Part 12: How Small and Mid Sized Companies Become Large

In this part of the series: “How Small and Mid Sized Firms Grow” we discuss recruiters and HR managers.

As Gerber used to say “Babies are our business and our only business”. Well, in most companies today people are the lifeblood of their companies. Without good people whatever else the company does will not be done right. This can be applied to business in general as to the staff you hire from sales to maintenance workers. Some companies hire their staff based on the most cursory of interviewing, reference checking and testing. Others go through such a lengthy procedure that by the time they are ready to extend an offer the candidate may be long gone and has taken a job with a company that did not make interviewing a career. Some companies hire on the spot while others have well over a dozen interviews before making an offer. There is a happy median in finding the right people that vets them in a reasonable period of time with the right procedures and tools. That number varies depending on the degree of difficulty in finding the right candidate and the importance of the job itself. But three to six interviews should be sufficient for most situations. According to the BLS the average turnover rates vary from 1.3% for government jobs to some 6% for construction. But that is just an average. Many companies who do a poor job can see a turnover in excess of 100% annually. In addition the cost of turnover had been determined to be 200% of a person’s annual salary (+/- 50 points depending on the position). These concepts would apply to recruiters and HR managers alike.

Staffing companies of course have a unique situation as their recruiters find candidates for their clients needs, be they temporaries or direct hires (including executive search). Successful recruiters here most understand the client’s needs and match that with the candidates they recruit. Using these numbers a good direct hire recruiter can reduce turnover. For a client with a 50% turnover they can reduce this rate in half. For a $75K/year person they can save over $37,000 annually. For a temporary or contract recruiter there is on average a 13% annual cost savings vs. a direct hire employee. This person would save the client some $10,000 a year while on assignment and if and when converted the same $37,000/year savings would apply.

The combination of these factors has led to temps and contractors becoming one of the fastest growing segments of the economy, with temps rising from 1.6 % of the private labor force in April 1999 to 2.3% last month, and should top 3% in about another 2 ½ years.

Hiring, managing and motivating is very similar to the steps covered in Part 11 of this series.

Our next blog will discuss determining when it’s time to expand and how to do that effectively.

To see all articles in this series please go to

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


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