Increase Staffing Company Valuation Through Recruiting

I really enjoyed Allen Cash’s blog posting, “How to Profit from (Low Quality) VMS/MSP Accounts.” I unequivocally agree with Allen’s conclusion, “VMS/MSP relationships are not going away, but even the lower-quality accounts can be profitable for staffing firms, if approached the right way.”

Prior to selling my staffing firm in 2009, I turned our focus to low-margin, “no call” MSP accounts where the staffing firm is not permitted to call hiring managers. In just two years, we were tier one to 20 Fortune 500 accounts across eight MSP/VMS companies. We were continually ranked in the top 10 percent of the majority of the programs we supported. You may be wondering how we did it or more importantly, did we do it profitably? Because we dropped our other more profitable staffing and search business upon launching our MSP staffing business it took us two years to see profits. But then profits rose steadily and culminated in the sale of our company to another multi-national staffing firm.

Here are the five critical success factors to realize profits from cost-conscious business model.

  1. Supply Chain Approach.You cannot deliver services in the same way you staff other types of accounts. Speed and quality of delivery is paramount which translates into the most important metric: Recruiter Productivity (# of Placements/Recruiter/Month).
    • See your recruiting workforce as an assembly line. There are more roles than just recruiter and account manager. Since MSP staffing is heavy on regulations and forms, enlist administrators to coordinate. High volume staffing is truly a numbers game so strip non-calling activities away from your recruiters to get them on the phones more.
    • Ensure your Applicant Tracking System is truly enabling your success by sourcing 24/7 and integrating with the VMS interfaces directly.
    • Minimize the amount of candidate qualification before presentation through the VMS. Spend five minutes on the phone qualifying availability and wage once you determine the paper résumé matches the job. Once the candidate gets an interview request, the recruiter can dive deeper into skill qualification.
  2.  Micro Management. Since you cannot afford to hire expensive recruiters (they don’t want to work this business anyway), lower recruiting costs by offshoring work and/or hiring and training junior recruiters. Be prepared that this choice forces you to invest in hiring experienced managers. Just because you contract offshore recruiters does not mean you implement a laissez-faire management style — quite the opposite. Your manager(s) must be in contact with these recruiters daily and treat them as an extension of your U.S.-based team.
  3.  Physical and Brand Separation. Let’s not have our highly compensated, “hiring manager-talking” recruiters taint the morale of our high-volume, low-margin recruiting group, shall we? Additionally, we are taught that when we do something for our clients, we tell them. This holds true for promoting the message of your newly formed and centralized delivery organization. Remember to update your website with your new service line, “MSP Staffing.”
  4.  Investment. Profits in this business come with scale. The old adage prevails: spend money to make money. Determine how much you are willing to invest in building a centralized delivery recruiting group. Prepare yourself to forgo profits until year two. VMS is here to stay so what’s the rush? If you are looking to sell your staffing firm within two years and have little to no MSP staffing revenue, you may just want to forgo the whole thing altogether and focus all of your energy on high margin, traditional, branch-managed accounts. It’s a marathon not a race.
  5.  Metrics Management and Reporting. What is the relationship of calls to subs to interviews to placements to starts for each recruiter? Ensure the recruiters know what activities generate what results and review these numbers weekly. Set goals that are reasonable and track to them daily. Analyze the number of Drop offs (candidates placed but do not start). Because these are the most likely candidates to bill revenue they should be your first improvement initiative. If the number is higher than 5 percent of your placements each month, it is worth researching. What can the recruiters do to mitigate the risk of drop off? Better qualification, candidate control, training ?

If you build a productive, low-cost, supply chain recruiting team to support your high volume, low margin accounts, what is preventing you from leveraging it across your entire organization? Perhaps, the value of your staffing business will be more than just your clients, revenue and gross margin; it may also include your low cost candidate delivery engine thereby increasing your overall valuation.

Jeannine Parise
Jeannine Parise is a principal at VMS Accelerators. She can be reached at jeannine (at) vmsaccel (dot) com.

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