My colleague and co-author Mike Cleland and I have spent a lot of time in the last couple of years thinking about what is different about staffing firms that are able to grow significantly faster than the market. As founder of Charted Path, Cleland has consulted with dozens of staffing firms, typically at a moment of crisis where growth becomes a challenge. And at SIA, we’ve long studied the largest and fastest-growing staffing firms in the industry. In fact, Cleland and I recently released a book on the subject called Breaking Through: Leadership Disciplines of Top Performing Staffing Firms. The premise of the book: There are predictable barriers to growth for staffing firms and those staffing firms that manage to break through those barriers to growth share some surprising commonalities.
Based on interviews with more than a dozen staffing executives who have gone from start-up to the top of the industry, Cleland and I have identified a common set of phases that most staffing firms go through as they grow — and that growth often plateaus as firms struggle to transition from one phase to the next. While the level of revenue a business achieves is often closely related to the level of maturity, it is possible for an organization to have significant revenue but still be operating at a relatively low level of maturity.
Owner/Operator Dependent. The vast majority of staffing firms are in the Owner/Operator Dependent stage of development. In fact, our research indicates that about 85% of all staffing firms have less than $5 million in annual revenue, and typically have an owner/ operator closely involved in the business. These leaders typically serve as a recruiter, salesperson, line manager and chief executive all at once. If you are not sure if you are in this stage, can you take a day off or a vacation without seeing a significant lapse in operations of your business? If you can’t, then you are probably an owner/operator.
Independent Operation. The key to arriving at the next stage of development is being able to delegate to and develop a next level of leaders. In this stage, the chief executive role becomes separate from that of line-level managers, recruiters and producers. While the chief executive may still sell or recruit, he or she has delegated much of the day-to-day operations to some key leaders. At this stage, the business can operate on a day-to-day basis without constant involvement from the owner and chief executive.
Organic Scale. Here, a staffing business is now mature enough to replicate its initial operations in multiple locations or business lines. This might mean going from a one-branch operation to several branches or it could mean that multiple skills or industries are served within one location. Typically, this means that a consistent operating model is developed along with standards for hiring, performance and compensation of a next level of producers and business leaders.
Strategic Expansion. Finally, successful staffing firms often reach the stage we call Strategic Expansion. In this stage of development, companies have successfully integrated an acquisition or launch while operating multiple business lines at the same time, often with differing revenue models and operating metrics. Most of the staffing firms among SIA’s largest list would fit this category, with offerings in addition to staffing that might include providing solutions, operating a managed service provider, operating globally or perhaps launching a consulting practice, to name a few.
What separates the companies that are able to move up the maturity model to greater levels of success? While every situation is unique, we believe that ultimately the quality of leadership in the organization is by far the most important factor in growth. In fact, we see a common set of disciplines among the leaders of those firms that grow. These disciplines include commitment, direction, culture, talent development and execution. In coming articles, I will explore each of these disciplines in more detail.
