Considering an Upgrade to Your Technology Stack?
by Visus Group Partners Bill Ehrmantraut and Chris Leigeb, Principals at Strategic Value Partners
Top Considerations When Upgrading Your Technology Stack
Face it, if you are not continuously evaluating and upgrading your technology stack, you are losing ground in the highly competitive staffing industry. There are challenges:
- you did not build your business around being experts in technology.
- most staffing companies do not have the resources to have a full time Chief Technology Officer.
- technology is changing and evolving at breakneck speeds, it is hard to keep up.
Where to start? You need to begin with an assessment of your current technology. There is a wide spectrum where your company may land here. On the one end, you could be using a bunch of home-grown solutions that include a great deal of manual processes and fragmented vendors, that operate in silos that are not connected in any meaningful way. Or you may have be using one of the major staffing software solutions and taking advantage of integrated technology partners that allow for seamless data transfers. Most likely you fall somewhere in the middle. There are opportunities for improvement no matter where your company falls on this spectrum.
Let us dive into the assessment of your current technology to get your baseline.
- To truly understand your current state and help you in your technology upgrade, you must map out your current workflows and processes.
- What are your key performance indicators (KPI’s) and metrics you utilize in your business?
- Highlight areas of weakness. For example, where there are manual processes, duplicate entries between systems or databases, confusing or complex work arounds?
- If you’re using an ATS, how long has it been since you implemented, and have you stayed up to date on the upgrades, new functionality or new integrations?
- Does your organization fully utilize the systems that you already have? If not, why?
- Evaluate your size verses when you made previous investments, growth plans, expansions into new regions or new business verticals. What will be needed to service that business and feed that growth?
Now that you have your technology baseline, its time to explore the technology marketplace. It is mind boggling how many staffing software solutions are out there and the claims that are made regarding their capabilities. And there are more staffing software providers coming to market all the time. You need to know what technology providers to evaluate.
When you look at technology, there are two major components:
- Staffing Software ATS, System of Record -This is the main software that will be the heart and soul of your technology. In some cases, it is just the Front Office (Applicant Tracking System, Onboarding) and others it offers a full Front and Back Office (payroll, invoicing, AR and general ledger interface). Many of the larger ATS systems have added in many of the features and benefits as internal functionality that used to provided by outside vendors. These can include items such as paperless on-boarding systems, website interfaces, social media integrations, job board interfaces, business analytical tools, texting, scheduling, timekeeping solutions, ACA tools, E-verify, CRM components and other solutions that bring real value, and keep as much work as possible within the primary ATS.
- Ancillary Technology Vendors– these are vendors that provide critical technology solutions. They are typically more robust than some of the internal tools provided by the ATS and can often be integrated via open API’s or simple file transfers. Think automated timekeeping, payroll processing, scheduling, paycards, WOTC providers, health care providers, job board management, recruiting solutions, funding, automated texting/communication, video interviews, mobile capability, Chat Bots, AI Interface, call center software, and so many more.
If you have several partners that fall into the second bucket in that they are key to your business, you need to find a Staffing Software solution that is integrated with your most important partners or offer an open Application Programming Interface (API). An API is a way for data to be automatically pushed or pulled seamlessly between the Staffing Software and the integrated partner. It allows you to stay in your software system and not have to log into other systems to complete tasks or view reports. If one of your key technology partners does not have an integration, a work around would be ftp file transfers.
Keep your expectations in check here. Not all your partners will have an integration with a Staffing Software ATS. Also, understand that while both the ATS and the Vendor may have open API’s the programing work will still need to be completed and can be very expensive and take time.
Vetting Staffing Software ATS
We will focus most of this section on vetting the Staffing Software ATS. At this point you have evaluated your current workflows and identified weaknesses and gaps in your current process. Some key points:
- As you go through the vetting process, create an internal team made up of staff from a broad representation of your organization: Operations, Finance, HR, IT, Sales, etc. Too many times we see just IT personnel involved in this part of the process. Make no mistake, they need to be included, but omitting the other key areas from the vetting will likely lead to a bad outcome.
- How big is your company? What are your growth plans?
- What staffing vertical (s) are you in currently? What verticals are you contemplating to add in the future?
- Do you need a Front Office and Back Office Solution? (define these). Or just FO or BO?
- What is your budget?
- Is there a slower period in your typical work year that could be filled with a new implementation?
Once you have answered these questions, now it is time to start the interview process. We recommend you identify at least 3 and at most 6 Staffing Software companies to evaluate.
One thing to consider. You may think your incumbent software provider should not be in the mix as a candidate. You may think they have let you down or that they do not have the right technology for your business. Beware, the grass is not always greener on the other side. We have seen companies switch only to come back to their original vendor. Take this opportunity to let your incumbent know you are evaluating your software providers and you would like to include them in the vetting process. You may be surprised at what their capabilities are when you take a deep dive in an organized fashion. Also, it puts them on notice that you are looking, and you may get some better terms or attention now that they know they need to re-earn your business.
Key parts of the Staffing Software ATS evaluation:
- Map out your current processes and workflows and identify the areas that you would like to improve.
- What staffing verticals do they service? Does this line up with your core competencies and future plans?
- What is the culture? Is this a good fit for your business culture?
- What is currently available in their software and what is upcoming and when?
- Demos – This is a key part of the evaluation process. Have a list of items you want to see prior to the demo. Record the demo. Believe it or not, sometimes a company will demo something that is not live yet. Having a recording to refer to can be very helpful.
- References – get a good spectrum of references. Those that have been long term clients. Those that have recently gone live. Ask for companies that are of the same size and staffing vertical. Ask the tough questions. Understand most staffing companies will only give you references that are going to say good things. Do your best to find companies that are using the software that may not have been provided by the ATS and get their perspective.
As your go through the above process, you will be able to eliminate vendors and narrow your choice down to a top 2. This will provide you a good negotiating position as the vendors will be willing to provide their best offer. From here you should be able to select the Staffing Software partner that is right for your business.
Feeling like you do not have the expertise or resources to do an evaluation? This is where a knowledgeable consultant can be a godsend. They understand the marketplace and the capabilities of all the players. They can fill the gaps for you and manage or guide you through the process.
Now the fun part – Implementation of your new Software solution! This will be the subject of our next blog.
When it comes to technology in your staffing firm, address these five areas first.
Technology in the staffing industry sure has evolved over the last few years. Right now, there are over 400 hundred technologies that are currently supporting the staffing industry. That’s right, 400+ technologies! How do you know which ones are new? How do you know where to start? How do you know which ones are the best ones for your staffing firm?
What I frequently hear from my clients and members is this: “I’m a business owner of a staffing firm, someone with a sales background. How can I possibly know how to make the right decision on technology?” It’s a valid question and one that has a variety of answers. The first step is to really analyze where you currently are on the technology spectrum ranging from low-technology firms, a smaller firm or one that doesn’t use too many products, to an enlightened staffing firm, one that has built out their tech stack and understands how to leverage their IT department for greater efficiency. The reality is that many are on the former side.
The good news is that we are in a unique position, through our Presidents RoundTable, to get exposure to all the IT challenges that staffing firms of all sizes face on a weekly basis. Through all of these stories and consulting moments, we’ve identified five critical areas that staffing firms need to address within their IT strategy:
Align your technology stack to your business model.
What is your business model? Define it. Know it. Map it out. And then determine what is the best technology to help you implement that business model in the marketplace. The number one error we see staffing business owners make is that they get enamored with shiny new technology. Or, they hear from their Sales Reps & Recruiters, “We have to have this new technology! This new technology will be a game changer for us!”
The worst mistake you can make (as it relates to IT) is fitting the technology to your process. The replicable business model is the anchor (the key criteria) in which all decisions on technologies are judged against. It is that simple. A simple decision-making tree will help any staffing firm make far better IT decisions. And knowing what specific business model is being implemented.
Decide who will manage your technology.
The makeup of your IT department can have an enormous effect on how fast or slow you are to new technologies. There are essentially two structures – in-house IT or Outsourced.
Outsourcing: If you are a small Owner/Operator staffing business you really have no choice, but to outsource as your payroll is best served for recruiters and salespeople. In this model, you will be paying for work done, some monitoring, but you may not see the dedication this company may have to building an IT roadmap as they will be in maintenance mode for you. The key here is to find an IT Support firm that aligns with the size of your firm and has your firm’s best interest at heart.
In-house: If your firm is midsize to enterprise, then you will most likely have IT personnel on your staff. The biggest challenge here is having the right person in the right seat. When you do, they are truly your IT QB owning the roadmap, procuring powerful vendor relationships, and getting themselves involved in your business to help make your processes better through automation. On the other hand, we have seen staffing firms held hostage by in-house IT personnel that “had all the magic passwords” or were unwilling to think critically. There are a lot of fantastic IT professionals working in companies. You just want to make sure you have someone that does not put job security over the company’s best interest.
Think about your integration strategy.
Let’s be honest, there is no staffing firm 100% happy with the ATS they are currently utilizing. Every ATS has challenges, wonky processes, or lack of wish list items. Also, every ATS has challenges customizing to an individual staffing firm’s specific business model. Your business could be part of the problem. How? Let’s think about three things. (1) Not fully vetting the capabilities of the ATS to the business need. We know of several staffing firms that implemented an ATS and in less than 18 months later switched to another ATS. Why? Because they didn’t stick to their business model. Define it, know it, then go out and find the best ATS that helps you implement that business model in the marketplace. (2) No ATS will be perfect. Just accept this fact. There is a front office, middle office, and back office. The reality is that most of the ATS’ in the market are for front office needs – recruiting and sales. It is no surprise that the middleware and back office can be suspect in many ATS platforms due to their focus on candidates and placements. (3) Integrated System Versus Separate Systems: this is a very big decision. Do I have one system where my entire process is integrated or do I find a fantastic front office and then find a separate middleware technology and back-office technology that becomes semi-integrated into that fantastic front office technology? There are pros and cons to both strategies and it just matters how this works with your business model. Also, a final consideration here is identifying your subject matter experts or those super-users who will help ensure the technology is running and all are abiding by the process.
Acquire a true technology leader.
As many of you know, we sponsor peer RoundTables through the Visus Group. Over the last several years, we have been asked to start a CIO RoundTable on many occasions, but we failed to get traction from this type of RoundTable. This RoundTable was meant to provide an outlet and community for IT leaders to discuss tech stack, current trends, and product roadmaps. Why did this fail to attract a following and what information did we gather from this? Outside of a lack of demand, it told us that many staffing firms really do not have a “true” technology leader on their staff. Rather, these staffing firms had “director-level” personnel on staff focused less on strategy and more on infrastructure and tech support. Instead, the technology strategy and roadmap responsibilities fell under the COO. In my opinion, this is not the right approach for larger staffing firms. Regional and national staffing firms need a true CIO on staff because technology is transforming the staffing industry at a record pace. Having an experienced technology leader on your leadership team ensures you have someone who understands how to evaluate new technology and translate it into current processes and overall roadmap.
Secure your technology budget.
The most important part of the equation – a technology budget. When you add up your tech stack costs between servers, ATS, phone, hardware and software to run your business, it all adds up quickly! Yes, this is all part of your IT budget, but is this a true representation of your entire IT spend? And can you calculate any cost savings or ROI? Many of our clients don’t know where to start or end with budgeting and determining the true ROI (return on investment) on technology investments. Our rule of thumb is this, if you invest in innovative technology and it does not increase the average gross profit production per internal production personnel, then it must not be the right technology for your business.
Technology has become an enormous area for staffing firms to conquer with the onset of new players and the pandemic increasing the need for digital transformation. As mentioned, these are the five areas I would circulate to my leadership team if I were in your shoes at your staffing firm. How can you correctly identify the technology that will work best for your firm without sacrificing wasted investment, additional processes or underutilized platforms? This is where the Visus Group comes in. We assist staffing firms by assessing their existing tech stack and make prudent decisions which align with your business model. Don’t get caught making the wrong decision – let’s chat!
Preparing for the Successful Sale of Your Staffing Firm
Whether it’s motivated by a planned exit strategy that leads to retirement, or perhaps other compelling reasons, careful planning for the future sale of your staffing business, along with understanding how to maximize the value received for your business, is time well spent.Continue reading
Today’s Talent Truths
Seven Most Common Mistakes to Avoid When Making a Staffing Firm Acquisition
With over 20,000 staffing and recruitment firms in the industry, there are always mergers and acquisitions that occur. According to Duff and Phelps research 115 staffing industry M&A transactions were completed by 96 unique buyers in 2020. This was a 20% decrease from the 143 transactions completed in 2019. Strategic buyers accounted for 85% of the staffing industry acquisitions in 2020, with private equity funds (financial buyers) investing in new platform acquisitions accounting for the other 15% of transactions.
Of the 115 transactions reported in the 2020, 44 involved companies whose predominant service offering was IT staffing and/or IT consulting. Healthcare staffing is another historically attractive sector, with 16 transactions completed in 2020.
We’re seeing that in this post-Covid era, a lot of staffing firms are in the market to acquire, but unfortunately, few do it well. Buying a small competitor or acquiring in a new market to get into that market sounds fun and sexy. The fact of the matter is that there are tons of places to make mistakes, whether it be wrong fit, not enough education of the financial indicators, or just being a novice to the valuation process.
In this short blog, I am going to outline some of the common errors I see buyers making in their attempts at acquiring a small to midsize staffing firm.
- Synergy & Trust: The number one thing a buyer needs to do at the onset is to establish synergy and trust with a seller. In fact, a buyer needs to actively build synergy and trust through the entire process. Why? No seller is going to sell their company to a person or group they do not trust. It is that simple. Building trust takes time and work. I see it often overlooked.
- Breaks in Communication: No news is bad news. Setting up weekly or bi-weekly calls to stay connected, move the process along, resolve issues, establish credibility, walk through information given and received is critical to success. When there are breaks in communication a buyer is simply communicating to a seller that they are not interested. Not good.
- Lack of Flexibility: No two deals are the same. No two sellers are the same. Buyers may have a preferred way in which to acquire a company, but when buyers approach the market with a “one size fits all” strategy, specifically regarding to the way they plan on structuring the payout of the acquisition, then they are just going to leave a lot of potential deals on the table.
- Lawyers: I see this error often with new buyers. Namely, they utilize a lawyer that does not have staffing industry experience. Big mistake. A buyer’s legal provider is likely to have M&A council on staff, but how much experience does this council have in getting staffing acquisitions across the finish line. I have seen a lot of deals go sideways simply because the buyer’s lawyer did not have the expertise in staffing.
- Lack of Focus: Nail down an acquisition profile and stick to it. Yes, stick to the profile. Such a profile is going to address the issues of size, geography, staffing niche, etc. Going to the market haphazardly or “opportunistically”, as I commonly hear, is only going to set up a buyer to waste a lot of time chasing a lot of deals that are only going to get washed. Get focused and stay focused.
- Money: Get the money lined up and secured. To start looking for acquisitions prior to having a bank on board and money lined up is only going to delay the process of acquiring a company. It is also going to communicate red flags to a seller. Most sellers will require “proof of funds”. The point here is to get your bank on board on the front end prior to going to the market.
- Not Using a Cultural Assessment: This is so effective in understanding if an acquisition is going to be a good fit. Find a tool or hire a consultant to conduct a cultural assessment on the buyer. Understand the buyer’s cultural preferences. Survey the potential acquisition using the same cultural tool. Determine if the acquisition target has cultural preferences that match the buyers. If a buyer acquires a firm where there is not a good match, post-acquisition is going to be ugly.
Here are just seven points here where buyers make common mistakes when acquiring companies, but there are many more. I will tell you, if you want to lose a lot of money, go do an acquisition without the appropriate assistance.
Here at the Visus Group we have 75+ staffing firms in our RoundTable program and over half of these members are actively seeking acquisitions. If you are looking to get orientated into doing acquisitions, think about our advisory services or joining a RoundTable and learning from staffing firms that have a track record of successfully getting deals done.
Visus Group’s 2021 State of the Industry Presentation
The Four Keys to Building a World-Class Production Team
“You cannot motivate people! All you can do is create an environment that encourages performance”. How about that statement? It did not come from me. Rather it came from my associate Steve Armstrong that was managing $4 billion in staffing revenue. How about this statement from Steve, “The number one driver of productivity is if the employee believes his or her manager cares about them.” Yikes! My associates involved in the extensive research conducted by Gallup on what the greatest managers do would disagree. They would say, “The number one driver of productivity is if the employee knows what is expected of them”. Creating an environment that encourages performance, clearly communicating expectations, caring for the persons being managed, etc.. Where in the world does a small business owner or manager begin in developing a world class team?
#1 Define The Roles
Developing a world class team begins with clearly defining the specific responsibilities for each role on the team. Let’s take fulfillment. The recruiters, are they sourcing, conducting phone screens, selling candidates on job opportunities, doctoring up resumes, negotiating pay rates & benefits & training, selling hiring authorities on candidates, etc.? Are the recruiters running a full desk? If yes, what exactly does that mean? How about the sales representative role? What percentage of the role is research, prospecting, getting contracts signed, job order information, developing relationships, presenting candidates, negotiating, solving post hiring problems? With both the recruiting role and the sales representative role there are so many moving parts. The very first thing to consider in developing a world class team is clearly – clearly – clearly defining all the specific work tasks and responsibilities specific to each role on the team.
#2 Establish Expectations
No doubt, establishing achievable expectations is an area that the staffing industry struggles with. It must be done in order to develop a world class team. These are the performance metrics that surround the role(s). On the fulfillment side, think about phone calls, phone time, connects, phone screens, interviews, submissions, starts, etc. On the sales side think about connects, face-to-face or zoom meetings, networking events, leads followed up on from recruiting or marketing, etc. Some business owners I have met say, “When I worked at X-staffing company I never agreed with or liked the metrics. I always said that if I owned my own staffing firm, I would never have performance metrics.” Think about this, the expectations that surround the role(s) is how an organization communicates to its employees how to succeed within the organization. Remember the Gallup data, “The number one driver of productivity is if the employee knows what is expected of them”. And if you ask employees, they want to know how to succeed in the company. Employees “want to know” what to do on a day-to-day basis that leads to success and productivity.
#3 Create a Development Plan
The staffing industry benchmarking data shows that staffing firms spend less than 1% of revenue on training and development. At the end of the year, if the sales reps and recruiters are not faster, smarter, better than they were at the beginning of the year then the management has failed in their job responsibilities. We have two dynamics here: training and development. Training is all about how to use the Applicant Tracking System, learning the recruiting methodology, learning the sales methodology, and all the intricate work tasks attached to these methodologies. The best staffing companies in the industry offer training every week. Why? Technologies change, processes change, customers change, and we all get stuck into bad habits. Development is all about knowledge and skills. Are the sales reps getting better at getting in the door of new clients or improving on ratios between jobs orders obtained and temps or contractors billing? Are the recruiters getting better at hires to submissions? Sales reps and recruiters move from a novice to junior to a senior. Well, who on board is “developing” them into seniors? How does that happen in the organization?
#4 Connecting the Dots
Back to Steve, my associate, does the manager actually show they care about their team members? I had a client that once told me that on Monday morning he would go around the office and greet all the employees, ask about their weekend, wish the best for the week and on Friday, as employees were leaving for the weekend, he would show them a spreadsheet and inform them if they made him money or cost him money. I laugh every time I think about this story. The reason why caring and connecting with team members is so important is that it is impossible to understand what is important to employees if no one connects with them. It is the pathway to understanding what motivates them (it is not always money). Rather, the intrinsic motivations, the aspirations, the challenges that all employees bring with them into the work environment.
Developing a world class production team is no short order. There are certainly a lot of moving parts with many components to consider. I have mentioned just a few of them here in this short blog. At the Visus Group, this is what we do. We help staffing organizations take a step back, think out, map out and develop world class production teams. Retention, engagement, productivity and profits go through the roof. Visit us at www.visusgroup.com to learn more about how you can benefit from a relationship with us.
Emerging OSHA Guidance and Rules Concerning COVID-19
Case Study: The Importance of Culture
by Visus Group Partner Don Jastrebski, Culture Consultant
The president of a $20-25 million education company, was told by his college buddy not to hire a particular candidate to replace himself. He had taken over as president when the family hedge fund acquired the organization. He was trying to set it up for the future. The president ignored this advice, as is usually the case, and hired the candidate anyway. 6 months later he fired the candidate for dishonesty, and embarked on another search.
This time the president thought bigger. With hedge fund backing, he had seemingly unlimited resources. Now, he wanted to hire the superintendent of Dallas Public schools. Again his college buddy told him to not hire this guy—he didn’t fit the culture. But again he ignored this advice. He was enamored with the superintendent’s pedigree, his contacts, his standing in the education industry. He would bring prestige to the organization and put the company on the map. He was totally focused on this candidate’s potential—which he envisioned in his own mind. He really didn’t want to hear naysayers who were warning of the candidates lack of culture fit. He hired him anyways. Less than a year, and hundreds of thousands of dollars later, he fired him. He kept him longer than he should have because he made such a large investment to persuade the candidate to leave Dallas and relocate to join a private sector company.
Not only did he waste hundreds of thousands of dollars in relocation cost, signing bonus, salary, termination settlement and outplacement for the failed hire—but he wasted hundreds of thousands of dollars in lost sales, productivity and executive salaries, while his team invested hours in things that had little benefit to the company or its customers. The former superintendent, upon his arrival, set about establishing a number of initiatives and programs that he thought important, but were superfluous. They were totally unimportant to customers and staff and the company’s best people spent hours on initiatives the customer didn’t care about. Different cultures worry about different things, and the superintendent’s preferences were of little importance to company customers, who primarily shared the company’s culture. Finally, even the hedge fund had its cost limit and the president had to pull the plug.
Thereafter, every new hire had to take the culture profile, even though his college buddy told him it was really only necessary for employees with customer contact or decision-making responsibility.
The Story Continues
A few years later, this same company had difficulty retaining sales people after Federal ‘No Child Left Behind’ legislation revamped U.S. education and disrupted the industry. Previously, customers were school principals, or on occasion, district superintendents. Now they had to sell to state legislators trying to implement the Federal mandate. Many on the sales staff could not make the transition from selling to local customers to selling at the state level. The company had a dismal record replacing those who could not adjust. The majority of sales’ new-hires left within the first year. The situation was desperate.
This time the CAT (the same Culture Assessment Tool) was used to assess the sales force. The company was amazed to discover that their few successful sales people all had the same culture profile—the same mindset. Thus began the search to find candidates with their top sales performers’ culture profile. They had a 30 to 35-person sales force with a supporting cadre of 40+ customer account representatives who trained and supported customers while maintaining the the relationship. This group was assessed by the CAT to identify those with the same top sales performer mindset, thus representing at least potential for success. These people were offered promotions into sales. To the company’s amazement those who chose to accept the promotion were immediately successful with virtually no turnover—they knew the product, knew the key customer issues and thought like the customer. Their mindset matched their customers’ mindset—in which the customers’ needs and expectations were embedded. Customers know they understood them, they trusted them, and sales followed.
- Assesses a candidate’s fit with the receiving culture
- Discovers if a candidate’s past success was accomplished in the same or different culture
- Foreshadow the candidate’s potential for long term success
- Avoid the cost of a bad hire. Identify a candidate’s fit
- Use the Culture Assessment Tool (CAT) to select top candidates.
- CAT provides the hard data and research to identify the culture type preferred by high performing individuals
- The output provides the context for selecting candidates who prefer the same top performer mindset
- These candidates have the appropriate thinking/decision bias that attracts the target mindset of external & internal customers.
- All other selection instruments measure a candidate’s strength in targeted traits found in a normative population across all culture types.
- They measure specific traits generalized to all cultures. They do not measure a candidate’s fit with one specific organization culture—or their customers.
- Other selection tests measure success traits, not culture fit.
As a staffing or recruitment firm leader, establishing excellent culture and ensuring there is culture fit should be one of your larger roles in the business. The impact is too important to miss! If Visus Group can provide any guidance, please let us know!