VMS Systems and why they are forcing staffing companies to shift towards hiring higher caliber sales people.

VMS systems have pointed out a weakness in the staffing industry. For a moment, pretend to be an auditor who works outside of the staffing industry, and you are looking across the entire staffing industry to perform and audit and identify the types of people most commonly hired into sales related positions such as branch managers, sales reps, and direct hire recruiters. What would you see? You would see the young and attractive girl who is hired to canvass her territory. She goes to office buildings and business parks to walk in without an appointment, asking if the office manager can come out to visit and dropping off a brochure. There is the room full of telemarketers/recruiters often set up in the "bull pen". Most of these individuals in the bull pen are either younger without much business or life experience, or they have never produced much success before. Sure, there are the few top gun sales people and branch managers. But I am talking about standard types of people hired by staffing companies across America.

Now let's dissect what it actually takes to sell staffing services, especially to a larger company that uses a VMS system. It's not as if one staffing company is selling a car with different features then another car. We all sell pretty much the same thing. What separates staffing companies is the customer's opinion of the sales person, or whoever they work with, maybe a perm recruiter. Employers choose to do business with staffing companies partly on price and margin, but largely they play the favoritism game and give business to the sales people they personally "like" the most.

Most hiring managers working for employers are in the 35 through 55 age bracket. Let's pick 40 as a very realistic age of the typical hiring manager. Being success in staffing is all about building relationships with internal managers, what type of sales person is more likely to build a relationship with the 40 year old hiring manager? Who would the hiring manager accept a lunch invitation from? Would they go to lunch with a sales person whom they viewed as a young & inexperienced telemarketer? Would they go to lunch with someone they felt they had nothing in common with? Who would the hiring manager meet for happy hour after work on a Friday? Who would the hiring manager go golfing or fishing with on a Saturday? Who would the hiring manager accept an invitation from to go to a Hockey game one evening? Basically, if the hiring manager had the chance, what type sales person would they be willing to socialize with, because that is who they will give their business to. A 40 year old hiring manager is going to feel they have much more in common with a more mature and professional sales person who can share life and business experience, then they would the stereotypical young telemarketer/recruiter cold calling from the bull pen.

Where I live there is a fortune 500 company HQ. There is also a VMS system in place. Ever since they implemented the VMS system all staffing companies in this area started to complain because there was no feedback, and they felt as if they were submitting resumes into a black hole. Sound familiar? I kept hearing from various sales reps that there was no way around the VMS. However, a personal friend of mine is a selling branch manager for an IT staffing company and he is the higher level type of sales person I am speaking of. He successfully bypassed the VMS and built a relationship with the CIO and several department managers. He has become friends with these people, meeting them after work, for lunch, going to ball games. The hiring managers give him job descriptions a week before they are input into the VMS. His recruiters get a week head start over any other staffing company to source candidates and the minute the jobs are approved and activated in the VMS, his recruiters are submitting resumes before any other staffing company has even started working the job orders.

I know of a sales rep at a staffing company that specializes in clerical and A&F and the same story applies to her. She has become the "favorite" sales person among a few of the important hiring managers and they protect her, and give show her favoritism so she gets the inside track ahead of other staffing companies.

What I just said is true with any larger company that uses a VMS system. If there are 20 staffing companies on the list, 18 of them are sort of stuck where working with the customer is like working for a black hole. But 2 of the companies will have higher level, more capable sales people who are able to find ways to bypass the VMS and develop friendly relationships with internal managers where they do gain an inside connection.

When the economy was good, there was plenty of extra business floating around. So the young sales person who went door to door canvassing their territory was able to bring in enough business to do ok. Or, the telemarketing bull pen, even with all the high turn over, produced enough revenue to do ok using a "throw it up against the wall to see what sticks" approach to sales & recruiting. But the recession has shone a light on this problem, and the lesson to learn going forward is we are not going to experience another boom economy like we had seen in the 06/07 years. Competition for business will be tough. The young & inexperienced sales rep who is going door to door will just not cut it in the years to come. They are not good enough. The youthful and inexperienced telemarketers in the bullpen will not make it because they are not at the level of professional selling I am speaking of, and the high pressure, micro managed telemarketing culture goes against the grain of building relationships, and actually causes employers to get sick and tired of receiving so many marketing calls from the same company every month.

Going forward what is essential in each staffing branch office is to have at least one sales Star. Someone who can set the pace, and pull all the others along on the ride with them. Yet rarely is this seen. If you were an auditor analysing a staffing company you would find most offices contain relatively average branch managers and sales people. When I say average I am speaking of someone who when they reach $65k income, sit back and relax because they are ok with that. What is needed are Hunters who would never be satisfied with $65k, and are the types who will continue to push until they reach their 6 figure income and then work hard to keep what they created.

And this leads me to make a point about compensation. It is a big mistake to use a compensation plan that pays commissions on an account for one year, and then that becomes a house account. In theory this pushes the sales rep to continue selling. In reality, this will burn them out. There is only so much business in a territory. 5 years into their career under such a plan a sales rep would have turned over most of the best clients to the company as house accounts leaving them with nothing. It is far smarter to avoid this, and set up a sales person to where they can enjoy the fruits of their labor one day as they shift from hunting to maintaining what they developed. If you want to grow a territory beyond that, just hire a second sales person to go after other companies and allow the first sales person to keep what they built, they deseve to be compensated just as much for maintaining a customer relationship over the years as they did for hunting to bring in the customer.

Many staffing companies have gotten used to paying low salaries to attract the relatively marginal sales people I am speaking of. And sometimes with a business model where there are several small offices in the same city, the territories are not large enough for a sales person to generate enough business to earn a respectable six figure income. That fact alone might become a barrier for such a staffing company to attract the best people to them in the first place. 6 figure income hunters are not going to consider jobs where the odds are against their earning 6 figure incomes.

Sometimes the office set up is a barrier. I know of certain staffing companies that use the bull pen model, and when you walk into their office it looks like a telemarketing boiler room. No professional sales person who can build relationships with customers is going to want to work in an office set up like that. A professional sales person will want some sort of peace and quiet so they can conduct the types of conversations with customers that lead to relationships. If they must stick their finger in their ear to block out noise so they can hear a customer speaking on the phone, or if they must wear earphones all day, that type of environment will turn off sales people who truly are the types who can build personal relationships with customers.

So going forward for a staffing company to successfully compete they must take a serious look at the profile and personality types of the people they have historically hired, and change towards hiring professional sales people, at least one Star per office. With one Star, they can set the pace and teach the others in the office, bringing up the capabilities of all in the office. But if a marginal person is hired, there is nothing for the others in the office to hang onto and learn from. Another piece of the pie is looking at the business model and compensation because in order to attract the best sales people, comp plans that pay $40k salaries with a potential to earn maybe $75k are just not going to do it.

This leads me to another barrier to hiring top talent. The staffing firm's view is a sales person should focus on the commission and overall opportunity, not just the salary. That might apply to a person who is unemployed and looking for a job, but is an incorrect way to think when trying to recruit top talent where they must be head hunted and lured into leavcing their job to switch companies.

If a sales person is earning $40k salary, and over 5 years has built up their commissions to earning $125k overall, they are not going to be able to afford to walk away from their overall income to switch companies. Their monthly bills will not be based on just a $40k salary. So here is what the staffing company does. They offer $55k salary, $15k more then the sales rep is earning. But $120k - $55k = $65,000 the sales rep is leaving on the table. Even if the sales rep is not happy with their current employer and is motivated to find a new job, they cannot afford to leave $65,000 in commissions on the table because their personal expenses are going to be based on their actual income. I am not suggesting you pay the sales person $125k to match their overall income. But I am suggesting that you show respect to talented people and pay them a respectable salary, especially if they can bring customer relationships with them. And, it would be wise to design some sort of financial bridge for 6 months to help make it financially realistic for them to cross that bridge to work for your company. And, you might want to look at other things you can do to add creativity to an offer when going after talented people. What if you cannot afford to pay more salary? Why not offer them 4 weeks paid vacation starting from the first year? Does that really hurt your company financially if that person produces results? And if they turn out to be a bad hire, you would have fired them in the first 6 months anyway. The point I want to make is without getting aggressive and creative when it comes to going after top talent and hiring them, a staffing company will get stuck hiring the same C & D level people over and over again.

Being what I have shared about the need to build relationships in this article is very true, and it we all agree it takes a certain type of person to sell at this level and build these types of personal relationships, then a specific strategy must be designed to go after and hire these types of people.

If a branch office is not doing well, it makes no sense to try and hire someone who is cheap and affordable within the under-performing branch budget because that will lead to more failure and loss. Sometimes it is best to just close an office, shrink back to where each remaining office is stronger and then grow again. Or, stop forcing offices to depend on their own budgets and pool money together from the entire company to fund a compensation plan that can attract the right person to come work for an under-performing office and turn it around.

Nothing I shared here is new or spectacular. This is all common sense if you think about it. Yet with as much common sense as this makes, many staffing companies are continually hiring the same types of people with the same comp plans, with the same office set ups and with the same management metrics they used in 06/07 - while the world has changed since then and the time has come to adapt.

Dave Fogg

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