1. Are Bigger Clients Always Better? GROWTH STRATEGIES for small to mid-size firms Jack Wellman, TSC, CSP October 13, 2010 2PM – 3:15pm
2. THOSE WHO LET THINGS HAPPEN USUALLY LOSE TO THOSE WHO MADE THINGS HAPPEN” - DAVE WEINBAUM “
3. OBJECTIVE | HELP EACH OF YOU MAKE THINGS HAPPEN IN YOUR BUSINESS RATHER THAN BEING A VICTIM TO THE PLANS OF OTHERS.
4. AGENDA | EXPLORE THE ANSWERS… 1 . WHERE WILL GROWTH BE OVER THE NEXT 2 - 4 YEARS? 2 . WHAT STRATEGIES ARE AVAILABLE TO SMALL & MID-SIZE STAFFING FIRMS? 3 . HOW CAN SMALL & MID-SIZE FIRMS OFFER SOLUTIONS TO CLIENTS OF ALL SIZES IN THEIR MARKET? 4 . THE IRRITATING PROBLEM… HOW TO COUNTER TRANSACTION-BASED DEMANDS OF CLIENTS?
5. WHERE ARE YOU LOOKING? HAVE THE LAST 20 MONTHS… GOOD DECISIONS WILL NEVER HAPPEN UNLESS YOU CAN GET DISTANCE AND LOOK AT YOUR SITUATION OBJECTIVELY WITHOUT PRECONCEPTIONS AND BIASES. DO YOU FEEL TRAPPED? AHEAD OR OVER YOUR SHOULDER? DEER IN HEADLIGHTS FEELING? GOT YOU IN A “NO TO EVERYTHING” MODE?
6. STAFFING SUCCESS | IN THIS DECADE… INDUSTRIES JOB SKILLS SIZE OF COMMUNITY BUSINESS SIZE
8. Who employs ½ of all private sector employees? TRUE OR FALSE… LARGE COMPANIES ARE THE BEST PROSPECTS FOR JOB GROWTH… Large Business Small Business *According to the U.S. Small Business Administration. Who has generated 60-80% of new jobs annually over the last decade? Large Business Small Business Who pays nearly 45% of the total U.S. private payroll? Large Business Small Business Who hires 40% of high tech workers such as scientists, engineers and IT? Large Business Small Business
10. *Used Metropolitan Statistical Areas established by the Federal Government EMPLOYMENT ANALYSIS | COMMUNITY SIZE 2001 - 2009 LARGE 1.5 MILLION+ BIG 0.8 – 1.5 MILLION MEDIUM 0.4 – 0.8 MILLION SMALL 0.1 – 0.4 MILLION
11. TRUE OR FALSE… THE BIG METROPOLITAN AREAS ARE WHERE PEOPLE ARE MOVING TO AND EMPLOYMENT OPPORTUNITIES WILL GROW FASTEST… JOBS ARE LEAVING THE BIG CITIES… MIGRATING OUT OF CITIES OF LESS THAN 1.5 MILLION TO METROPOLITAN AREAS BETWEEN 400-800,000.” “
12. BETWEEN MARCH 2001 – MARCH 2009 TOTAL CHANGE SINCE 2001 MSA SIZE % CHANGE | ABSOLUTE # 1.5 MILLION PLUS - 4% (834,591) 800,000 – 1.5 MILLION - 1% (66,331) 400,000 – 800,000 3% 65,200 100,000 – 400,000 - 2% (25,702) THE LARGEST CITIES HAVE LOST 4% OF THEIR EMPLOYMENT.” “ COMMUNITIES BETWEEN 400,000 – 800,000 HAVE ACTUALLY INCREASED EMPLOYMENT LEVELS BY 3%.” “
14. *According to The Bureau of Labor Statistics forecast for the 2008-2018 period. shift Anticipated 14 million employment growth in service-providing industries compared to “no growth” in goods-producing industries. THE SHIFT TO A SERVICE-BASED ECONOMY CONTINUES
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16. LOWER SKILLED POSITIONS TEND TO HAVE A HIGHER ‘REPLACEMENT’ BURDEN THAN SKILLED POSITIONS…” “ TURNOVER CREATES STAFFING OPPORTUNITIES
20. STRATEGIES ASK YOURSELF… 2. WHAT WILL BE YOUR SEGMENTATION CHOICES? 3. WHAT WILL BE YOUR PERSONAL CHOICES? 1. WHAT WILL BE YOUR STRATEGIC APPROACH?
21. MICHAEL TREACY/FRED WIERSEMA: THE DISCIPLINE OF MARKET LEADERS MICHAEL PORTER: COMPETITIVE STRATEGIES A company must find the unique value that it alone can deliver to a chosen market. There are three types of “value discipline” that successful companies adopt to command leadership in their markets. MODELS MAY APPLY TO SMALL & MID-SIZE STAFFING FIRMS Firms with a high market share and low market share were often profitable for different strategies BUT those with moderate market share were the least profitable. A FIRM NEEDS TO CHOOSE ONLY ONE OF THESE STRATEGIES… MULTIPLE STRATEGIES LEAD TO CONFUSION & MEDIOCRE ACHIEVEMENT.” “
22. OPERATIONAL LOW OR LOWEST PRICE WAL-MART EXCELLENCE AND HASSLE-FREE SERVICE MCDONALDS VALUE DISCIPLINE OPTIONS PRODUCT OFFER PRODUCTS THAT PUSH INTEL, NIKE, 3M LEADERSHIP PERFORMANCE BOUNDARIES CUSTOMER DELIVERING WHAT SPECIFIC NORDSTROM INTIMACU CUSTOMERS WANT VALUE DISCIPLINE BASIC PHILOSOPHY EXAMPLES MICHAEL TREACY/FRED WIERSEMA: THE DISCIPLINE OF MARKET LEADERS A company must find the unique value that it alone can deliver to a chosen market. There are three types of “value discipline” that successful companies adopt to command leadership in their markets.
23. REMEMBER: A STAFFING FIRM HAS TWO STRATEGIES TO DEVELOP CLIENT (DEMAND) & CANDIDATE (SUPPLY) MICHAEL PORTER: COMPETITIVE STRATEGIES Firms with a high market share and low market share were often profitable for different strategies BUT those with moderate market share were the least profitable. SEGMENTATION STRATEGY COST LEADERSHIP DIFFERENTIATION STRATEGY UNIQUENESS COMPETENCY LOW COST COMPETENCY BROAD MARKET SCOPE NARROW MARKET SCOPE
24. THE BIG INFLUENCE ON STRATEGIES FOR SMALL & MID-SIZE FIRMS…
26. LOCAL MARKET REGIONAL MARKET GLOBAL MARKET SMALL CLIENTS MID-SIZE CLIENTS LARGE CLIENTS CUSTOMER INTIMACY INNOVATION EFFICIENCY GENERALIST FIRM SPECIALIZED FIRM YOUR STAFFING FIRM … AND SERVICE SELECTION
27. LARGE FIRMS STRATEGIC OPTIONS GENERALIST OR SPECIALIST LOCAL OR REGIONAL OR NATIONAL OR GLOBAL ENOUGH $ TO GET BY OR AS MUCH $ AS POSSIBLE QUALITY-FOCUS OR LOW COST PROVIDER VOLUME OR INDIVIDUAL REQUIREMENTS YOUR FIRM GENERALIST OR SPECIALIST LOCAL OR REGIONAL OR NATIONAL OR GLOBAL ENOUGH $ TO GET BY OR AS MUCH $ AS POSSIBLE QUALITY-FOCUS OR LOW COST PROVIDER VOLUME OR INDIVIDUAL REQUIREMENTS
28. STRATEGY DO YOU HAVE THE PURPOSE , PEOPLE & PROCESS WITHIN YOUR FIRM THAT MUTUALLY SUPPORT YOUR STRATEGIC CHOICES? PURPOSE PROCESS PEOPLE
29. CLIENT ADVANTAGES| OF SMALL & MID-SIZE STAFFING FIRMS… LOCAL RESOURCE/MEMBER OF THE COMMUNITY EASY ACCESS TO OWNERSHIP/DECISION MAKERS AT STAFFING FIRM SPECIALIZED FOCUS RESPONSIVENESS EACH CLIENT IS CRITICAL PERSONALIZED SERVICE
35. ADVANTAGES STRATEGIES • LOCAL PRESENCE • PERSONAL CONTACT WITHIN COMMUNITY • SPECIALIZATION FOCUS (CONTROL OF BEST TALENT) • CAPACITY TO “WALK AWAY” ADVANTAGES & STRATEGIES | FOR SMALL & MID-SIZE FIRMS REGARDING LARGE CLIENTS… • NETWORK AT LOCAL COMMUNITY VENUES AND TECH/ PROFESSIONAL ORGANIZATIONS WITH USER MANAGERS • GO FOR SECONDARY VENDOR STATUS - NOT NECESSARILY SUB- CONTRACTOR STATUS ENORMOUS OPPORTUNITY! ACCORDING TO ASA’S STUDY BEFORE THE RECESSION 85% OF US BUSINESSES WITH MORE THAN 25 EMPLOYEES DID NOT USE STAFFING SERVICES.” “
36. FORECAST BIG IS NOT BETTER! JOB GROWTH WILL COME FROM SMALL TO MID-SIZE COMMUNITIES WILL COME TO SMALL TO MID-SIZE EMPLOYERS SKILLS NEEDED BOTH SAME AND NEW SKILLS NEEDED BETWEEN NOW AND 2010. INDUSTRY GROWTH DRIVEN BY DEMO- GRAPHIC FACTORS AND INNOVATIVE TECHNOLOGY TOWARDS HEALTH- CARE, INFORMATION & INFRASTRUCTURE
37. NOTE : The American Staffing Association does not promote one strategy over another within the industry. The comments and recommendations offered are solely those of the presenter. If you are bewildered, concerned, offended, insulted, pleased or have any other feeling and wish to share them… Please do so with Jack Wellman at [email_address] and NOT with the American Staffing Association. It’s not their fault! ! DISCLAIMER
Editor's Notes
Are Bigger Clients Always Better? Growth Strategies for Small to Mid-Size Firms Presentation by Jack Wellman, TSC, CSP October 13, 2010 2PM – 3:15PM
“ Those who let things happen usually lose to those who made things happen”
Objective Help each of you make things happen in your business rather than being a victim to the plans of others.
• Where will growth be over the next 2-4 years? We will explore different dimensions of growth to understand where the future lies… What strategic choices are available to small and mid-size staffing firms? Not Strategies only…but the Approaches and Choices made with limitations you have Hence what Value do small and mid-size staffing firms offer? Ultimately the Strategy focuses on a VALUE STATEMENT that is supported by your decisions of Strategic Decisions, Tactics, Processes, and People Choices How can small and mid-size staffing firms offer an advantageous solution to all sizes of clients in their markets? Can you really? Is this a reasonable goal… choices always leaves someone out…. The Irritating Problem – how can you counter a transaction-based demands by clients? We will focus on this since it is so “REAL” in everyone’s mind….
Let’s get our heads on straight! Are you looking ahead by looking over your shoulder? Has the last 20 plus months got you in a “NO to everything” mode? Do you have that “trapped” or “deer in the headlights” feeling? Good decisions will never happen unless you can get distance and look at your situation objectively without preconceptions and biases Planning Challenges for Small to Mid-size Staffing Firms Attitude: 90 lb weakling mentality instead of David and Goliath How can you fight BIG FIRM (competitor or client)“power”? “ All of you staffing firms are alike…” Are you the same as everyone else? Can’t see the light… Classically business owners do not network well within their industry to evaluate and learn options Being at ASA alone sets you apart from the crowd….
STAFFING SUCCESS IN THIS DECADE Tied to where the demand for staff/employment will be growing There really are only 4 dimensions to explore: What business size will grow the fastest? Big business versus small business What will be the growth of employment based on size of community ? Big city, small city, suburban, town What job skills will be in the highest demand? What industries will expand the most?
Let’s take the first of these four factors… business size
The Great Recession of 2007-2009 Compared to all recessions since WWII its ranks worse in terms of jobs lost (over 8 million) and second worse in % decline ( 6%) With a forecast for a long and slow recovery,,,,, Where will the new jobs come from… Since 1980 nearly all net job creation has occurred with firms less than 5 years old. WITHOUT FIRM START-UPS NET JOB CREATION WOULD HAVE BEEN NEGATIVE! Of the 12 million new jobs added in 2007 young firms were responsible for the creation of nearly 8 million of those jobs. Facts: In 2006: Firms with less than 500 employees represent 50% of the employed workforce A breakout further is: Firms with less than 20 employee is 18% of the workforce Between 20 and 100 employees is 18% Between 100 and 500 is 14% of the workforce Firms with more than 500 employees equal 50% of the workforce…. The other half… BUT where is job growth coming from! Firms less than 5 years old and by consequence generally small employers.
Let’s take the first of these four factors… business size
*Tried to have representative areas from all parts of the US. Employment Analysis re: “Community Size” 2001-2009 Used Metropolitan Statistical Areas established by the Federal Government Large (1.5 million plus) New York Los Angeles Chicago Dallas Atlanta San Francisco Big (0.8 to 1.5 million) San Diego Denver Baltimore Tampa Portland OR Medium (0.4 to 0.8 million) Columbus OH Austin Salt Lake City Rochester Smaller (0.1 to 0.4 million) Columbia SC Wichita Springfield MA Stockton Ann Arbor
The big metropolitan areas are where people are moving to and employment opportunities will grow the fastest… NOT TRUE! According to our sampling, jobs are in fact leaving the BIG cities (getting fewer) Migrating out of cities of less than 1.5 million to metropolitan areas between 400-800,000. Refer to Appendix B • Changes in Employment Based on Community Size (Recession) March 2001 – March 2003 • Changes in Employment Based on Community Size (Growth Period) March 2003 – March 2008 • Changes in Employment Based on Community Size (Recession) March 2008 – March 2009 • % Change in the total U.S. Employment Based on Community Size for the 3 Periods
BETWEEN MARCH 2001 AND MARCH 2009 The largest cities have lost the most – 4% of their employment. Communities between 400 – 800 thousand have actually increased employment levels by 3%
Let’s look at the growth of various skills The Bureau of Labor Statistics issued its forecast for the 2008-2018 period Using both economic and demographic projections Note the changes caused by both • T he aging of our population and the increased demand in health care services • The shift to a service-based economy continues Anticipated 14 million employment growth in service-providing industries compared to “no growth” in goods-producing industries Refer to Appendix C Increase/Decrease of Occupations – 2008-2018
For those looking for the new HOT highly skilled JOB TITLES – some suggestions Organic Food Expertise Data Technology Genetic Counseling Computational Biology Simulation/Model Engineering Neuroscientist Parallel Programming Care Giving to Baby Boomers Robotics
But there is one other aspect of the labor market In addition to growth of employment, certain job categories also have a level of “churn” or turnover that creates staffing opportunities. Lower skilled positions tend to have a higher “replacement” burden than skilled positions
Primarily healthcare related, service industry related or productivity/technology related…. Don’t see old line manufacturing high on the list as the global economy has reallocated the application of resources based on factors other than national borders.…. One aspect of the management approach to labor cost for a service based industry versus the manufacturing sector is the % of operating costs that are costs of labor ….
Strategies for Small and Mid-Size Firms There are several layers of questions you need to address: What will be your strategic approach? What will be your segmentation choices? What will be your personal choices?
These approaches were published in 1993. Note that there still needs to be a strategic decision made before selecting the preferred value discipline What is the firm’s chosen market?
Developed in 1980 and appears to understand the element of market definition and choice….. A precursor to Treacy/Wiersema’s proposition Empirical research on the profit impact of marketing strategy indicated that firms with a high market share were often quite profitable, but so were many firms with low market share. The least profitable firms were those with moderate market share. This was sometimes referred to as the hole in the middle problem. Porter’s explanation of this is that firms with high market share were successful because they pursued a cost leadership strategy and firms with low market share were successful because they used market segmentation to focus on a small but profitable market niche. Firms in the middle were less profitable because they did not have a viable generic strategy. Combining multiple strategies is successful in only one case. Combining a market segmentation strategy with a product differentiation strategy is an effective way of matching your firm’s product strategy (supply side) to the characteristics of your target market segments (demand side). But combinations like cost leadership with product differentiation are hard (but not impossible) to implement due to the potential for conflict between cost minimization and the additional cost of value-added differentiation. This choice really dictates how you want to operate in relation to your client and candidate….. Segmentation Strategy is essentially being a big fish in a little pond and focus on being a market leader there (customer intimacy or product innovation) Niche strategy…. depending on the needs of the clients One observation Michael Porter made is that it is hard to combine cost leadership and differentiation because of the conflict between cost minimization and the added cost of value-added differentiation.
How do you want to be known as in your COMMUNITY (defined in many ways): The staffing industry The town/city in which you live In your club or church In the golf foursome you play with every week THIS VISION WILL DETERMINE THE ANSWER AS THE MANAGER OR OWNER BECAUSE THE ANSWER IS VERY, VERY PERSONAL
Understanding the available approaches and your personal biases sets the stage for… Your Segmentation Selection! Geographic Markets Service Focus Skills Industries Client Types What are your choices that will dictate the future of your firm?
Now you have made up your mind: Your personal biases Your segmentation decisions Your strategic approaches Apply them to the following grid
Your Segmentation Selection! Service Focus Temp, Temp2Hire, Direct Hire, Exec Search, RPO, VMS, MSP, VOP…. Skills Industries Geographic Markets Client Types size, credit worthiness, etc.
This is where the discussion goes to the following: The KEYS are the answers to the following questions? What is the definition of your market? Then where is your strength? - Location, Specialization, Price, Convenience, Quality, Timing, Personal Service, etc. Compared to the Client’s needs? This leads you to not only focusing on where your COMPETITIVE ADVANTAGES are compared to your COMPETITIORS and the CLIENT’s Needs…..
Here are some suggestions once the list is offered by audience… Focus on what your strategic choices are based upon…
Suggestions Think long term… BIG pond versus LARGE OCEAN Simplicity equals Clarity HINT: The “Natural” relationship between skill level and geography: Low level skills = LOCAL advantage High level skills = National/Global Advantage
The staffing industry has educated the professional buyer too well! Thankfully, every client is not price-driven…
Comments from Large Staffing Firms about Themselves “ 70 basis point (-0.7%) decline [in gross margin %] from our temporary staffing business as we are now feeling the effect of the pricing pressures in most of our markets during all of 2009 because of the economic environment.” - Manpower 10-Q 4/29/10 “ Our average mark-up has been impacted by shifts to a higher portion of light industrial business compared to clerical and to large corporate customers compared to retail.” - Kelly Services 10-Q 5/12/10 “ We work with companies of all sizes. But small and midsize businesses represent the biggest part of our client base. We build the Robert Half name serving these companies, which especially value our specialized and consultative approach. By our estimate, we work with less than 10% of the U.S. companies that fit our profile.” Robert Half, 2009 Annual Report Stockholder Letter
Look at Gross Margin %s for the first quarter 2010 for these three LARGE firms Manpower 17.1% Kelly Services 15.9% Robert Half 36,4% The LARGE Firm exception… because it doesn’t follow the “classic” LARGE Firm strategy
Positive planning approach Change the Rules If you play the game of large staffing firms and large clients, generally small to mid-size staffing firms won’t win… The game’s rules are “stacked” against you. Start your own game and set the rules where you can win -Be strong where they are weak
What are some advantages and strategies for small and mid-size firms regarding large clients… Advantages Local presence Personal contact within community Specialization focus (control of best talent) Capacity to “walk away” Strategies Network at local community venues and tech/professional organizations with user managers Go for secondary vendor status (Not necessarily sub-contractor status) Enormous Opportunity! According to ASA’s study before the recession 85% of U.S. businesses with more than 25 employees did not use staffing services
My forecast for you BIG is not better! Job Growth will come from small to mid-size employers Job Growth will come to small to mid-size communities Both same and new skills needed between now and 2018 Industry Growth driven by demographic factors and innovative technology – further away from manufacturing towards infrastructure, information and healthcare.
NOTE : The American Staffing Association does not promote one strategy over another within the industry. The comments and recommendations offered are solely those of the presenter. If you are bewildered, concerned, offended, insulted, pleased or have any other feeling and wish to share them… Please do so with Jack Wellman at [email_address] and NOT with the American Staffing Association. It’s not their fault!
