Strategic plan or sales plan: What’s best for your staffing firm?

It is that time of the year where business owners and senior management in the staffing industry are working hard to plan for 2021. And as much as pundits say we need a roadmap in order to succeed in our businesses, developing one is one of those leadership responsibilities that senior people in the staffing industry loath the most. This goes for the small privately held staffing business to the very large national staffing firms.  

Several years ago, INC Magazine conducted a survey of the common things that business executives did that landed them on the INC 500 list and stayed on the list versus the firms that got on the list and fell off the list. Strategic planning, formal planning, and annual planning were on the short list for the firms that got on the list and stayed on the list for five plus years. Point being, strategic planning is a really smart thing to be doing if you like to see growth in your business.  

I have always been curious about the reasons why so many executives running staffing businesses have a resistance to annual formal planning for their business. One past client of mine said, “We tried planning once, it didn’t work so we never tried it again”. Another past client of mine said, “I don’t plan because if I develop a plan for my business then I would have to follow it. I like shooting from the hip”. I hear most often, “Things change too much. We have put plans together in the past and by March the plan is out the window”. 

I attended a recent staffing show and during the show, I was talking to a staffing leader that had grown several staffing businesses to north of $100 million in annual revenue and sold them. An unassuming gentleman. I asked him, “What are the top three most important things to focus on when growing a staffing business?” He said, (and this is likely the most important thing to think about in this blog) “Plan, People and Financing. You have to have a well thought out plan, you have to have the right people in the business to execute on the plan, and you have to not get in trouble financing your receivables.” 

We have all heard “If you don’t plan, you plan to fail.” This, actually, is not 100% true. We all have met people that grew a business, generated tons of wealth, and did it with no plan in mind. Lucky?  Maybe. Right place at the right time? Maybe. A rarity? Absolutely. For the most part, the ninety-something percent of us fall into the same mindset – if we do not plan, we really do plan to fail. 

What is the best way to proceed with this planning conundrum? Do we plan for our business or do we not? 

It has been my experience that for smaller owner-operator staffing firms, a “Sales Plan” is actually more important than a strategic plan. If you download a business plan format for a startup, you will quickly discover that it is a simple sales plan format. That aside, a sales plan is going to force the owner of that staffing firm to lock down on a unique selling proposition, an ideal client profile, an account analysis of key accounts, a top 50 prospect list, and much more very tactical sales related dynamics that are very critical to the growth and sustainability of a small staffing business. At the end of the day, a sales plan is a part of business planning.

For larger staffing firms, it is best to pursue a formal planning process. It is not uncommon that larger firms bring in an outside resource to facilitate this process. An outside resource is not politically attached to any one executive or any one idea and becomes the point person for driving the process forward to completion. For larger staffing firms, vision, mission, values and culture development are essential to articulate as the organization has grown well past the owner-operator structure. Such a planning process is going to include an industry analysis, a customer analysis, an internal analysis, the development of key initiatives and action plans, a financial model to back the plan up and much more.

The Visus Group has been facilitating sales planning processes and business planning processes for staffing firms of all sizes. Understanding the internal human and financial resources and how to allocate these resources, understanding the external threats and opportunities, getting focused on a few key business altering initiatives is critical to success.  It is never one size fits all when it comes to successfully planning for the business.

Another form of planning and business optimization is through the implementation of the Entrepreneurial Operating System (EOS). Visus Group partners with a Professional Implementer that focuses solely in the staffing industry. This process is another great way to simplify your business, develop a plan, and begin to deliver on execution of that plan with a high level of accountability. More on that in our next post…

Bottom line, remember what my colleague said, “Plan, People and Financing”. It all starts with the right planning and we think the time is now. Ready to get started? Please give us a call to help you get there. 

Covid 19 forced me to save $17,000 per employee per year!

By Dr. Jeff Elias, Ph.D.

Due to Covid 19, working remotely is becoming more popular than ever. There are many benefits for both the employer and the employee1. A mutual benefit is lower cost and expenses for both the employer and the employee. How can these cost reductions translate into employee compensation strategies? Let us start with a brief background regarding these benefits. For the employer, benefits include:

  • Reduction in real estate expense 
  • Lower employee absenteeism
  • Increased employee retention
  • Improved employer brand
  • Access to a larger talent pool
  • Potential to create a more diverse organization

For the employee, the benefits include:

  •  Lower level of stress
  • Greater work/life balance
  • Greater level of freedom
  • Experience greater sense of well-being
  • Greater productivity
  • Less work-related expenses

The Hard Dollar Benefits equals $17,000+ per employee per year. According to the Global Initiative Organization, working remotely saves an employee, on average $6,000/year. These savings are from gas, car maintenance, transportation, parking fees, a professional wardrobe, lunches bought out, and possible day care expenses. The typical employer can save, on average, $11,000/year. These savings come from overhead costs, real estate costs, transit subsidies, and continuity of operations. Together, remote working saves an average of $17,000 per year per employee.

There are other financial benefits such as lower turnover, lower recruiting costs, lower absentee rates, and more satisfied employees. These cost reductions are harder to financially quantify but are of substantial value.

So, how can this $17,000 cost savings translate into a compensation strategy? Can it be leveraged into providing higher salaries, contributing to lower SGA expense, and increasing GM dollars which may affect bonus/commission payouts, or used as a competitive advantage in recruiting key talent? Many of our Staffing clients are choosing to leverage remote work as a recruiting competitive advantage. Firms need to understand how competitive their current salaries for new hire and tenured employees are. Does the staffing firm pay the same as their competitors, do they pay more, or do they pay less than the competition? In compensation speak, if the firm pays better than 50% of the competition, they pay at the 50th percentile. If the firm pay at the 25th percentile, then 75% of the competition pays better. At what level does your company pay?

To be a player in the most competitive markets, the staffing firm should pay at the 75th percentile. This means they would be paying better than 75% of the competition.

Maybe the $17,000 per person per year (remote work cost savings) could be used to pay higher starting salaries or create a more lucrative commission plan. Also, offering remote work, either part time or full time, by itself could offer a significant competitive advantage in recruiting top talent. There are 3 issues the Staffing Firm should tackle:

  1. A staffing Firm should review their pay scales and determine at what percentile they pay against the competition.
  2. The firm should decide if remote work is a viable option for their business.
  3. The firm should decide how to reinvest the $17,000 cost savings. Reinvest in the business, the employees, or the bottom line.

If you’re interested in exploring these cost savings, we can help you. The Visus Group can help you determine how competitive your salaries and commission plans are – are you underpaying or overpaying for the needed talent? Also, we can help determine if remote work is a viable option for your business, and if it is, we can help you design an effective remote work program. Additionally, we can help you decide how to reinvest your $17,000/person/year cost savings.

1 How to Cultivate Effective ‘Remote Work’ Programs, Gartner Research, May 14, 2019

Compensation on Steroids: The Top 3 Sales Levers that Need to Pop in a Strong Commission Plan

Given everything that has happened in 2020, the COVID-19 pandemic may have flipped your business upside down, but one thing is certain – you need a simple and compelling commission plan that incentivizes your employees to produce in a way that grows with the business. The considerations that need to be addressed along with trying to account for continued uncertainty with the pandemic is still top of mind. This time of year provides a great opportunity to assess and address your top sales driver – your commission plan – as you look to grow or recapture some of your lost business.  

A quick reminder…your staffing firm is a sales organization.  And because you are a sales organization, your sales commission structure is critical to your success.  Compelling, engaging, motivating commission plans are not easy to craft.  Such plans really need, first and foremost, to fit into a financial model.  And the best plans utilize multiple sales levers to account for the ever-changing environment.  When I speak with clients, here are my top areas to consider when creating a competitive commission structure:         

Salaries: No secret here that salaries have crept up over the past few years.  For years the staffing industry has enjoyed very reasonable base salary levels with aggressive commissions.  It is safe to say that these days are over.  New graduates coming out of college are straddled with debt.  Their appetite for low base salary and high commission jobs is close to non-existent.  Two quick scenarios that I would like to outline that I’ve seen staffing companies dealing with throughout the years:  

    1. Step-down salary management – Think about building a plan where the salary decreases as commissions increase in the first year of employment.  For example, the target salary may be 40K.  But to attract promising reps and recruiters the company starts an employee out at a 60K salary level.  After three months, the salary decreases 2K a month for the next nine months.  
    2. Performance management –  A Manager should have a sense after 3 months if a sales rep or a recruiter is not going to work out.  After 6 months, the manager has the performance data.  Getting this decision down protects the financial investment.  For example, the company offers an employee a 50K salary, add 20% for taxes and benefits and the real cost is 60K.  An employee that does not make the cut in 6 months, is in this example, only a 30K investment.  

Gross Profit Production:  Clearly, for a staffing firm, gross profit production is king.  This should be the central in any commission structure for a staffing firm.  Several thoughts here to consider: 

One, think about a threshold.  Namely, the employee must generate 5K of gross profit prior to receiving commissions.  

Two, have a graduated scale.  For example, 2% for the first 10K of gross profit generated for the month, 4% for the next 10K of gross profit generated, 6% for the next 10K of gross profit generated, and so on.  This component of a commission structure rewards and motivates getting into the upper buckets of a commission plan.  

Three, the closer the reward is to the behavior the stronger the reward will be.  Paying a gross profit production commission on a quarterly basis rather than a monthly basis is a mistake.  

Four, never, ever, have a retroactive component.  For example, once an employee hits 50K in gross profit production they receive the higher percentage commission reward on the entire 50K of gross profit.  

Five, add an individual monthly component specific to the rep or recruiter.  For example, a company that hires a new rep, just starting out, needing accounts, pay a 2K bonus for hitting a quarterly new account target.  With this component, a staffing firm can individualize its commission structure.  There are so many more ideas for this component of the commission structure.

Performance Drivers: The achilles heel of commission structures in the staffing industry is that so few firms reward performance drivers.  Any staffing firm worth its salt knows the three to five activities that drive business, gross profit growth and revenue growth.  These are called “leading” indicators.  Gross profit, by the way, is a “lagging” indicator.  The goal here is to have some component of the commission plan that rewards the few things that drive growth.  For sales reps, these are client visits, attending networking events, and following up on job orders and leads from recruiters.  For recruiters, it is submittals into hiring managers, candidate interviews and delivering leads to the sales team.  A performance quota component of the commission plan rewards an employee for hitting certain targets on a monthly basis.  For example, a staffing firm could have 2K a month activity bonus.  If a rep hits 100% of their target they receive 100% of the 2K.   If the rep hits 90% they receive 90% of the 2K.  If the rep hits 80% they receive 80% of 2K, and so on.  Anything below 70% is zero.  

As in any sales plan, these ideas are just the tip of the iceberg. There are so many factors to consider in developing a strong commission plan for keeping your sales team engaged and motivated to win.  Developing the right one can be a daunting task as you look at every facet of your business during your budgeting season. 

We’ve been helping staffing companies solve these types of challenges for over 25 years. That’s why we’re your hub for any compensation plan discussions you think you will need during this time. Contact us and let’s connect. We’ve been working with staffing and sales leaders for decades developing the right plans to grow their firm. 

At the end of the day, it’s about growth and the winning commission plans utilize a combination of best practices, multiple sales levers, and timely rewards to instill the behavior you are seeking that will lead to your firm’s success. One last thought, keep your plans as simple and scalable as possible!

Client Engagement

3 Minutes of Wisdom - Jenifer Lambert

Jenifer Lambert, Chief Revenue Officer of TERRA Staffing Group, sat down to talk with us about client engagement. We all experience client attrition. How do we reduce such attrition to its lowest possible level? The art of Client Engagement.

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Listening to One’s Inner Voice

3 Minutes of Wisdom - Amelia Nickerson

Amelia Nickerson, CEO of First Step Staffing, explains how knowing one’s intrinsic motivators, listening to one’s inner voice, and being a life long learner are all aspects that lead to success.

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The New Business Model

3 Minutes of Wisdom - Maurice Fuller

COVID-19 has forced us to “work from home.” Maurice Fuller, Founder of Staffing Tec, explains how the new business model will be a mix of brick & mortar and working from home. To succeed, high quality technology & processes will need to exist to support such a business model.

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Becoming an ESOP Entrepreneur

3 Minutes of Wisdom - Tim Rettig

Tim Rettig, Interim Owner of Staffanation, has a fascinating story to tell and a unique mission in business by creating wealth for internal employees and associates seeking a second chance in society. Well worth the listen.

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