In these times of uncertainty, organizations need to be ready to adapt. In the last few years, staffing firms have looked to diversification as a means of rising to the challenges of this moment, including opening new verticals or incorporating SOW, RPO, or direct sourcing models into their business.
Ursula Williams, Chief Operating Officer of Staffing Industry Analysts (SIA), sat down with a few experts from across the staffing industry at Engage Boston 2022: C-level executive and company board advisor Teresa Carroll, Guidant Global Chief Operating Officer Brian Salkowski, and Chief Administrative Officer of DISYS and Signature Consultants Mark Nussbaum. During a lively panel discussion, these industry leaders shared how they’ve approached diversification in their businesses and what other firms should be thinking about as they consider diversification as a means of future-proofing their growth.
Below is a recap of their conversation, condensed and edited for clarity.
Ursula Williams: There’s a lot of conversation about the talent shortage and how difficult it is to find talent, which feels pretty counterintuitive to everything that we’re feeling with wage inflation, with the interest rates going up, and with what’s going on in the world. Right? We’ve experienced so much growth in our organizations across the segments. If that growth was to slow down, how can business owners, leaders, and executives diversify their business? Should they diversify the business? What are some of the pros and cons of diversification?
Mark Nussbaum: With COVID, we decided to join with DISYS, which resulted in tremendous diversification. Each company had over 300 customers at the time, and the total overlap was 12. Diversification was a risk hedge at the time, and it worked very well because not only did we have geographic diversity and client diversity, we had business model diversity. And I think it got us through, and our growth since we came together has exceeded 30% in the last 12 months post-close.
I think of diversification as a risk amelioration strategy. It’s not just a growth strategy. So if you try and diversify, you’re increasing your risk profile by doing it because you’re stretching your capital or your management, which is high risk. You have to take your risk management strategy into account.
Ursula Williams: What does it take to achieve growth — is diversification part of that?
Teresa Carroll: Without a shadow of a doubt, whether it was growth, turnaround, or wherever I was, it was the talent strategy that, in my opinion, drove the growth. I believe in “Service drives customer service, which drives profit and growth.” So I would say you can look at all the things that boards look at, and you can look at all the things that the C-suite looks at, but without an excellent talent strategy, I don’t think you’ll grow.
Mark Nussbaum: Whatever your business strategy, it depends on your team to execute. If you’re not working on that as a team, that other strategy won’t work.
Ursula Williams: What are your thoughts on specialty versus scale and diversifying into another segment?
Teresa Carroll: I think the way to focus right now in our industry is specialization, and I think if you can flip it to talent, however that works out, that would be great. Because we have the specialties by skills in healthcare and industries and all that, I think everybody is realizing that talent is going to be the driver, so if there’s a way to focus on talent differently than anybody else, I think that would be a big growth strategy.
We learned that geographies are different. We’ve learned that when you become a specialty player, you become a player for a reason because you have something unique. If you’re going to scale, don’t try to do every specialty the same way. It’s unique for a reason.
Ursula Williams: Can you talk a bit about SOW and diversifying into that and segmenting?
Brian Salkowski: Is SOW good for the business? It can be. You have to know who you are and what you have the talent and team to deliver on. I’m taking on that risk to build and service a deliverable, and I must understand the requirements. I need team members who cannot only recruit but also manage a project, help scope requirements, devise that statement of work, build in the right service levels, etc. And if you don’t have that, you can find yourself upside down. You’ve committed to a fixed-price deliverable. You’ve committed to certain milestones. If you can’t execute on that, you’re taking that financial risk upon yourself.
And you can improve your bottom line if you can execute, but it comes down to whether you have the appetite for that risk. What is your risk strategy? Do you have the team, the personnel, and the talent to devise and create those statements of work and adequately scope them? My advice is that it could be a good strategy if you’re prepared to make that investment. If you’re not ready to go that route, that’s okay, too.
Ursula Williams: What are your thoughts on RPO?
Brian Salkowski: Part of the question is, what do you define RPO as? As many people as there are in this room, I might get that many different definitions. So, many people are doing recruiter-on-demand, which is a relatively low risk. “We’ll charge you for a recruiter who will augment your staff, your internal talent acquisition team.”
But there’s also true recruitment process outsourcing — multi-year contracts that are built around employee value, employer value, proposition campaigns, recruitment marketing campaigns, tech stack associated with that in terms of outreach, bringing in to fulfill — and, by the way, there are service levels and accountabilities with that deliverable. So right now, I’ve seen many people interested, because it is so red hot. There is money to be made, but it is an investment.
So, when we talk about diversification, is this a long-term strategy, or are you reacting to short-term changes in the market? And if it’s the latter, I’d think long and hard about what you’re doing there because it will change.
Ursula Williams: How effective would a strategy be to get into large accounts, depending on what the economy’s doing?
Teresa Carroll: Business models can be a specialty. If you create a business model for an MSP, it’s probably a different way to deliver than you might for your retail.
Mark Nussbaum: There’s this lure of the large enterprise, but you have to do the statistical analysis of, “How much could I get, and what am I willing to sacrifice to get there?” Because that’s probably a multi-year process to get there, besides the investment.
Can you comment on the direct sourcing model?
Brian Salkowski: There is a lot of interest in it, but if you look at the fulfillment statistics of how much volume and supply is being met through a direct sourcing channel, it’s still a small fraction relative to what’s being fulfilled through traditional channels today. But it doesn’t mean that it doesn’t have great promise.
What’s necessary is the right tech stack to make sure that the community is well cared for. These are client-directed or client-referred resources based on their brand, so there’s a level of care and consideration associated with maintaining that community so they can be fed back into opportunities there.
We see it as a lot of promise but as a complement to traditional supply. It is another channel within the overall ecosystem, and, especially in talent-scarce times, if it meets a need, we’re happy to plug it in and leverage it to lean in on that.
Teresa Carroll: It’s more about the tech stack, and it’s more about the brand and the digital marketing that has to evolve for the whole industry. You should use it for all your recruiting, not just when somebody asks you for direct sourcing.
Ursula Williams: What is one piece of advice you have for future-proofing your business?
Mark Nussbaum: Whatever strategy you pick, you can’t lose sight of the fact that your company is just a group of people, and you need to work on that group at all times because the market is constantly shifting. And the solution you’re going to be bringing today, you will not be bringing six weeks or six years from now. So don’t forget the home base and work on that as much as any strategy.
Brian Salkowski: My one piece of advice would be to make sure that as you’re doing that, you’re also looking at automation within your business. And I think that ties in well to what Bullhorn’s doing, but in general, there are so many transactional elements within a recruitment process, and the return on those that are administrative and HR are very low. And so, the extent to which we lean into automation provides a real opportunity for all of us to move up the value chain and do more in advisory and consultation versus charging for administrative service.
Teresa Carroll: Determine how you can disrupt based on how you treat those temporary and contract employees. One of the boards I’m on is a home healthcare board, and I’m consulting with another healthcare agency, and they treat their workers at the frontline, who we would call temporary workers, just like they’re full-time. And they do engagement surveys with them and all that. So, spend time understanding that community as well and disrupt that way.