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It would be desirable if owners and staff worked towards common objectives. An owner’s goal is to achieve growth, maximize profit and increase the value of their company. Employees want to maximize their compensation, have advance opportunities, good working conditions and job security. The question is how to reconcile these two objectives?

Comp plans were seen as a zero sum game where the winner won and retained most of the money paid out in wages. During periods of high economic growth and labor shortages the employees had the edge. More recently due to outsourcing, automation and the recessionary periods, employers were in the driver’s seat. With few exceptions, the union labor movement is long dead and pitted employees against their employers. Progressive companies realize that employees can be their most valuable asset when made part of a team and properly incentivized. Interestingly, China’s advantage labor costs advantage is rapidly eroding due to an 17% increase in wages, substantially lower productivity compared to American workers, the theft of intellectual property, etc. US companies have gotten their costs under control with better management tools and operating with a leaner and better educated workforce. It is estimated that by 2015 production costs for many items, we will be on par with China. On top of that we are in the new normal economy for the indefinite future where the old rules of an 8-10 year boom-bust economic cycle may no longer apply. There should be a slow but hopefully sustainable growth assuming no “black swan” events. If US companies are properly managed both they and their staff should come out ahead. So the question is how does one go about doing this?

We will concentrate on staff compensation, although perks, contest, etc. should not be ignored. There are two parts to a good comp plan; short term comp and the long term comp. Short term comp (annual) has a base salary (or a draw) plus an incentive in the form of a commission. The commission for producers (sales reps/business developers and recruiters/schedulers) should be tied to the margin $ they are responsible in generating. This should be calculated on a sliding scale where the highest producers that one can least afford to lose are commissioned at the highest rate and those less critical at a lower rate. This sliding scale is the core of a win-win comp plan. The amount to be paid out should ideally be part of a pool of monies set aside for staff compensation so that both the company and its key producers do well. We usually divide up the pie into 4 portions (which need not be equal) for the person: who develops the relationship with the client, who finds and qualifies the candidate, who gets JO and detailed specs, and who schedules, debriefs the candidates and closes the deal. The amount paid out as a percent of margin $ varies as overhead (fixed cost) varies, but there are certain rules of thumb depending on ones mix of business. The details of the payout plan should arrive at a decent return on sales for the company and high compensation for superior employees. We test the plan under various scenarios to make sure that it works as intended for a win-win program.

The second part of the plan is a long term retention plan to retain its best people which can include cash, real or quasi stock (golden handcuffs plan). This is conditional on both achieving certain performance standards and can be used as a retention and exit plan. The idea is to lock in those needed for long term growth and sacrifice a lucrative deal to take a job with the competition. As the company value is a multiple of its profits one can design a generous program which is the ultimate win-win comp plan. There are rules of thumb here too as to what is needed to make this effective along with conditions for qualification.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

In this the third of a multipart series of posts started with:”Why Small and Mid Sized Firms Grow”. This conversation will deal with treating everyone as you would like to be treated yourself.

To get the best out of everyone it is important that people are made to feel important and not just some replaceable part of a machine. This becomes more difficult the larger a company becomes as there can be thousands upon thousands of people to try to make them feel special. But for small and mid sized companies this should not be such a difficult exercise. It all starts with the philosophy at the top and having a CEO and leader that recognizes that staffing is not a manufacturing company and its people are its assets. And that the selection, training and nurturing of those assets pays the kind of dividends for a service company that maintenance and upkeep of plant and equipment do for companies selling a product.

So how does one make people feel important and get whatever rewards they need to become motivated and productive members of the company? Start with getting to really know your people, what motivates them, what gets them out of bed in the morning with “I can’t wait to get to work attitude” instead of “no not another day at the salt mine” or “how can I make time go faster so I can get back home again”. The answer to this question is again finding out how to motivate people, which is different for each of us. For most people its money and the rewards that money brings. This is why incentive plans and commission are usually so critical (which will be covered in future conversations). While everyone needs money, not everyone is primarily money motivated. For some people it’s the recognition and ego that has to be nurtured, for others it is feeling part of the team and being involved in meetings, for others it may be personal time off, perks, working conditions, or things you might not even think of if you do not ask the question. This does not mean that you have to agree to every item on someone’s wish list but once you understand what drives them you can often customize a program that works out to the mutual satisfaction of both parties. One example is one might give up some compensation to have more flexible hours, as long as this does not upset the chemistry of the group. Another might be that if advancement and promotion is a key goal they must be willing to learn new roles in the company and provide greater flexibility within the organization. This is the way you would like to be treated as an employee and need to do the same for your staff if you want to get the most out of them.

In the last blog, we discussed being honest and fair in a different context. Being honest and fair here is meeting peoples’ needs as to the rewards that they seek. If you find that your company goals can never mesh with theirs no matter how you try one may need to part ways and find people whose goals are more compatible. For example, if someone is simply not money motivated and will not work to achieve whatever standards of performance are needed from them, the sooner you find this out and they leave the better for both parties.

In the last blog, we also mentioned being accessible. Most people will not tell you what turns them on; you need to draw them out on this subject as you get to know them as individuals. This can’t be done in a group environment and this is where as a small or mid sized company you have the time to get to know dozens or even hundreds of people where one can’t do this when there are thousands.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

In this the second of a multipart series of posts following our initial discussion on “Why Small and Mid Sized Firms Grow”. Having been a senior executive from start-ups and large staffing companies to Fortune 500’s, I have seen the variety of things it takes to profitably grow. This conversation will deal with becoming a visible and respected leader of your organization.

There is a big difference in making placements and creating an organization that thrives. And being visible is important, for who wants to work for an absentee landlord? To overstate the case, as the old joke goes, 90% of success in life is just showing up. The truth is one leverages their ability by being and strong and effective leader. Having worked with hundreds of staffing companies over they year, we have only seen 2 that had the magical charismatic leader. One does not need to light up a room to be leader. They need to empower other by setting an example, by working hard and smart and being efficient, honest, fair and accessible. The staff looks to its leader, typically its owner to set an example of what is expected from them. If they say one thing to their people but do something else that does not work very well in most small to mid sized companies. Everyone makes mistakes, but covering up things is the crime. Owning up to them and making changes is commendable.

What do I mean by hard working hard? Getting in on time, staying late, making calls in the evening, making sure one plans out their time wisely and prioritize their work. It is hard to tell the staff to be there at 8:30 if you come at 9:00, or making 25 telemarketing calls a day if the portion of the day that you make phones is 5.

If as a leader you make recruiting calls, working smart and being efficient often means calling candidates in the evenings. If you provide anecdotes of such calls your team will get the message. Working smart may mean converting JO’s into placements. When as a worker your conversion rate was say 40% and your better employees do this as well, you can hold that up as what is achievable target.

Being honest and fair is obvious. Being honest means not telling things which are clearly not true, such as taking credit for someone else’s hard work or saying that you were at a client meeting when you were playing golf. This will eventually catch up with you. Playing favorites who performance is clearly inferior is not a good message either. Allowing some people to get way with murder when others are given no stack will demoralize your staff and result in high turnover.

Lastly one needs to be accessible. A closed door policy makes it very hard to get an early handle on problems and opportunities. If your staff feels intimidated that you know everything and they know very little, they will not bring things to your attention you need to know. Some of which may not be the kind of news you want to hear. No one wants to be the messenger of bad news who gets killed for their efforts. Intimidation leads to the cover ups noted earlier.

We welcome your questions as to personal and business challenges you face in order to grow.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

This is the first of a series of posts following up on our previous discussion;”Why Small and Mid Sized Firms Grow”. We will be describing some of the various ways companies become successful. It all starts with surviving the precarious first year or two.

For example, you may have worked for a firm that used temps and knew their shortcomings of the staffing firms they used, so you drew upon your hiring and candidate contacts and started your own firm. You placed people, hired a small staff and found a niche. But you did not separate yourself from competition and figure out how to become special. Too many companies are complacent and are happy to get by. That’s OK, but if you want to become a large and profitable company this doesn’t happen by magic. To be effective you may need people with an outside perspective as to best practices, how others have succeeded and what mistakes you want to avoid. Remember your competitors are not standing still. And don’t listen to Satchel Page the famous baseball player who said “don’t look back, something may be gaining on you”.

After getting to breakeven you realized you needed an assessment of your strengths, weaknesses, threats and opportunities and do a SWOT plan to figure out how to grow by increasing your market share. To do this requires a series of action plans targeting what you found out in the SWOT analysis, with specific responsibilities and financial targets by individual with hard due dates. Successful, growing companies don’t accept any excuses for not meeting assignments. And when one task is completed another one is added to the list. Doing this well requires hiring and retaining good staff, setting standards, targeting key accounts, retaining clients, minimizing risk, using metrics, doing a cost benefit assessment and a lot more. Successful companies set aggressive goals but have a realistic vision of what is possible, work hard and the leader should set an example for others. We will deal with these and other areas in future blogs.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

Did you ever wonder why small companies want to grow? Large companies are a headache and have complex personnel, accounting and legal issues. But most people want to grow. Why? Having been a senior executive from start-ups to Fortune 500’s we have seen what it takes and why people give it their all to become a big fish.

Those who start companies want to run things and large egos. And for sure being large has its advantages, they: are able to attract more talented employees and advisors, can absorb the loss of key clients or employees, command a higher price upon sale, raise capital less expensively, use donations to their advantage, amortize fixed cost to increase profits, entertain to retain key clients, can fund investments and buy other companies, establish their brand name, enjoy both a nice life style and retirement and fail less often and survival is no easy chore as 37% fail in the first 4 years.

In the next installment we will get into the specifics of how does a small and mid sized company go about becoming large? Follow up blogs we will discuss the specifics of achieving success and growth.

We welcome your questions as to personal and business challenges you face in order to grow.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

Doing the same thing may allow you to stay in business, but it is the big idea that will separate you from your competitors and allow you to maximize your sales, profits and value of your company. So what are some things that can be converted into the next big idea?

 We can go back a few decades to find seminal ideas that helped boost the staffing sector. The big ideas: that corporate clients could better afford paying hiring fees instead of job seekers, that companies would be willing to pay for the outplacement of executives who they terminated, using temp for interim assignments who could also do the job less expensively and MSP/VMS for economies of scale, just to name a few.

 So what will be the next big idea? We can look around for current changes taking place in the economy, life style changes or other situations ripe to create a staffing opportunity.

 We now have both the new healthcare laws starting to go into effect this year and next and the elimination of the payroll tax holiday. For smaller clients the difficulty of having to deal with theses changes can become our opportunity if payroll their employer and become the employer of record, relieving them of this burden and do so less expensively as well. Those doing pay rolling are already primed for this, but those who are not need to get up to speed to provide the same service. This will entail develop an infrastructure to handle pay rolling, documenting the savings they can provide, package this service and then aggressively market this service.

 As a result of the current political climate, there is now a major divide between the right and left on many social issues that we can take advantage of; as the AMAC formed a socially conservative senior organization as an alternative to more liberal AARP. Staffing company can rebrand themselves based on local social values (i.e. American Values Staffing or Rainbow Coalition Personnel), or just create a promotional tag line to their services. 

There are possibilities for big ideas we can create out of who cloth. Automation has been a driving factor in a tepid job recovery while corporate profits and stock prices have risen markedly. The impact of which has eliminated millions of jobs while making the US more competitive. This pace will only accelerate and those who ignore this trend do so at their peril. The government is keenly aware of this situation which is showing up in anti-immigration polices, tensions over the second amendment and general social unrest. We can help in this transition. Larger staffing company’s big idea can come up with alternative solutions for a smooth transition (perhaps even funded by Federal and State monies). Smaller companies can work at the local level to retrain workers, get into career transition counseling, reposition themselves into the right niches, etc……… We will explore other “big ideas” over time.   

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

We wanted to take a moment and announce our newly redesigned website for Optimal Management. This new design allows for a more user-friendly navigation into our services and products. You can also find some of our Success Stories of some of our previous clients. We hope you enjoy browsing our new site.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

We were wondering about your thoughts about what the  staffing industry is going to look like in 2013 here in California. Things are looking good now with temporary and contracting continuing to increase its penetration rate which is up from 1.6% to 2.4% and is on track to reach 3% in 2015. While there are still many uncertainties in staffing here in California, it is up 6% from this time last year and back to 2008 levels. But things certainly vary by locale and by specialty and we’re off our previous highs. Nationally, we are almost fully recovered. Direct Hire is coming back up strong as well. What do you think?

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

As we begin 2013 with the excitement of fresh starts and new opportunities we are thrilled to announce some exciting news about how great 2012 was for us at OM.

Optimal Management has been selected for the 2012 Best of San Mateo Awards in the Business Management Consultants category.  The San Mateo Award Program recognizes local companies that have achieve exceptional marketing success.

Thank You San Mateo Award Program.

We are thrilled to receive this honor from our community and are thankful for all those that have worked with us to achieve it. This is an amazing way to send off 2012 and gets us excited for what is it come in 2013.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.

Everyone wants to earn more money, but in today’s new normal economy raises are hard to come by. And where raises exist they amount to rather little. A highly incentivized comp plan presents the best opportunity for the company and its producers to be on the same winning ticket and amounts to potentially a lot more then a raise. For sales reps and recruiters, commission can be tied to margin cost with a sliding scale to motivate and retain people as they become more valuable to the company. Appropriate steps and risers are needed, with the levels and rates to be determined by the market, the competition and ones own P&L. Although we have designed dozens of plans over the years, no two are ever the same. The values are typical set on an annual production basis, but other time frames can work. A trail and error approach is best to arrive at a “win-win” program that works best and is reset as conditions warrant.

Optimal Management is the premier management consulting company to the staffing industry. We act as mentors to owners and managers to maximize their sales, profits and value of their company. We become an extension of our clients operations and are there for all of their staffing and business needs, from sales, marketing and compensation plans, to finance, M&A, general management and everything in between.