Staffing at its roots is an entrepreneurial industry. Some of the most successful staffing companies can point to strong leadership, aggressive execution, and ambitious production personnel as keys to their success. It is an industry defined at many levels by its shear will to succeed, and through the nineties that seemed to be enough.

Over the last decade, we have seen massive changes in the competitive forces that impact the industry. These changes have allowed buyers to become increasingly sophisticated on how they engage and manage their relationships with staffing vendors. Buyers are leveraging technology to enable programs that closely manage both processes and pricing, driving the staffing firm’s operational costs up while at the same time squeezing gross margin profitability.

To preserve bottom line profits staffing firms responded with a focus on increasing the “productivity” of the recruiting and sales organizations to achieve activity metrics that were simply not possible even five years ago. Operational improvements are a continued necessity to survive in the staffing business, and can briefly give a company a competitive advantage. However, is it enough to outperform the competition long term?

The short answer is no. A longer answer can be found by reading an excellent article named “What is Strategy” by Michael Porter. Porter’s contention is that while operational excellence is a requirement in any industry it is simply too easily replicated to provide a sustainable competitive advantage. A prime example is how databases have evolved over the last few years, with the SaaS models giving even the smallest firms access to the type of automation only established firms enjoyed. So in the end you need consistent operational improvement just to stay competitive, but do not count on it long term as a differentiator.

So where does strategic planning come in? Building a strategic plan focuses on creating a system of unique differentiators that are difficult for the competition to replicate and provide a unique value to your clients. A strategic plan defines your value proposition, your target accounts, the necessary operations to support it, and determines how hire and train your employees. All roles of the organization are focused on the common goals, as defined by the strategy. However, creating a well aligned plan is only the beginning. The organization must be actively managed to ensure the organization makes the changes necessary to effectively execute that strategy.

A company focused on a well defined strategy minimizes waste, is more adaptable, and enjoys more profitable growth. What are the keys to becoming a strategy focused organization? That will be the topic for next week’s blog.