Top Five Threats Facing the Staffing and Recruiting Industry Today - Jonathan Thom


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We are in an economic period where many experts predict the economy will expand at a tepid pace. Whether you are a small staffing and recruiting firm or an expanding national or even international firm, your challenge will be to grow your business at a rate greater than the economy and industry overall. How will you grow your business by 10% in an economy expanding at 2%?

Join Jonathan Thom, Vice President of Express Employment Professional’s professional staffing division, to learn what the top five threats facing the staffing and recruiting industry are today, and most importantly, his strategic ideas and thoughts on how you might overcome them. Some threats that he will cover include:

Continued globalization of our business – which may result in continued downward pressure on margins
The stiff competition for internal talent as more companies in our industry compete for well qualified internal candidates
Regulatory nightmares associated with the HCRA
One thing is for sure – you will not want to miss this Keynote address on Friday June 7th.

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  • Top Five Threats Facing the Staffing and Recruiting Industry Today - Jonathan Thom

    1. 1. Changes inthe economicenvironment havealtered businessfundamentals forever.YourYour EndangeredEndangeredBusinessBusinessTop FiveThreats FacingThe Staffing andRecruitingIndustry TodayThreat 1:Inability to InnovateThreat 2:Losing YourCompetitive AdvantageThreat 3:Globalization andConsolidationThreat 4:Poor Leadership &CommunicationThreat 5:Regulatory NightmaresPresented by Jonathan Thom, VicePresident, Express EmploymentProfessionals
    2. 2. Pre-Recession Economy Was StablePre-Recession Economy Was Stable• Large companies kept competitors atbayPost-Recession Economy is allPost-Recession Economy is allabout Competitionabout Competition• Entrepreneurial spirit• Ability to anticipate, respond and adaptto threats• Survival, Evolve• Prepare for organizational change in aminute’s notice• Or become EXTINCT!
    3. 3. The Big ShiftThe Big ShiftDigital EconomyShortening life cycle of productsand services: If you understand thetechnology, it is obsolete.Super data powered consumers:“Customers now aggressively seekalternatives, compare offers, and holdout for the best option.”Globalization of world economies,technologies, and innovations.Shift of emphasis from a decayingindustrial economy to a knowledge-based entrepreneurial economy drivenby innovative technology.ThreeThreequarters ofquarters ofadults areadults arenow online.Source: Michael Hammer, “Agenda”
    4. 4. ““The topple rateThe topple rateat which companies losetheir leadership positionshas more thandoubled.doubled.””Source: Measuring the Forces of Change: The 2009 Shift Index, The Deloitte Center for the EdgeRapidly changingbusiness environment:“It’s not the big that eatsthe small; it’s the fastthat eats the slow.”Less innovative andefficient companiesdownsize or go out ofbusiness, and moreinnovative and efficientcompanies grow.
    5. 5. Companies that have becomeCompanies that have becomecomplacent have been lappedcomplacent have been lappedBecoming #1 is easy, Staying there…Becoming #1 is easy, Staying there…– Yahoo Google– Myspace Facebook– Local video stores Blockbuster– Blockbuster Netflix– Local newspaper/ network news Internet– Kodak To everyone elseWhat companies in your market?
    6. 6. Source: Jason Jennings and Laurence Haughton, “It’s Not the Big that Eats the Small … It’s the Fast that Eats the Slow”SustainingSpeedFastThinkingFastDecision-MakingFast toMarketLetting the bestidea winForecasting &roadmappingEstablishingguidingprinciplesConstantlyreassessingOwning competitiveadvantageInstitutionalizinginnovationFinancialflexibilityAdaptabilityBusiness processmanagement systemDoes Your Company have an Engine ofDoes Your Company have an Engine ofInnovationInnovation
    7. 7. Microsoftexecutives were asked how theywould break down the$375 billionmarket capitalization value oftheir company.They replied…$210 billionof their $375 billion valueis from…““The stuff inThe stuff inpeople’s heads.”people’s heads.”Source: Conference-Board. “The Value of HR”,“The Financial Value of Talent Management”“Relentless Growth”
    8. 8. Threat 1:Inability to InnovateInability to InnovateTop Five Threats Facing the Staffing and Recruiting Industry TodayJac Fitzenz, author of ROI of Human Capital“ … people arethe onlyelement withinherent powerto generatevalue … all othervariables offernothing butinert potential.”If you do not have the best talentyou will not survive today.your endangered business
    9. 9. Innovation Depends on Four FactorsInnovation Depends on Four Factors• Financial Capacity• Knowledge• Research• People who make it happenIf your employees embrace the top 3WE SURVIVEThreat 1: Inability to Innovate
    10. 10. 80%WhereWhere’s’syour weakest link?your weakest link?of surveyed respondentswho are currently employed“would considerleaving their currentjob if presented withother opportunities.”Threat 1: Inability to InnovateSource : Opinion Research Corp.
    11. 11. • Employees are testing the market• Prediction of 40% turnover/generational• Some studies say employees will have 10 jobsby age 40• The War on Talent is Real!• Retention is becoming #1 objective toorganizational success• It’s not a battle for people but a battle fortalent• You cannot innovate without retaining yourknowledge assetsThreat 1: Inability to Innovate
    12. 12. What is the organizational cost indollars, morale and culture fornot getting this right?83%83%of companies surveyedpicked “shortage of talent”as the #1 pressure in 2011.Sources: Aberdeen Group Study “Talent Acquisition Strategies”Deloitte Center, Measuring the forces of long-term changeTodayToday’s Talent Battle’s Talent BattleThreat 1: Inability to Innovate
    13. 13. Shortage of Talent vs. Shortage of People• How many open positions do you have inyour organization?• If those positions were filled, what impactwould that have on your bottom line?• How can clients perceive us as “experts inhiring” if we struggle in this area?Threat 1: Inability to Innovate
    14. 14. Not only is your competitionwatching your corporateactions on social networks, theyare stalking your talent.Source: Source: Careerbuilder.comSource: Source: Careerbuilder.comTodayToday’s’snewnewweaponweaponof choiceof choicefor talentfor talentpoacherspoachersOf the 2,600 North Americanhiring managers surveyed,45% use social-networkingsites to research jobcandidates.CyberCyberProwlersProwlersThreat 1: Inability to Innovate
    15. 15. … has many companies resorting to extreme actions. What areyou doing to retain top employees?Trying to find the sharpest needleTrying to find the sharpest needlein a very large stack of …in a very large stack of …Source: Small Business Panel Occupational Safety and Health Administration 2009reportThreat 1: Inability to Innovate
    16. 16. Myth – This economy has a largenumber of available employeesTruth – The best with greatestknowledge to innovate are fewThreat 1: Inability to Innovate
    17. 17. Threat 2:Losing YourLosing YourCompetitive AdvantageCompetitive Advantage“With competitionleveling the playingfield, an engagedworkforce is one ofthe intangible assetsthat can reallybecome a firm’scrucial competitiveadvantage.”Hugh G. Courtney Vice Dean andProfessor of the Practice at theUniversity of Marylands Robert H.Smith School of Business,Washington Post, Jan. 23, 2011Top Five Threats Facing the Staffing and Recruiting Industry Todayyour endangered business
    18. 18. The criticaldifferentiator forbusiness survival intoday’s competitivemarketplace is…Without muscleWithout musclehow can you compete?how can you compete?EmployeeEmployeeEngagementEngagementThreat 2: Losing Your Competitive Advantage
    19. 19. Do you have an army ofDo you have an army ofsleepwalkers?sleepwalkers? Employees who don’t leave:the under-performing and disengaged“I had a bad month lastmonth, but I am confidentI will close $50k thismonth….”TheThe “quit-“quit-and-stay”and-stay”phenomenonphenomenonThreat 2: Losing Your Competitive Advantage
    20. 20. Employee Engagement• Disengaged employees quit (butunfortunately stay)• How come we don’t classify them asdisengaged until after they leave?How many of you have disengaged employees?Are supervisors/managers partly to blame?Threat 2: Losing Your Competitive Advantage
    21. 21. How many employees areimpacting profits?• Most companies admit the inability to run at fullcapacity is due to employee lack of engagement• Customer retention is directly linked to employeeretention• If you rely on outstanding customer service –begin internallyThreat 2: Losing Your Competitive AdvantageEngagedplan to stayfor whatthey GIVE.Disengagedstay forwhat theyGET.
    22. 22. Many companiesMany companiesunderestimate the importanceunderestimate the importanceof their front line.of their front line.60%of the workforceare hourly employees.50%leave before theyhave been on the jobfor six months.Threat 2: Losing Your Competitive AdvantageThe hourlyworkforceonly receives30% of thedevelopment resources.Source: U.S. Bureau of Labor StatisticsBlessingWhiteApproximately
    23. 23. • Can you truly differentiate yourself from yourcompetitors?• Are you truly innovative?• Do you offer “non-traditional” solutions?• How do you “take the pulse” of what othersare offering and what clients are asking for?Threat 2: Losing Your Competitive Advantage
    24. 24. Threat 3:Globalization andGlobalization andConsolidationConsolidationTop Five Threats Facing the Staffing and Recruiting Industry Today“The personwho does notworry aboutthe future willshortly haveworries aboutthe present.”Chinese proverbyour endangered business
    25. 25. What impact hasthis had on marginsand fees in yourmarket?$46.5 BillionSource: SHRM Research QuarterlyIn Staffing RevenueIn Staffing RevenueGenerated from threeGenerated from threefirms…firms…Threat 3: Globalization and ConsolidationDoes this surprise you?Does this surprise you?
    26. 26. And theeconomy isexpanding at arate ofSource: Forbes2.5%inrecentyears.Ask yourself:Ask yourself:If the temp penetration rate is less than 2%...How can I growmy business by 10%?Threat 3: Globalization and Consolidation
    27. 27. Ask yourself:Ask yourself:As a small to mid-sizedindependent staffing andrecruiting firm, how can Icompete?Source Research Benchmark 2010 StudyMost markets have more than100 competitors. How do youcompete? If a client has a needinternationally, where do yougo?How many $50,000How many $50,000mistakes can you afford?Threat 3: Globalization and ConsolidationAdvertising• What amount do I budget foradvertising and marketing?Infrastructure Costs• How do I distribute costs overa small area?New Hire Training Costs• 13% of salaryNew Hire Productivity• What ROI do you see in thefirst 90 days?
    28. 28. The spill-over effect has yourtalent dealing with: Productivity slow down due to lack of focus Poor team morale Increase in absenteeism High turnover rate Difficulty in internal recruiting Leadership withdrawal High burnout due to work overload Disruption of entire team synergyDon’t think yourengaged talent isimmune.I’m leaving!Maybe I should start looking…Why am I staying?Threat 3: Globalization and Consolidation
    29. 29. • How will globalization effect yourbusiness?• Will “Reshoring” of production jobs helpyour business?• In a stagnant world economy, how willyou grow at a rate that is quicker than theeconomy is expanding overall?• What are your training objectives?• What is your value proposition to yourinternal customers?Threat 3: Globalization and Consolidation
    30. 30. Threat 4:Poor Leadership &Poor Leadership &CommunicationCommunication“Aninvestment inknowledgepays the bestinterest.”Benjamin Franklinyour endangered business Top Five Threats Facing the Staffing and Recruiting Industry Today
    31. 31. WhatWhat’s on your dashboard?’s on your dashboard?““I quit!I quit!””.One in two employees islooking to leave or haschecked out on the job.Worker satisfactionis at its lowest levelsince The ConferenceBoard beganmeasuring it in 1987.Only 45%Only 45%satisfiedsatisfied Two-thirdsTwo-thirdsof companies are moreconcerned aboutretention now than theywere before theeconomic crisis.Threat 4: Poor Leadership & CommunicationSource: U.S. Bureau of Labor StatisticsEd Frauenheim Workforce Management
    32. 32. As Recession FadesThe #1 Priority Becomes Retention• 45-50% of engaged employees are open tojob change. How are you targeting thesepotential recruits?• Many are actively looking• During recessionEmployers not loyal to employees• Post-recessionEmployees not loyal to employersThreat 4: Poor Leadership & Communication
    33. 33. Just becauseyou havetalent in yourfield doesn’tmean you’re agreat leader.Toxic WorkToxic WorkEnvironmentEnvironmentDo you knowwhat it’s like towork for you?Ask yourself thesethree questions:Threat 4: Poor Leadership & CommunicationSource: Robert Sutton, Stanford business professor1. Do you know how topush without beingrude or obnoxious?2. After someone talksto you, do they feellike they have moreor less energy?3. Do employees feellike you have theirbacks?
    34. 34. 32%Need foradvancementLeadership is the #1 reason talent leavesLeadership is the #1 reason talent leavesSource: Gallup20%Lack ofjob fit17%MismanagementONLY 22%Pay andbenefitsThreat 4: Poor Leadership & Communication
    35. 35. Continuous Learning IsContinuous Learning IsCrucial to MaintainingCrucial to Maintainingand Managingand ManagingTalentTalentSource: Jim Collins, “Good to Great”American Society for Training & Development50%of organizationssurveyed feeltheir executives havea gap of leadership level skills.51% from thesamesurveyed organizationsfeel the skills of theircurrent workforce do not matchtoday’s market challenges.The mismanagementof human resourcesis one of the mainreasons many“Good” companiesnever become“Great.”ASTD study was crystal clear,firms that invested the most intraining and development had a totalstockholder return 86% higherthan firms who did not invest.Threat 4: Poor Leadership & Communication
    36. 36. Threat 5:Regulatory NightmaresRegulatory NightmaresTop Five Threats Facing The Staffing and Recruiting Industry Today“This countryhas come tofeel the samewhen Congressis in session aswhen the babygets hold of ahammer.”Will Rogersyour endangered business
    37. 37. Regulation and ComplianceSource: Small Business Administration Economists Nicole and Mark CrainSource: Small Business Administration Economists Nicole and Mark CrainWayne Crews & Ryan Young, InvestorWayne Crews & Ryan Young, Investor’s Business Daily’s Business DailyTopTopBusinessBusinessRiskRiskThreat 5: Regulatory NightmaresIn 2010, there were 224 major rules that hit the books –expect more as the government searches for more waysto generate revenue and increase compliance.The total cost of federalregulations to employershas increased over $1.75trillion.
    38. 38. Top Business Risk• Regulatory agencies enact 3,500 newregulations in an average year• New federal rules hit books every 2 hours• Simply put, uncertainty around regulations iskeeping many businesses from hiring• How do you turn this reality into opportunityThreat 5: Regulatory Nightmares
    39. 39. Source: NFIB Research: Small Business Problems & PrioritiesWhatWhat’s keeping you up at night?’s keeping you up at night?Threat 5: Regulatory Nightmares Federal, state, and localrestrictions Background checks Hiring, firing,and employment regulations Social media protections Healthcare reform On and off boarding Class actions
    40. 40. You need to raise your fear factor.You need to raise your fear factor.Threat 5: Regulatory NightmaresThe never ending legislation in 2013The never ending legislation in 2013Avoid costly legal liability when….Avoid costly legal liability when….• Recruiting and screeningRecruiting and screening• HiringHiringFailing to keep up with changing rules and regulationscan cause serious consequences.• Evaluating employeesEvaluating employees• On & off boardingOn & off boarding• Verifying legal statusVerifying legal status• Giving referencesGiving references
    41. 41. There is a shortfall of at least $800 million due to allegedworkers’ compensation insurance fraud.Threat 5: Regulatory NightmaresWorkersWorkers’ Compensation:’ Compensation:Another insurance crisis.States aregoing afterpast clientsof insuranceproviders torecoverlosses.Source: Workforce Management
    42. 42. Workers’ Compensation• Every state has their own W/C laws• Regulatory nightmares; do you have astrategy to manage?Threat 5: Regulatory Nightmares
    43. 43. Threat 5: Regulatory NightmaresTaxes &Taxes &PenaltiesPenaltiesNew tax increase:SUTA tax is now based onthe first $9,500 in wages,up from $7,000 in 2010.Stiff Federal PenaltiesLate Penalties:One to five days late6 to 15 days late15 days and overOther Penalties:Unauthorized payment methodsIf payment remains unpaid2% penalty5% penalty10% penalty10% penalty15% penalty.Source: Internal Revenue ServiceState Specific Agencies
    44. 44. IRS and State AgenciesIRS and State AgenciesCrackdownCrackdown“The federal government estimates thatmisclassification of employees as independentcontractors will cost the U.S. Treasury Departmentmore than…Threat 5: Regulatory Nightmares$7 billion$7 billionin lost payroll taxrevenues.”They planto start collecting.Source: Washington DC Employment Law Update – Littler Governmental Affairs
    45. 45. How long can we keep jugglingInsurance Reform?Insurance Reform?No wonderNo wonderyouyou’re up nights.’re up nights.Starting in 2014, employers with 50 or more employees will berequired to pay stiff penalties if they do not offer medical insurance.Source: High Roads and Hewitt Associates Survey Lack of federal guidance on what therequirements are. Disconnect on the true cost to small businesses. What employees need to be told by employers. Employee’s lack of understanding of changes.Threat 5: Regulatory Nightmares
    46. 46. Light at theLight at theEnd of theEnd of theTunnelTunnelHere is the goodnews: havingsurvived theeconomic challengesof the past, you areright around thecorner fromimprovingperformance,efficiency, flexibilityand costs – ensuringyour future growth.
    47. 47. YES!YES!Because great leadersBecause great leadersturn threats intoturn threats intoopportunities!opportunities!
    48. 48. Turning Threats into Opportunities• Great companies• Great leaders
    49. 49. CompetitiveCompetitiveKnowledge BasedKnowledge BasedInfrastructureInfrastructure Outsourcing Central core work force Flexibility Geographic constraints Customer centric Reduce cycle time
    50. 50.  Economies of scale Standardization ofworkforce Corporate HQ as operationalcontroller Employees seen as expense Internally focused top-downgovernance Individualistic orientation Information based on “needto know”YesterdayYesterday’s Slow’s SlowIndustrial MethodIndustrial MethodCompetitiveCompetitiveKnowledge-BasedKnowledge-BasedInfrastructureInfrastructure Customization of work Flexible, skill-based workforce Treat talent as a scarce resource HQ as advisor and corecompetency guardian Employees seen as investment Team orientation Emphasis on changeSource: Corporate Leadership Council, Washington, D.C.
    51. 51. Where should your focus be?Emphasis on ChangeInnovateProtect your CompetitiveAdvantageAvoid Reckless HiringLeadership/CommunicationAvoid Regulatory Nightmares
    52. 52. Understanding the cost of each employee.Mandatory CostsFederal Social Security Tax 6.20%Medicare tax 1.45%Federal Unemployment Tax 0.80%State Unemployment Tax 2.90%Worker’s Compensation 4.30%Total Mandatory Cost 15.65%Hiring Costs (on boarding)Recruiting, hiring, training,book-keeping, payroll 6.90%Severance Pay 0.10%Total Hiring Cost 7.00%Discretionary Costs (have become obligatory)• Vacation 4.90%• Holidays 3.40%• Sick Pay 1.30%• Retirement 5.40%• Profit Sharing 1.20%• Health & Life Insurance 11.09%• Bonuses & Incentives 0.40%• Non-Working Time 3.50%• Miscellaneous Benefits 1.90%Total Discretionary Costs 33.09%TOTAL ADDITIONAL COSTS 55.74%RISKS?RISKS?How muchprofit willbe gainedor lost?
    53. 53. Success isignited bysurroundingyourself withthe rightpeople.