Archives For staffing

We had snow in North Carolina!

Here’s another example of losing big, this time on scheduling with managed services or staffing.

The client asks to have someone on site full time.  This is a great deal as it represents recurring revenue.  They can’t afford a full time IT person (or perhaps project team member), so they contract with you to have the person three days each week.  The obvious way to make this work is to have that person show up on Monday, Wednesday, and Friday for eight hours each day.  You agree on a rate and begin work.

In this case, the sales person wins; at least short term.  The rate is $120 per hour, with a burden of $75.  This leaves $45 per hour in gross profit, on which the sales rep will be paid.  There are 24 hours billed each week, or just under 100 per month.

On the back end, Technical Services is stuck with a contract that takes their engineer on site three days per week, or 24 out of 40 hours per week.  This leaves 16 hours of unused time, which can only be used on Tuesday’s and Thursdays.  What are the chances that someone will sell a contract using that same person only on Tuesday and  Thursday?  From my experience, not very good.  The engineer’s utilization rate is now at 60%, or just over break-even.  I’m sure some work will come in, but not enough to get these numbers where they need to be.  Take vacation, sick time, and training time out of this person’s year and you will be at or below break-even before you know it.  Even if they do manage to pull in a few dollars over break-even, it’s not a good deal for the company and won’t make up for falling margins on product sales.  The goal of managed services and staffing is not to break-even, but to produce stronger profits to make up for the downward trends on product margins.

A final note:  If this same contract is sold for two days each week, say, Tuesday and Thursday, the loss is much greater.  Never take such a deal!

© 2010, David Stelzl

Advertisements

Jim Collins tells us in his book, “Good to Great”, that successful business planners start by assembling a top-notch team, and then figure out what they will actually do for business.  The people matter, and the best offerings will fail without great people.  This Friday at 11:30 I will be addressing this critical issue – after overseeing hundreds of interviews I have put together what I think will be invaluable insights on how to build your hiring process, read between the lines on resumes, and ask questions that will reveal weaknesses you need to know about before making an offer.  Here are some points I plan to cover in detail:

  1. Why it is so hard to find great people
  2. Where to look
  3. How to discern between great people and liars
  4. How to measure character and evaluate skills, especially with sales people
  5. How to build a hiring team that will reduce the chances of making a mistake
  6. How to figure out quickly if this person will work
  7. What to do if things are heading for disaster

Whether you attend or not, you need to know; 70% of people surveyed in one study I read agreed that they would lie on their resume and in their interview to get a job.  The cost of interviewing and bringing someone on is high…making a mistake can devastate existing client relationships, cost the company as ramp-up money is paid from the bottom line, and infect your team with cancerous people.  And it’s getting worse….you’d think there are more great people to hire given the economy.  Not true.  There are more people who have been cut for lack of performance as financial pressures mount.  This has put more people on the street, and made it more difficult to find the great people you need to hire. Don’t miss this!

Sign up here: http://www.stelzl.us/business_strategy_TeleS.asp