountability Office (GAO). Complying with extremely ambiguous government regulations to determine the accurate classification of workers is an enormous burden on employers’ resources and expertise.
Here is where you come in….by partnering with us, you can add value to your clients (and actually get sales appointments in this market) by providing them a significant education regarding 1099 compliance and helping them calculate the financial risk associated with misclassification. Best of all, as they begin to call you as their use of independent contractors rise, you will know that their business is picking up, signaling the right time to offer your traditional staffing services.
I look forward to sharing other ways to help you grow sales and profits by diversifying beyond staffing. Your clients will appreciate the value, and you will only strengthen the relationship by becoming even more integrated into their business.
Posted in Strategies for Staffing Companies | No Comments »
April 9th, 2009
Last time, I shared that I am asked frequently what staffing companies can do to compete in this market. I promised to share one unique idea demonstrating true innovation – how to up-sell in a way most have never heard of, helping your clients turn cost centers into profit centers.
Instead of FOLLOWING your competitors by slashing mark-ups, getting into outplacement, charging applicants fees, trying to get into RPO, opening offices in areas less impacted by the economic crisis – do something dramatically different.
Most companies are not hiring (which means you do not have much to sell). Most of your clients have had to cut staff, furlough employees, and reduce costs. Let me offer a suggestion. I suggest you start with the following pitch on your next sales call:
“Hi, my name is Seth from ABCefef Staffing. I promise I am NOT calling to discuss your staffing needs. I understand you are most likely not hiring and that all of my competitors are calling you weekly trying to get you to meet with them to develop a relationship when the economy turns around. I promise, Ms. HR Rep, that I am calling to help turn your department into a profit center today.”
You may be asking yourself what I am talking about. I consult with companies on safety and workers’ comp, timekeeping solutions, diversifying staffing firms by adding different lines of business, and more. A recent home run has been helping staffing firms by getting into the recycling business.
What Does Recycling Have to Do with Staffing?
Well, if you are in construction or industrial staffing, you work with companies that have or will have a recycling program.
In fact, I just met with a manufacturing company who told me that their clients are starting to conduct social responsibility audits and it will be a condition of working with them. Currently your clients are probably working with a firm that CHARGES them to pick up their material.
Our partner, Complete Recycling (www.completerecycling.com) works with staffing firms to offer their clients the opportunity to generate additional profit by managing paper, plastic and metal recyclables through one vendor: YOU. These programs reduce business costs, generate profit, manage waste efficiently and have a positive impact on the environment and economy.
Bottom line, through a partnership with Complete Recycling, you will be able to eliminate the charge your client is getting from their current vendor AND give them cash or my preference: a credit towards future staffing, because the price we get for recycled goods usually beats the competition.
We are able to save your client money and then split the additional profit with you. So you can up-sell to a current client and obtain NEW clients by saving them money, making some for yourself, and gaining a future staffing client.
Plus, by selling to HR, you give them the chance to earn money for the company, a role typically reserved for sales. You will gain a client for life through this program. This has proven to be an innovative solution during a time that requires innovative action.
Posted in Strategies for Staffing Companies | No Comments »
April 6th, 2009
As you can imagine, I am asked frequently what staffing companies can do to compete in this market. I recall a 2008 Staffing Industry Analysts survey on revenue growth strategies.
It reported: “Revenue growth is the most frequently cited priority of staffing firms. Fifty-five percent of surveyed staffing firms cited revenue growth as one of their top three company priorities, exceeding even bottom-line profitability as a top focus. And how do firms plan to achieve that priority?”
The piece continues, “Up-selling services to existing clients and securing new accounts in the under $10 million range were the top answers to that question.”
Well, I Guess I Have a Few Questions
1. While up-selling is a great idea, and you should probably already have all of the business at your client, who is buying today?
2. I love the idea of securing new accounts. In addition to my previous question, I also ask what is the cost of doing business at that account where you had to practically give it away?
3. Why is revenue growth a top priority? I would rather focus on an area that is more important to the firms I consult with today: workers’ compensation. To be fair, I live and work in California, where the state’s Insurance Commissioner is recommending a 27% increase in workers’ compensation premiums after years of declines. So, this makes this issue a top priority today.
But since our firm offers high deductible workers’ compensation solutions for staffing companies with $3M of payroll or more, I have seen how enhancing a safety and workers’ compensation system (and even firing an unsafe client, aka reducing TOP LINE) has saved hundreds of thousands of dollars to the BOTTOM LINE.
Let Me Share a Scenario
A staffing firm who does $3M in payroll (and who has a higher than average mod rate of 1.50) is paying $300,000 in a guaranteed cost plan for workers’ comp. The owner comes to me and asks if there are any opportunities for cost savings.
His workers’ comp losses for the last year are $180,000 with $50,000 in claims coming from one client (who does $500,000 in payroll). Keep in mind that best case, the $500,000 in payroll represents $25,000 in bottom line.
Our solution: Go into our deductible plan where he is responsible for the first $340,000 (if they even occur), BUT gets to keep every dollar saved if his total claims experience costs less then the $300,000 he is already paying.
So, if he fires his client with $50,000 in claims and only has $130,000 in claims for the year, he saves $170,000 a year. I would take the $170,000 savings rather than keep my $500,000 in revenue.
What’s Next?
Instead of doing what 47% of your competition is doing (up-selling), I will share in my next post one unique idea demonstrating true innovation, how to up-sell in a way most have never heard of, and help your clients turn cost centers into profit centers.
Posted in Strategies for Staffing Companies | No Comments »
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