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The Fordyce Letter

Straight Talk for the Recruiting Profession


Business

Business, Industry News

Employment Services Help Fuel 3rd Month Of Big Job Gains



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Temporary workers and agency hiring helped drive a big part of February’s 227,000 new jobs, according to the report out this morning from the Bureau of Labor Statistics.

It’s the third consecutive month of job increases over 200,000, and the numbers exceeded what most economists were expecting. The unemployment rate remained at 8.3%, which is what economists expected.

Surveys conducted before the numbers were released this morning showed economists forecasting somewhere between about 210,000 and 220,000 new jobs last month. Few individual economists expected as strong a showing as this for a month of 29 days.

For Managers

Think Units, Not Dollars



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Daily I receive calls from owners and managers who ask the same question:

“What billings goal should we have for our consultants?”

This is a fair question. As a prudent business owner, you need to understand the billings/cash-in numbers required to support your operational objectives. This includes determining your monthly operational break-even point or “nut,” as well as calculating revenue projections and profit margins. From that point you can establish minimum and targeted production figures for each position in the organization and for the organization as a whole. However, in managing your staff, focus on unit placements first and dollars billed/cashed-in second (number on assignment, length of assignment, and gross margin for temporary staffing).

Most of the experienced producers in our industry, if allowed to concentrate only on dollars billed/cashed-in, reach a production comfort level somewhere between $150,000 and $250,000 per year. With an across-the-board average fee of $19,000 to $22,000, that equates to less than one placement per month.

A specific example is an experienced consultant I spoke with last week who has a goal of billing $250,000 this year. However, his average fee is $32,000. That means he needs to finalize only eight deals/placements this year. Although the overall billing numbers do not look bad, consummating eight placements within a 12-month period of time means this consultant will be continually walking the fine line between success and failure. If one or more of these deals do not come to fruition, his overall billings number shrinks dramatically.

As an industry, we tend to recognize high billing numbers, and to some extent we should. However, as owners, managers, and producers, a more accurate picture of our capability is reflected in our number of unit placements.

In those staffing firms where the focus is on unit placements, minimum individual performance standards generally align with the following numbers:

Business, Business Development, For Managers, Industry News

Source Of Hire Survey Suggests New Business Directions



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America’s largest companies are still turning to third party agencies for help with their difficult to fill jobs at about the same rate they have for the last few years.

A recent source of hire survey by the CareerXroads consultancy found 2.8% of all external hires last year came from third party recruiters. That’s down from 2010, but it’s still a marked improvement from the worst of the recession.

Indeed, third party agency use ebbs and flows with economic conditions, as the accompanying chart of large employer data shows. Over the long term, however, the downward trend in the use of contingent recruiters is clearly evident.

In 1997, the Employment Management Association found that 10.4% of hires were attributed to contingent recruitment firms. Search firms sourced another 2.1%. Three years later, the association found 6.8% of hires coming from agencies and 1.6% from executive search.

What changed? Part of the explanation is that Internet usage exploded during that time. In the 1997 survey only 2.1% of hires were sourced from the Internet. In the 2000 report, the EMA found 27.4% of hiring was being done online.

Despite that meteoric rise in online sourcing, it would be wrong to say the Internet is entirely responsible for reductions in the use of third party recruiters. More probably, as many HR leaders have reported, large employers have bolstered their in-house recruiting programs, diminishing the need to go outside.

This in-sourcing hits at exactly the sweet spot for third party recruiters — earners in the upper payscales, but not executive level, and the harder-to-fill critical jobs. As more attention has been focused on talent management, the largest employers — the ones that participate in the CareerXroads annual survey — have put ever more emphasis on developing their own pipelines to ensure a steady stream of candidates-in-waiting.

Certainly, the thesis is reasonable, however, the data on source of hire nationally, over time, just isn’t strong enough to draw firm conclusions. For instance, the EMA surveys polled a far different group of employers than did CareerXroads. For data purists then, it’s not quite as bad as apples to pineapples, but more like comparing different types of apples.

Still, the CareerXroads data alone shows a general decline in third party hires among the survey participants. Furthermore, 54.3% of the employers said all of their full time hiring is done with in-house recruiters.

What this suggests is that to grow a business, agency owners aren’t looking to the biggest companies, but at those more in the mid-range. Employers with a modest recruiting staff, or with generalists filling multiple roles, are the most likely to need the help of outside recruiting professionals when critical openings arise.

The Association of Executive Search Consultants 2011 recruitment survey found companies most likely to turn to contingent recruiters to fill jobs in the $100k-$200k range. “Overall respondents saw strengths in contingency recruiting,” the survey notes, “when timelines were limited and cost was an issue.”

What kind of company does that describe, if not mid-sized firms and smaller companies with specialty jobs?

For Managers

Get a Lawyer



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Do not wait, it may be too late.

Get a lawyer. Get one now. Do not wait. It may be too late. Do not hesitate. Be the first one on your block to be represented by an attorney. Don’t wait until you think you need one. Don’t wait until you are faced with a problem collecting a fee and need help. Know one now and get advice before that happens.

You are in a business. I know it is a professional occupation, but it is also a “business;” a business based on contracts between you and your clients. And your clients have lawyers on their staff or use them on a retained basis. You have to get on an even par with them before they have the advantage over you. Do not delay any longer, stop and get a lawyer now and then come back to read the rest of this article. But if you put it off, do not blame me. Read on.

Business Development

Great Questions Get Great Results



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When it comes to new client development, great questions get great results.

Professional recruiting firms exist to connect great employers with the top talent needed to meet their business goals. Firm growth requires those within the organization responsible for bringing in business—the sales professionals— to continually seek new client companies to serve. New client development is essential to success and the most successful recruiting sales professionals know that the emphasis is on development.

Small and medium sized recruiting organizations can compete with much larger firms when development of strong business relationships takes precedence.

Value is created in the eyes of the receiver. Value for me will be different than value for you, so you have to walk in your client’s shoes to know what will be valuable to him or her.  It’s easy to assume that we already know and understand the other person’s perspective, but often this is not the case.

So how do you create value?  By providing leadership, building relationships and delivering creativity.

Entrepreneurship, For Managers

What It Really Takes to Own a Profitable Recruiting Business



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It can be relatively easy to open a recruiting firm, especially if you’ve decided to be a sole proprietor working from home It is much more difficult to create a profitable recruiting business. Starting a small business takes courage, but courage does not pay the bills. Have you taken the time to stand back and review all aspects of business ownership?

If you are your business and it can’t profitably run without you, you have merely created a job for yourself.

You are in business for two primary reasons:

  1. To generate profits
  2. To live the lifestyle of your dream

If you are not generating profits, to be blunt you don’t have a business — you have an expensive hobby.

The good news: it is never too late to make changes necessary to elevate your business to a new level of success. You can’t continue to do things the same way and expect different results. As a business owner, you need to embrace and implement change in order to take advantage of trends.

Business, For Managers

An Eight-Step Process for Achieving Your Goals



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Using a proper methodology for setting your goals is very important because the result must be specific, realistic, and most importantly, achievable. Additionally, you must baseline your performance and establish specific activity benchmarks that must be met on a daily, weekly, and monthly basis in order to achieve your goals (see my June 2008 article in The Fordyce Letter, “Baseline Your Performance”).

Observations from my consulting work with hundreds of search and staffing firms indicate that goal setting is generally a challenge for both management and staff. However, as turnover rates and year-end results clearly demonstrate, the bigger challenge is achieving the goals once they are established.

Business, Entrepreneurship

Value Added Services in a Slow Job Market



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In an economy of high unemployment and a large pool of qualified candidates, some employers may be under the impression that recruiters are not as necessary. This is untrue. In a market like this, professional recruiters may focus on different aspects of their practice to better support clients and increase revenue.

For Managers

Why You Should Be Seriously Thinking About Succession Planning NOW , Part II



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The KEY to Growing a Great Business That Commands Top Dollar When You are Ready To Leave…. Even if Your Time Horizon is 10 or More Years Out

Last week I wrote about what many believe to be the first step in a successful exit plan from this business. That step requires you to have a clear vision for yourself as to a) “what’s next?” in your life and b) how much money you have to have put away to finance that lifestyle.

As I stated last week, the absolute best time to begin an exit plan is five, ten, or more years before you plan on leaving the business. Why? Because it takes time to put in place and then master the right systems and strategies to maximize your firm’s valuation. The more systematic your recruiting business, the more likely you will sell it for the highest amount possible.

What if you are not sure you EVER want to leave the business? Keep reading. Here is what I discovered in building a firm with the objective of maximizing its value to a buyer:

The way to grow a great business is to set it up as if you wanted to sell it. 

For Managers

Why You Should be Seriously Thinking About Succession Planning NOW — Even if Your Time Horizon is 10 or More Years Out!



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Most of us dream of the string of days where we won’t have to deal with clients and candidates ever again. The day where we sell our firm for millions, buy a small yacht, and tour the Caribbean.

The problem is that most recruiting firm owners are ill-prepared for anything close to this reality for several reasons. In this two-part article I hope to share some insights to help you prepare an exit strategy for your business even if your time horizon to leave this business is a decade or more out.

As a matter of fact, the longer your time horizon the better off you are simply because you have time to implement the right systems and structure into your business that will make it the most attractive to a potential buyer. Additionally, you have time to really do some introspection on what life will be like after you leave your firm.

In part one of the series, I will tackle helping you define the next steps AFTER you transition out of this business, and in part 2, next week, I will outline the things you can do NOW to begin to maximize value of your firm and some ideas on structuring the deal.