SI Review: September 2012

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The Right Dose

How self-examination helped The Delta Companies regain its mojo

By Leslie Stevens-Huffman

The healthcare been considered a recession-proof segment of the U.S. economy, so executives at The Delta Companies saw little need to create a contingency plan. After all, the healthcare staffing firm had experienced double-digit organic growth since its founding in 1997 by focusing on physician and allied health markets with fewer than 50,000 people.

Success made it easy to ignore the occasional aches and pains that often plague rapidly growing staffing companies as critical shortages of healthcare professionals, particularly in rural areas, propelled the company to record revenues.

But midway through 2009, medical clinics and hospitals started canceling direct hire requisitions as aging physicians, reeling from recent losses in their investment portfolios, put their retirement plans on hold. And because some 90 percent of the company’s direct hire placements involve relocation, declining real estate values made it virtually impossible to close deals, as skittish healthcare clients eliminated moving stipends and candidates couldn’t sell their homes.

When the demand for locum tenens physicians and traveling therapy professionals began to ebb and hungry urban competitors invaded The Delta Companies’ bucolic markets, CEO Jeff Bowling realized it was time to regroup.

“We were experiencing growing pains before the recession, but the downturn made them more serious,” Bowling says. “In retrospect, I should have been more transparent by acknowledging our issues but I didn’t want to inconvenience the staff.”

The Reorganization

Nothing was sacred when the executive team convened an emergency planning meeting in August 2009. In fact, the organization’s unique structure, a critical issue for executives, topped the agenda. The company had been enjoying great success structured as four separate LLPs but now those fiefdoms were creating inefficiencies and befuddling the staff.

“Reorganizing under a single holding company made sense because it allowed us to reduce administrative staff and overhead by optimizing shared services,” says COO Marc Bowles. “Plus, it allowed our executive team to espouse a single, unified message and eliminate the internal silos that were frustrating our team and impeding our progress.”

Subsequent changes flowed from the structural reorganization as executives took a pay cut and instituted an across-the-board reduction in the company’s 401(k) matching contribution. Additional reductions would be more painful and could inhibit future growth if they affected morale or abolished producers.

After reviewing the costs and returns for each business unit, the executive team decided to eliminate a fledging accounting division and a struggling contingency search group and rededicate their efforts to the firm’s core competencies. Or, as Bowling puts it, they unanimously agreed “to dance with the one that brung us.”

“We wanted to be positioned for the rebound, so we made a strategic decision not to eliminate staffing personnel or reduce their pay,” says Ty Chambers, executive vice president for Delta Locum Tenens and Delta Physician Placement. “It was tempting to cut our Rolex awards or downsize our quarterly meetings or annual award trip for top producers, but we never waivered in our commitment to our employees and now, that’s looking like a great decision.”

Continuous Improvement

The executives launched their revised business plan in the first quarter of 2010 but it would be almost a year before sales started to rebound. In the meantime, executives garnered buy-in from employees by being completely transparent about their strategies and motives and never wavering in their resolve. They also used the downtime to boost productivity and staff morale by revising ineffective processes, helping employees acquire new skills and selectively upgrading the staff.

For example, Bill Tracewell, the executive vice president who oversees Delta Healthcare Placement and Delta Flex Travelers, discovered an opportunity to boost sagging contingent staffing revenue after instituting new key performance indicators and taking a hard look at performance data.

“We were having a tough time filling orders because our therapists were between regular jobs and would only work one assignment,” Tracewell says. “We needed recruiters who could build relationships and attract long-term contractors who are willing to work multiple assignments instead of settling for the low-hanging fruit.”

In addition to replacing several members of the recruiting staff, Tracewell jump started motivation and productivity in the direct placement division by switching from a flat commission structure to a sliding scale and retooling the candidate submission and pre-interview procedures.

Staffers says they needed more sophisticated skills to synthesize local market data and discuss future staffing needs with clients after an in-depth analysis revealed a reduction in talk time and deal flow. So instead of slashing training budgets during the grueling recession, the company shelved the scripts and provided weekly skill clinics for the entire staff. Bowles notes that key performance metrics improved when trainers started teaching staffers how to think instead of telling them what to say.

“Some staffing executives don’t like to invest in training because they lose that investment if people leave, but what happens if you don’t train them and they stay?” Bowles wonders.

At the same time, the company took further steps to dismantle internal silos by revamping its 90-day training and on-boarding program for new hires. Now, every new hire receives an experienced guide or Sherpa when they enroll in the company’s Infusion Institute and 75 percent of the curriculum is dedicated to problem solving, critical thinking and industry knowledge while only 25 percent covers specific business unit expertise.

In the spirit of greater transparency, the direct hire staff started sharing the results of advertising campaigns, direct mail and other sourcing efforts with clients because the company utilizes a hybrid placement model that includes an upfront recruiting fee for initiating a search. In exchange, recruiters visit the local community and medical center to understand the organization’s needs, emulate their hiring process and to paint a realistic picture for relocating professionals and their families. The company charges an additional placement fee once the candidate starts.

“We wanted to be more up-front and honest with our clients so they could see exactly what they’re getting for their money,” Chambers says. “We currently provide a monthly report on search activity and review the results via conference call, but we’re building a Web portal so clients can have realtime access to their data.”

Finally, the executive team took a hard look at the performance of its 40 front-line managers and retained only the top 20 who currently oversee teams of 10 to 12 associates.

“You don’t know who can sell and who’s just an order taker until they’re battle tested,” Bowling notes. “Our front-line leadership wasn’t as good as it seemed and now we’re getting the job done with half the number of people.”

The Rebound

The Delta Companies’ retooling efforts appear to be paying off as revenue rebounded in 2011 and is expected to reach an all-time high of $72 million in 2012. The hiring freeze has been lifted and the company has added eight to 11 new producers each month since the start of the year.

Although the staff continues to focus on physician and allied health needs in small communities and hospitals with less than 150 beds — and curtail staffing of registered nurses, which tends to be price-driven — the company is preparing for the future by allowing a small group of recruiters to service orders from MSPs.

Executives vow never again to ignore or sugar coat problems because additional change may be necessary if the economy slows and it’s difficult to predict the long-term impact of healthcare reform.

“Now, we anticipate a recession every time we budget or plan because we’ve learned that if you run a business like it’s in a crisis, it never will be,” Bowling says.

Leslie Stevens-Huffman is a freelance writer in Southern California who has 20 years’ experience in the staffing industry. She can be reached at lesliestevens@cox.net.

[SIDEBAR]

Snapshot: The Delta Companies

The Delta Companies has made the Staffing Industry Analysts’ list of fastest-growing private staffing firms five years running, Inc. magazine’s “Inc. 5000 America’s Fastest-Growing Private Companies” list three years running and the Dallas Business Journal’s “Dallas 100” fastestgrowing private companies list six out of the last seven years.

  • Founded in 1997
  • Approximately 200 employees
  • Two direct placement and two contingent staffing divisions
    • Delta Physician Placement
    • Delta Locum Tenens
    • Delta Healthcare Placement
    • Delta Flex Travelers
  • Annual revenue
    • 2009 $64.5 million
    • 2010 $56 million
    • 2011 $64 million
    • 2012 $72 million (est.)

[SIDEBAR]

Snapshot: Healthcare Staffing Segment

  • The healthcare staffing market grew 11 percent in 2011, driven primarily by strong growth in allied staffing and expansion in travel nurse staffing, as well as growth in locum tenens staffing and per diem nurse staffing
  • Projected growth of 9 percent in 2012, decelerating to 7 percent in 2013
  • The healthcare staffing market will reach $9.2 billion in 2012 and $9.8 billion in 2013
  • Year-over-year total employment growth was positive across the three major sectors of the healthcare industry, however, acceleration trends varied
  • Spend through managed service providers (MSPs) continues to grow, particularly in nurse and allied staffing

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