SI Review: May 2011

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Attack, then Win

How to sell (effectively) to the midmarket

The various segments of staffing markets are very different from one another. For the purposes of this article, I want to share how some firms are attacking and winning in the exciting segment commonly referred to as the midmarket. As it relates to professional and niche staffing segments, midmarket refers to clients with less than three contractors on assignment at any one time. (See box, page 34.)

There are three main reasons why the midmarket is considered by many an attractive segment.

Job growth. The midmarket has been credited with creating the largest portion of new jobs in the last 20 years.

Access to management. The typical midmarket client allows you to have direct access to senior management and hiring managers (no managed service provider or vendor management system to be in the middle).

Better pricing. Pricing and gross profit percentage in the midmarket usually are not as restrictive. The market allows for the service provider to do a quality job and have the benefit of pricing that supports the extra level of service.

Building Blocks to Success

The accompanying pyramid illustrates what I consider to be the fundamental building blocks to a successful plan for winning midmarket accounts.

The success of any plan depends on the strength of its foundation. Here, the foundation is built upon a strong operating model with robust databases and systems, strong staff incentives, metrics, tracking, and recruiters and sales reps with the right skills and training to support growth.

Operating Models

There are several operating models from which you could choose. The three most common, which I discuss here, are the Rotation, Full Desk, and Inside/Outside models. There are pros and cons to each model. It is important to pick the right model for your firm — and to stick with it! With a deep commitment to one model you can build the incentives, systems and processes around one well thought-out approach. Following are brief descriptions of the three models.

Rotation. The rotation model is designed with a team of three that rotates each week. The functions are sales, recruiting and fulfillment. An individual runs the sales for one week, the next week recruiting and finally fulfillment for a given territory or segment. The best thing about this approach is that each member of the team learns each position. From the client perspective, the client becomes more loyal to the company verses an individual.

Full Desk. This model is very straight forward: One individual handles all functions. One person performs all the selling, recruiting and fulfillment in their respective area of focus. This model creates a one-stop-shop approach to the clients and candidates, which allows for crisp communication. The difficulty with the model is that the caliber of person necessary to function is hard to find, and if the staff person leaves the firm, the relationship goes with them.

Inside/Outside. This is the model I see most often. The model begins with an outside sales person and inside recruiting/fulfillment person. The job functions are well defined but it also takes a lot of communications and teamwork to make this model function well.

Common among all of the operating models are the remaining elements of the pyramid.

Segment Focus

Even the best operating model will struggle if it does not have a segment focus. Too often, I find that firms underperform due to being overly extended. The focus could be a niche area or size of account (midsize vs. large), or even a combination. It is also important to decide how much direct hire you plan to do. Without having clear lines drawn, the execution risks increase greatly.

Metrics

Also embedded in the design of the operating model are the costs needed to reach and serve the midmarket effectively.  Clay Morel, president and CEO of Atterro Human Capital Group (formerly Prostaff), says the midmarket strategy needs to be based on numbers. “The more sales calls and touch points you make on midmarket companies, the more likely it will be that a sale will be made,” Morel says.

But today’s sales/recruiting professional simply cannot make enough dials or emails to effectively cover enough opportunities to allow for a reasonable return on investment at the typical staffing company. Therefore, creative firms are utilizing technology, redesigning business models and often times are investing in lower cost offshore resources to meet the challenge.

Donato Diorio, founder and CEO of Broadlook, cautions that you should be careful of your social network activity. “A search for candidate or client over five websites is not efficient. This process is equivalent to reading. Have your recruiters live in your CRM. Pick tools that perform a ‘Pull’ process. If the process is built into the CRM, it can be standardized, automated and reported on. Stay in the CRM and stay efficient,” Diorio explains.

Building the Database

The Internet contains tremendous information on midmarket companies. Over the past eight years, the number of companies that have a Web site has increased by about 15 percent each year. In addition, the average sales rep is spending 65 minutes per day on this activity. Recruiters spend even more time on the Internet than sales staff.

Recruiting and sales activity involving the Internet should be deliberate. Manually searching a company Web site, LinkedIn, news groups and other sources for contact information is incredibly time consuming. The question to ask yourself is simple: At the end of the process, can I repeat it, automatically?

Take Broadlook’s Profiler and Market Mapper technology as an example. A manual process of identifying 1,200 companies in a national niche market and then finding all the names, titles, emails, phone numbers and bios for potential contacts takes about three man-months. This is desk-building 101. If you want to get into a new market and be competitive, you need the data. Using Broadlook’s solution, a single person can accomplish the same results in three hours over a three-day period. In addition, the process can be repeated on demand, with the press of a button.

Compensation and Incentives

I would offer three key thoughts when designing your plans. First, have as large a portion of total compensation as variable as possible, preferably a draw vs. commissions.

Second, target your payouts as a percentage of gross margin dollars. A target range is somewhere between 20 percent and 30 percent per revenue dollar for total compensation (base + commission) of both the sales and fulfillment efforts. Direct hire tends to be a little higher, typically between 40 percent and 50 percent of the fee.

Finally, it’s ideal when creating your incentive structure to reward the teams for filling orders at the highest margins possible. I have seen sliding scale plans that are very motivating and highly cost effective.

Staff Profile

Something that is often overlooked when considering which operating model to use is taking into account the type of staff who will be most productive and enjoy working in the midmarket segment. I have typically found the most successful people need to be tech savvy, possess a high sense of urgency, be collaborative, detail-oriented and have a great amount of energy for work. The amount of activity required is not for the faint of heart.

Needless to say, the midmarket is not for everyone. Someone successful in the VMS world and large account space is typically different from the person who is successful in the midmarket and vice versa.

Training 

Veteran industry trainer Tim Alderman says the key to approaching the midmarket is training the teams to find the opportunities when the opportunities are hot, and once those opportunities are uncovered, teaching performers how to make an impact and a positive lasting impression. The hardest thing to do is connect with prospects, Alderman says, and the second hardest thing to do is to reconnect. “When someone connects with a client or prospect, they’d better know how to do more than just show up without a meaningful message or solution. I stress that it’s their one chance to make a difference now and in the future with that one client or prospect they’ve been trying to reach. What you say after ‘hello’ becomes critical to your ROI of marketing dollars,” says Alderman.

Integrating Technology with Process

The middle of the pyramid is where technology-focused activity and communication come together, building on what has been established in the foundation of the pyramid.

The technology needed is a robust front and back office combined with Web crawling capabilities, such as a company like Indeed offers. You’ll need to be able to build effective, targeted databases, utilize an auto phone tracking system and make calls to large groups quickly, as Call-Em-All offers. The benefit of using this technology is that from your PC, smart phone or practically anywhere on the planet, you can set up follow-up phone calls or text campaigns at a rate of more than 100 calls a minute.

Finally, you’ll need to bring all of these moving parts together with the ability to track all of your various sales and recruiting efforts. Some front offices such as Bullhorn — a favorite tool of many staffing firms that target the midmarket — have integrated many of these functions. Bullhorn has the added benefit of having a CRM tool that keeps you organized by tracking and measuring all of the critical efforts produced by the sales, recruiting and marketing teams.

Meanwhile, video is starting to move past the early adopter stage and is becoming an integral tool to firms with a midmarket focus. From the nimble small staffing companies to most of the majors (Adecco, Manpower, Volt Workforce Solutions), video is being used to engage a broad range of audiences on corporate Web sites, Facebook pages and YouTube channels. Multimedia is helping organizations differentiate themselves and, in some cases, increase email marketing open and click-through rates. One company, Vipe Inc., is a thought leader in this space, providing a range of video services and technology that scales to the size of the staffing organization.

Social Networking

Don’t forget about social media. LinkedIn, Facebook and Twitter are very effective tools for marketing to small businesses. As they are free tools, “it’s simply a matter of making sure your staff is effectively growing and engaging in networks,” says Art Papas, CEO and founder of Bullhorn Systems. Products like Bullhorn Reach can help reduce the learning curve and automate the time-consuming components of social media marketing.

Referrals have always been the Holy Grail of the midmarket. Loren King Shields, a respected industry leader in social media and recruiting states, “Professionals who are good at what they do know other professionals with similar skills or staffing needs. A warm lead will always reduce time-to-fill over dialing through a hundred cold-calls or reviewing a stack of resumes.” Because social media sites such as LinkedIn provide insight into contacts’ professional networks, staffing professionals make more directed inquiries. Instead of asking a contact “who do you know who might be interested,” Shields points out, the staffing professional who has reviewed his or her contact’s social media network can ask about a specific professional connection. This reduces the effort on the part of the contact, and increases the probability of a meaningful referral.

Meeting Rhythms/Tracking /Accountability

I have found over the years that the glue that many times holds the operation together is the internal communication, tracking and accountability to plans. Unfortunately this is often one of the least appreciated areas in many companies. I recommend to people that they have frequent update meetings — daily or every other day — to review progress made regarding key metrics, prospects and open orders. This 15- to 30-minute session should be crisp, to the point and discuss opportunities as well as choke points. I also recommend posting the activity and results in the most visible manner possible, white boards are terrific for this purpose. There is nothing like visibility to create a little healthy tension and internal competition.

Below is an example of a niche staffing client I work with in the Midwest who has embraced the concept and has put it all together with impressive results.

The numbers are actuals. The firm has $10 million in revenue with two full desk reps and a selling owner. The company also has a person dedicated to constantly building their database. This firm also makes very few in-person sales calls. Its ratios of new requirements and starts per sales rep are about three times what they were before they began this integrated approach about 18 months ago. In the last six months, they have added an offshore recruiting component through PSG Global to supplement the relatively large recruiting team in the U.S. As seen, this firm has increased its reach, added new clients at increased rates, as well as accomplished all of this at a much lower cost than in the past.

Another client of mine is producing a variation of these numbers with the addition of fast calling technology, Call-Em-All, to the sales mix.

Seeing Results

What does success really mean in the midmarket? It really means different things to different segments of staffing, but I would like to offer a few key metrics that I would consider indicative of a successful effort.

Where’s the Success?

If the midmarket is growing, the margins are higher, and it is not yet threatened by vendor management systems, why aren’t more people producing better results?

The trick in the midmarket is to find the openings just when the talent is needed. However, finding them at just the right time and for a reasonable cost is very challenging. The “needle in the haystack” model can be difficult and typically requires a constant amount of activities, focused at both clients and candidates.

With the advent of technology and the integration into front and back offices, it is now possible to build a targeted database and sell to that database in an effective manner. But without a disciplined, targeted approach, your clients will treat your efforts as spam and be turned off immediately. The other piece of the puzzle is that it is essential to lead the marketing campaigns by marketing your talent. I believe in a candidate-centric approach to staffing. Being candidate-centric is especially effective in the niche areas of light industrial as well as across the board in the professional and medical categories.

Why Companies Fail

I have seen many staffing firms put considerable effort toward attacking the midmarket. Unfortunately, few have reached the success that they wish they could. In my view, it really boils down to three key reasons.

Lack of focus. People set themselves up for success by planning the proper model, compensation plans, technology and metrics. When results come slowly, they often stray from their plan and lose their patience.

Lack of Discipline. Even after careful planning and setup, people often allow themselves to get distracted by other opportunities.

Client Centric vs. Candidate Centric. Often, people want to lead with the clients as priorities. Most people will look for open requirement first and then begin the recruiting. That’s natural — it’s what most people have been taught. In my view, though, if you take the opposite approach and recruit an inventory of talent and then market the talent, the orders will follow.

The client-focused approach is very difficult to execute as it relates to the midmarket because it is too costly and slow. If you already have the right talent at the right price in your database of inventory, your time-to-fill will be dramatically less and the fill ratios much higher.

Summary

If you like having a low level of client concentration, a wide client base of relationships that value your abilities, and are willing to pay for them, the midmarket might be right for you. I would also like for you to consider that if history repeats itself, in the future, the midmarket is also anticipated to outgrow the Fortune 1000 companies in terms of hiring over the next cycle life of this recovery.

                                                                                                                                                                                                                                      

[Sidebar]

What is Midmarket?

The term Midmarket means vastly different things to various industries. As it relates to professional and niche staffing segments, I’d like to borrow the definition that Robert Half International has used for many years to describe its client strategy. For years, Robert Half has publicly stated that their primary targeted client is the midmarket — clients with less than three contractors on assignment at any one time. Having less than three contractors per client is, in my view, a credible definition and speaks to a segment that is non-MSP, non-VMS, and non-large contract. These firms typically have between 50 and 500 regular employees of their own.

The definition differs when it comes to the healthcare segment. I’d like to use the definition of Jeff Bowling, founder and CEO at Delta Cos., a fast-growing therapy and locum tenens staffing firm that is headquartered in Dallas. Bowling likes to describe the midmarket as hospitals with bed counts of between 50 and 150.

                                                                                                                                                                                                                                      

[Sidebar]

Possible Threat

An emerging area that could pose a possible threat to a midmarket strategy is growing talent exchanges. Companies like ODesk, Elance, and OnForce are bringing buyers and talent together like never before. In a video posted on Elance’s website, the company claims “we are an alternative to staffing companies.” Furthermore, they advertise their inventory of both job postings (46,616) and talent available (336,360).

The client can search from the talent pool and select who they want, for a specified time period, and can negotiate the bill rate. Sound familiar? This transaction is done online, typically not using the client’s worksite, thus saving the utilization of valuable real estate costs. These firms also keep work diaries where projects are monitored and time stamped.

The punch line is that the markup over the bill rate is typically less than 10 percent. These firms provide to the client the workers, work history, work portfolio, feedback process and test scores. While this model is not for every client, it is an area to pay attention to. These sites make available talent from around the globe, making them a formidable marketplace to contend with.

                                                                                                                                                                                                                                      

Greg Palmer is the former CEO of Remedy Temp Inc. and founder of GPalmer and Associates, a management consulting firm focused on the staffing industry. You can find the recently published GPalmer temp labor forecasts and related material on the GPalmer website. www.GPalmerandassociates.com.

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