On this episode of The Staffing Show, Cary Daniel, CEO and co-founder of NEXTAFF, joins the podcast to discuss how he got started in the staffing industry and what led him to co-found a franchise-model organization. He talks about the personality traits that often go hand-in-hand with successful business ownership and shares his thoughts on tech adoption in the staffing industry. He also touches on how a daily gratitude practice has made a positive impact on his life.
David Folwell: Hello, everyone. Thank you for joining us for another episode of The Staffing Show. Today, I am super excited to be joined by Cary Daniel who is the CEO and co-founder of NEXTAFF. Cary, super excited to have you on today. Excited to hear about your background. To kick things off, if you could tell our audience a little bit about who you are and how you got into staffing.
Cary Daniel: Sure. Again, Cary Daniel, co-founder and CEO of NEXTAFF. My entry into the staffing world is very similar to a lot of folks that I hear. It was purely by accident and almost, sometimes I say, by force. I had a good friend of mine, actually, my co-founder, James Windmiller. He was working for a national company. This is back in the mid-90s. And he called me up, knew I was looking for a sales job, and said, “Hey, this company’s hiring. You got to check them out.” And so, at the time, this is back in the Labor Ready days, when it was Labor Ready. So, I put my suit and tie on, and I walked into my interview into a labor hall filled with day laborers and thought, “I obviously am in the wrong place.” And the gentleman that interviewed me was the branch manager. And I believe he interviewed me with a dip of Skoal in his mouth.
So, I thought, “This is really odd. I’m not sure what this is all about.” And he said, “Well, we don’t have any sales positions, but I have….” They called them account managers. “I have an account manager position.” I said, “No, that’s not what I’m looking for. Thanks, but no thanks.”
And James called me later that night, “How’d it go?” And I said, “Well, they didn’t have sales, so I turned it down.” And he said, “You don’t understand. They’re growing. They’re opening all these offices. You really should consider, because I think you’ll get into sales in a very short amount of time.” And so, I joked that I reluctantly took this position with the future in mind. And sure enough, six months later, I was in sales. A year later, I was in management. A year after that, I was running one of the largest Labor Ready offices in the, I think, top 20 in the country and really cut my teeth in day labor.
And I had somebody that was not in the day labor asked me one time, they managed the district for a more temp-to-hire type business and asked me one time, “Hey, do you ever think about leaving Labor Ready?” I said, “Every morning at 4:30.” So, she called me and connected me with the president of that company at the time. And I went to work for them. And they sold to another roll up a month after I was hired. And I thought, “You know what? This is really not what I’m looking for, to have somebody else control my destiny.” And so, I got into my own business in ’98 and running my own thing ever since.
Folwell: That’s amazing. And so, you started NEXTAFF in ’98?
Daniel: We actually started…the first company was Human Resource. We built that up. That was a standard branch-operated model. And we built that up through a number of locations and actually sold that in 2003. And when we sold it, it was a good deal for us and the couple of investors we had at the time, but not enough to go off and retire at 30-something years old. And so, we thought, well, I don’t really know much else outside of staffing right now. So, what if we franchise the concept? And so, we talked to the gentleman that had purchased the Kansas City market. And he said, sure, as long as you don’t do it in my territory.
So, that’s what drove us into the franchise model, was taking the four years of hard lessons that we learned, going out on our own, doing everything wrong, recreating the wheel. And we thought, we could save people so much time and money if we could package this up into a nice little program and franchise it. So, that’s what we did when we rolled it out in ’04.
Folwell: And I saw that you’ve been…and I don’t know if this was Human Resource or NEXTAFF, but the Inc. 500 five different times?
Folwell: And was that mostly with NEXTAFF or Human Resource and NEXTAFF? What’s the background there?
Daniel: It was a combination, but mainly under the NEXTAFF brand.
Daniel: I think maybe under Human Resource, I think we may have done it once. Just hit 2022 this year as well for the Inc. 5000.
Folwell: That’s amazing. That’s amazing. And what is the size and revenue of where you guys are at in terms of company size for NEXTAFF at the moment?
Daniel: Company size right now we’re turning toward 80 million for 2022.
Folwell: Awesome. And explain a little bit. So, it sounds like you figured out the model with Human Resource, decided to go out and franchise, build a franchise model with NEXTAFF. Tell me a little bit about what that experience has been like, some of the lessons you’ve learned along the way.
Daniel: So, going from the branch model to the franchise model, probably the biggest shift that we had to do, well, one, in the branch model you’re there in the office every day and what’s in your head can be translated downstream pretty easily because you’re there within your 10, 12 people every single day. With the franchise model, it needs to be more replicable. You need to be able to…I think I read a book sometime that said, “If you can’t drop somebody off in the middle of nowhere with your ops manual and your training stuff and have them succeed, then you really don’t have a good, proven franchise system.” And so, it took a lot of effort getting what was in our heads down on paper into a training format into something that somebody could replicate 2,000 miles away without us being there every single day or without them calling us every five minutes.
That was the biggest shift. The second biggest shift was going from a paid group of individuals working for you to basically a volunteer army that are all self-employed. There’s a big difference between saying, “Hey, here’s what I need you to do. I need you to make 100 calls this week, and I need you to go on five appointments. And if you don’t do that, we’re going to have to talk about replacing you with somebody else.” That’s a lot different than working with a franchise owner. It’s a more encouragement of, “This is what we strongly recommend.” But the franchise owner can say, “Piss off, I’m going to do nothing.”
So, you’re like, “Oh man, how do we get these franchise owners to do what we know works but not as employees?” They’re owners as well. And so, that’s been a big shift, is how to convince people to do things when you can’t…you start to understand how lazy you were as a leader or an owner when your main source of inspiration and motivation was threatening to terminate somebody or threatening to replace them or cut their pay, cut their bonus, whatever, if they don’t do what you want them to do. Having to move over to the volunteer army.
Folwell: More of a carrot model.
Daniel: Oh, you definitely have to grow in terms of your leadership capabilities and your persuasive skills with that crew.
Folwell: And what are some of the benefits from your perspective of shifting to the franchise model?
Daniel: I think probably the biggest one for us is seeing the growth that somebody comes in from outside the industry, knows nothing about staffing, knows nothing about owning a business, and watching their progression and the satisfaction they get from staking their claim and their territory, “This is mine,” doing their grand opening, being an owner, and seeing people succeed beyond their wildest expectations. And honestly, sometimes for us, we get folks that come in here and you’re thinking, “We’re going to have to work with this individual a lot. They don’t really hit the core strengths of what we need. But I think there’s a lot of potential there.” And to see those people just blow it out of the water versus the person that comes in the door and you think, “This gal’s going to do awesome. She’s going to be our number-one franchise owner, no doubt,” and to see them struggle. So, really, to see people grow from 9-to-5 employee mentality into owner mentality into self-employed and seeing them produce numbers that are just mind boggling sometimes.
Folwell: That’s got to be really incredible to watch. And I know one of the things that you and I talked about previously is the success rate that people have with NEXTAFF. And I wonder if you could touch on what the success rate is for people that actually go out and buy the franchise model. And then also maybe discuss a little bit about who you typically see coming in and deciding, “Hey, I want to open up a NEXTAFF franchise.” And what does that look like for them?
Daniel: Yeah. So, for us, the success level, I guess it depends on how you define it. Some of the questions we get when somebody’s interested in the franchises is, “Tell me about the people that have failed.” And fortunately, in our system, we don’t really have a lot of those that we point to. And success at my level of what I think your success could be or should be is different from what other people’s level is. So, like I talked about, that volunteer army, for example. We have an office that does very well for what they’re trying to do. And as much as I want them to do more and I see more in their territory, they’re very happy doing what they’re doing. They run a very nice boutique solid office, solid temp-to-perm, do great direct hire fees. I look at them and I think, “God, you could be 10 times bigger if you want them to be.” But they have young kids and they want to spend time with them. They want to do that. So, sometimes I have to re-draw my definition of success to: success is what they say it is.
And so, for us, we really… in the last, we took a break from franchising from about 2009 when the Great Recession hit up through about 2017, we had purchased a PEO and a payroll company. We did that for a number of years. But we really just started launching the franchise again in ’17. And since then, I can’t think of one that has closed their business outright said, “No, it’s not working. I could close my business.” We’ve had a couple that got in, decided this really wasn’t what they wanted to do, and sold their business to another franchise owner, or sold to a third party. We had one that retired. But I can’t think of one that said, “You know what? I’ve tried your system. I’ve tried it. I did what you said to do. And it’s just not working. I have to close my business.” For us, fortunately, we haven’t seen that.
Folwell: That’s amazing. Then, one thing that I’ve also noticed is that your franchises go across different verticals, which when I think of a franchise model and staffing, typically, I think of, it’s light industrial or a specific vertical and kind of stays focused on that. Can you talk a little bit about what it’s been like to open up the franchise model with different verticals and some of the challenges or opportunities you’ve seen with that?
Daniel: Yeah. So, we started originally with…it was just a franchise model and you could do whatever your background led you to focus on. And so, early on we had administrative offices. We had light industrial offices. We had IT offices. And that seemed to work pretty well. Where it didn’t work well was when we tried to force-fit somebody into something or somebody tried to get into an area that they didn’t have any experience. That’s where people would struggle for a little while. But the way we operate now is you essentially get to decide, “Do I want to own a commercial vertical, healthcare, or IT?” And you get to select one of those. You can purchase all three, if you want. But what we tend to see is people get into their vertical and they expand in that vertical, meaning they expand to another territory within that vertical.
We have a couple owners, not very many. I’m trying to think of them off the top of my head. We have one, two. Well, now I’m sitting three, four. Four that I can think of. So, really, and they own quite a few multi-unit locations. So, we have four that do….
Folwell: That go across the different verticals? Yeah.
Daniel: But they tend to have a segment that does that. Like we typically preach, they don’t typically have a recruiter that recruits nurses and forklift drivers. They don’t do that. They typically have a vertical. They start in commercial. They get that built up. They start doing well. And they decide, “Hey, you know what? There’s a good healthcare market here. I want to get into healthcare.” And they bring on a healthcare recruiter, somebody that focuses on healthcare. And so, even though it’s in the same office, they run independently of each other.
Folwell: That makes complete sense. I think we see the same thing. When I talk to a lot of owners, it’s like, if you’re not segmenting it off, the conversations alone are different from each of the verticals. With that, so, you’ve talked about the different success that some of your franchise owners have had. What are some of the top traits that you are looking for when you’re hiring? Or, I guess you’re not really hiring. They’re coming in and purchasing a franchise. And I think about, and then what are the differences that you’ve seen from that versus when you are hiring a branch manager versus somebody who’s coming in to buy a franchise? Is that a significant difference in what you look for from the individual? I imagine there’s some key things that might make it a little bit nuanced for you, guys.
Daniel: The profiles are very similar. So, with a branch manager and a franchise owner, you’re typically looking for somebody that has the high drive, that has the high social skills, has a high sense of urgency. And the area that you sometimes wander on is kind of the rule-follower segment of that. The thinker personality, typically, those will be lower. But what we see is, if it goes too low, like in my instance, my example where my rule following is very, very low, they tend to be your Mavericks. And so, that’s one of the reasons that I became an entrepreneur, is because I realized I would be a very terrible employee.
Funny story about this. This tells you the kind of personality that, sometimes, we want people like me, right? You want somebody that’s driven. You want somebody that’s go, go, go, somebody that can sell, somebody that’s a good people person, great sense of urgency. But you want somebody that can follow the rules a little better. In my second position in the staffing industry, I like to tell this story about who we tried not to hire. I came in, started working with them, and I didn’t like the layout of the office, because when you walked in, you basically had two chairs and there was a wall. And I thought, “Well, this is really stupid.” So, I think I’d been there maybe two weeks. And I came in over the weekend and I brought my Sawzall. I cut the wall in half. I cut the wall in half and put a little counter on the top.
And I remember the vice president came in a couple weeks later and walked in and was like, “What happened to the wall?” And I said, “I cut it off.” He said, “You can’t just cut it off. You can’t do that.” I was like, “Well, I did….” It actually blew his mind that somebody would actually do that. And in hindsight, I think about, if I had one of my employees come in and just start cutting walls in half. Like, “What the hell do you think?” So, you have to balance that equation, right? You don’t want somebody coming in and cutting your walls off, but you want somebody with that kind of drive and initiative. So, it’s very similar, the branch- manager profile and the franchise owner profile, very similar.
B2B sales is what we look for as a critical skill set or background. But really, drive, energy, the achiever, somebody that’s…and we get them a lot. They come in. When they’re coming through training and the ones that want to know about the records who holds the fastest record for this, who holds this, how fast….
Folwell: That’s always a good sign.
Daniel: Yeah. And they want to know about competition. And probably, our top three right now that battle constantly every single week on our scorecard, those three are always the same…they’re always wanting to know where this person’s at, who’s doing this, who’s doing that, very competitive. And it’s not in a bad way. We actually have a contest going right now between all three of them. As a fun, the loser buys the happy hour kind of contest. But they love it. They thrive on that. And they want to know what’s the next contest, what’s the next goal. Those kind of folks do very, very well.
Folwell: And then at the, I guess, franchise-owner model, where you said actually in terms of owning the entire franchise, what type of tools or strategies are you helping them? I imagine there’s a lot of training that goes into keeping them up to speed with what’s going on. What type of things are you putting in place to make sure that they are successful? And do you have a model for how you roll things out with them?
Daniel: Yeah. So, the onboarding for this is quite extensive. It typically takes about 90 days. When somebody signs on with a franchise, we use a platform called FranConnect. That’s kind of a big dog in the franchising industry. And it gives them all-encompassing sales tools, CRM, onboarding, learning management system, project manager, everything. So, when they come on board, they get enrolled in essentially our project manager. And it lays out on a Gantt chart based on when they say they want to open. If they say, “I want to open in 60 days or 90 days or 120 days,” it will adjust the Gantt chart accordingly. And it starts them from: Step one: filing your articles of organization or your articles of incorporation. Step two: get your PIM. Step three: register with the…on and on and on, all the way down to grand opening.
In between there, we have all kinds of LMS courses that go from recruiting to sales to operations to management to finance. They come in for a week-worth of classroom training, typically, about a week before their office opens. Then, once their office opens, we have our director of franchise development come out and spend a week with them. And then they have supplemental training that goes on after that. And then, we follow it up with, every single week, we have on a rotation, training every Wednesday that either covers finance, operations, management, back office.
Or sometimes, we’ll do an owners-only forum where it’s just kind of owners only, no staff, no internal staff from the support side, except for James and myself. And this is where they can talk about their finances, they can talk about, “Hey, I think I’m going to have to fire my branch manager,” or, “Hey, I want to change my compensation plan. What are you guys doing?” A very cool open peer-to-peer forum that they can talk about anything they want. So, the training’s extensive. It’s probably 100 hours of online, 40 hours of classroom, and then constant week after week after week to where it’s like a baton, a very long baton to where we don’t take the training wheels off until they tell us, “I’m good. I’ll call you when I need you.”
Folwell: That sounds really incredible. When I think of being an entrepreneur myself and also having run marketing for multiple startups, one of the main reasons I’ve seen companies fail is not always coming back to not knowing what to do, it’s knowing when to do what they should do. And I feel like having a guided process of, “Here’s exactly what you need to do, when you need to do it, and when it’s important.” So, I frequently see entrepreneurs jump the gun on spending too much money on marketing or too much money on logo development, things that maybe don’t make sense at the stage they’re at. And it sounds like you’ve got the framework as for the franchise owner to just ensure that, “Hey, this is going to go smoothly. You don’t need to worry about these components of it. You just need to get it done.”
Daniel: The very last day of training, we tell them, or the very last day of discovery day, they come in and they decide, “Yes, I want to go,” “No, I don’t.” The moment they say, “I’m on board. Let’s go,” usually, the next conversation we have with them is exactly what you said, which is, “We have done this many, many, many times, not only in the franchise side but in personal offices. Trust us when I tell you it will all get taken care of in the order that it’s supposed to be taken care of.” And we tell people this story. We say, “Because you get all excited, the first thing that we get all the time is you sign a franchise agreement, you send your check, you’re all excited, you want to get business cards.” I’d say, “Oh, great, you want business cards? What’s your address?” “Oh.” “What’s your phone number?” “Oh. Yeah, I guess I need to get….” So, trust us. You do certain things in order. I know you want to get your business cards, but we got to have your address and your phone number first. So, those will come to you in the order that they are. And fill that out for everything else, training-wise and everything else. So, they want to come to training tomorrow.
Well, you’re not going to open your office for 90 days. You will forget 95% if you come to training next week. So, trust us. That will happen at the very end, so that you can finish on Friday, open on Monday, and hopefully retain more and get busy working it. So, we have to tell them that, look, we don’t make a dollar unless you make 10. So, trust us when we tell you that this is all….
Folwell: It’s in their best interest. You need them to be successful.
Daniel: We are not going to steer you wrong. In no way by us steering you wrong will that help us.
Folwell: Absolutely, that’s great. So, shifting gears a little bit off the franchise model, but in just more generally, staffing. What are some of the major trends that you’re seeing, whether it be on the different verticals, new technology, just any major trends that you’re seeing in staffing right now?
Daniel: So, well, one in terms of the franchise side is the increase in healthcare inquiries. Actually, with COVID, post-pandemic, the level of inquiries on the healthcare has gone up sizably. I’d say, five years ago, we were 5% healthcare. Today, we’re probably 50% healthcare, because once COVID hit and everybody saw the demand for nursing, everybody is kind of running to that. And then some of the multi-unit owners, that’s where they’re really focused on it. So, I have one based out of Des Moines, one based out of Denver, one based out of Nashville, and one based out of Sonoma. And all of those are doing multi-unit locations on a development plan, all in healthcare. So, unless we get some commercial folks that want to do that same, I see us trending to where… I wouldn’t be surprised if five years from now we’re 75% healthcare, 25% commercial.
Folwell: I don’t know if it’s New York Times. Recently, I saw an article about how travel nursing is hitting some slump. But I think it might have been in pay rates. And I’m just curious what you’re seeing in terms of the market and demand for the travel nurses or ongoing healthcare services as a whole from a staffing perspective.
Daniel: So, we don’t get into the travel nursing. That’s an area that we kind of stayed away from. But what we have seen is the supply and demand is starting to level off. So, even six months ago, but certainly a year ago, two years ago, our offices, our owners could walk into a healthcare facility with contract in hand and say, “Hey, [inaudible] people. Are you interested?” And they’d say, “Absolutely, when can you get us people?”
I went to a trade show about 18 months ago in Phoenix with an office. And it was the Arizona Healthcare Association, I think. And I have never been to a trade show where people actively came up to your booth, handing you cards, saying, “Can you please call us? Can you please call us?”
Folwell: That’s amazing.
Daniel: I told Art, the branch manager down there, I said, “This is unlike anything I’ve ever seen.” It was crazy, the number of people that sought us out at that thing. But now, I’m starting to see it level off. And the ability to go in there and just command whatever you want to command has dropped quite a bit. And now it’s getting back to a little bit more of the norm, which is, “Okay, let me see your agreement. What are your rates? Well, your rates might be…” And maybe a little pushback on rates. So, that’s getting back to the little more traditional things that we’re used to seeing.
Folwell: And in terms of longer-term for the staffing industry, when you look out three to five years, I know there’s the gig economy at play and all of the different paths that people are going down in terms of technology, any things that stick out for you or changes that you think staffing agency owners should be aware of?
Daniel: For us, where we see it going… and we get this question a lot. So, somebody will call me and they’ll say, “Well, what do you think about is AI going to replace staffing or platforms going to replace staffing agencies? What about the gig economy? What about Uber jobs or Google jobs or any of these things? Are you guys eventually going to go away?” And same thing with remote work. “Oh, man, what happens if everything goes remote? Are people going to be willing to use staffing agencies?”
And our theory has been, if you stay in the right verticals and the right segments, there’s certain areas that are just not going to go away. And it’s no different than…and COVID is a great example. If you look at the businesses that were deemed essential or ones that weren’t affected as much, you can’t manufacture a widget remotely. You need to go to the building.
Folwell: You need people.
Daniel: You can’t do food production on a food production assembly line from your house. You can’t do that. It has to be local. You can’t be a CNA from your house. You have to be in the long-term care facility. So, as long as you’re in those type of areas, I think you’re safe.
Where it could get a little tricky is if you’re doing all administrative work, all clerical work. And as you’ve seen over the last handful of years where all the verticals are growing but the clerical administrative has been kind of flat, it hasn’t been keeping up. And I can see that, whether it’s through offshoring or AI, becoming a little bit of an issue. As it relates to the platforms, I think we heard that question back in the late ’90s. “Oh, man Monster…” And then the staffing industry became probably the best customer of Monster, same way with ZipRecruiter. Fine, ZipRecruiter can give you 100 resumes, done. Okay, who’s going to go through them? Who’s going to pick out the one out of 100? So, I love that ZipRecruiter’s thing is the needle out of the haystack. No, ZipRecruiter is giving you the haystack.
Folwell: I’ve never thought about that. That is 100% true. They give you the haystack. And the effort to get to that one is significant.
Daniel: And they talk about AI and they talk about technology and matching up with stuff. The savvy HR people and people that have been in the history know it’s no different than SEO or Google search, right? We get resumes in our office the same way. If they’re applying for customer service, the words “customer service” appear in their resume 27 times. If they’re applying for account management, the same resume, “customer service” changes to “account management.” And it’s listed 27 times. And that’s what’s going to match up to your job that you say, “I’m looking for a customer service rep with this number of years’ experience.” Well, that resume populates up there because the bots are searching through there and they see that, “Oh, this person looks like they’re really qualified. They mentioned customer service 27 times.” Well, maybe, they’re just really good at resume writing and they understand how technology works. And is that really the most qualified person? No, you’re getting 100 resumes that come to you. You still have to figure out how do you get quality out of that. And we have not seen anybody that can pull that off through AI completely. That’s still tough.
And for us, the good thing about our industry, too, is people are way overconfident in their ability to select winners from losers. And I don’t know that the American ego can say that they can let that reside to technology. They still want to talk to them and meet them and give their unstructured interview, even though it’s worthless and it’s very…. study after study after study says that is a very terrible way to select quality people. And yet, everybody does it.
Folwell: Everybody does it, yeah.
Daniel: Well, for us, we shake our heads and laugh and say that’s kind of good for us because the moment they say, “You know what? I’m going to let Watson determine who my next hire is going to be. I just don’t know….”
Folwell: Good luck.
Daniel: Well, I don’t think they’re going to allow it.
Folwell: And you just touched on something there. And I love that you talked about the unstructured interviews. Do you, with your team as well, have structured behavioral interviews that you roll out that everybody goes through and have a standard kind of NEXTAFF scoring system to allow for a higher predictability at hiring?
Daniel: Yeah. So, that’s our whole foundation. As I mentioned, during the Great Recession, rather than put more staffing locations into a declining market, we actually went on the offensive and we did an acquisition and acquired a payroll on a PEO company. And we ran that for about eight years, to where our model for the handful of franchise owners that we had at the time was more of a workforce strategy. We can do temp-to-PEO. And that was a great model at the time, especially with the Affordable Care Act. And everybody’s uncertainty around that. But you had a lot of companies looking to just do their entire payroll. “Hey, you guys do our temps. And then once they go full-time, we’ll use you as the PEO.”
It was a great model. The only challenge with that model was I didn’t like it. James didn’t like it. Because you look at it from the outside very naively at first. And we thought, we do temporary staffing. We do payroll. We do benefits at card. This is PEO. It’s essentially the same thing, but somebody else’s payroll, how different can it be? And the analogy we use is: staffing industry complexity is about bicycle, PEO is more like a motorcycle. They both have two wheels and handlebars, but they are so different in complexity.
And after operating that PEO for a number of years, the day we got the call from…I can’t remember if it was a broker or somebody, and said, “Hey I’m representing a large national brand. We’re looking for acquisitions.” Yes, please. So, we sold that back in 2016. It’s now part of Paychex. And so, we were glad to get rid of that. But what that did was it made us get back to our basics and look and see, okay, if we’re not going to be this workforce strategy model, who are we? What’s our USP? Why us? Why NEXTAFF? And it started with a fundamental question, which is, what do the buyers actually want?
And I don’t know if you’ve seen that survey that SIA does, but they do it where they pull the staffing buyers about their top three priorities when selecting a staffing firm. All clustered down in this pile are diversity and speed and service, risk, and workforce strategy. It’s all clustered. The way up as the outlier is worker quality.
That’s not the surprising part of the survey. The surprising part is when SIA then goes to its staffing member database websites, looks to see what the staffing agencies are marketing. 80% of them are marketing this bundled stuff that people really don’t care about. And only 18% are marketing worker quality.
Folwell: That’s so amazing. I didn’t realize that. That’s a great insight.
Daniel: Huge disparity, right?
Daniel: 80% of the buyers say, “Hey, we don’t care about anything else but worker quality.” And 80% of staffing agencies are like, “Hey, look what we can do. Oh, what, worker quality? Yeah, whatever.”
Folwell: We’ll get you the person in there the fastest. We just want the best quality. And you’re like, “Well, we’ll get them there the fastest.”
Daniel: So, what was interesting was, so when we read that, we thought, “Wow, here’s a great chance to be different, a great chance to stand out. I wonder what some of the staffing agencies are doing?” And so, staffing agency, quality people, staffing agency, quality worker, staffing…we did our own research. And what we found when we did find an agency that talked about quality, it was always subjective. We have better quality people because our people are better. What does that mean? I don’t understand what that means.
So, there was no quantitative data behind it. And so, we went on this quest. And it took us about a year. And we found every white paper case study, anything you could find that had been published related to worker quality. And we packaged it all up. And we put it out there and said, “You know what? There’s a lot of tools out here that people aren’t using that are two, three, four times more predictive on quality hires. I wonder why people aren’t doing it?” And what we found out was most of the people that get into staffing or get into HR, they kind of fall into it. Or you’re talking to an HR director and they didn’t go to school to be an HR director. They were an admin, or they were in customer service. They were the front desk person that now is all of a sudden handling the hiring. And they’re doing interviews like they were interviewed. They’re screening resumes.
Daniel: Yeah. They’re putting in this pile, “yes.” This pile, “no.” Doing that, doing that. Bringing them in, and asking five different applicants five different questions, and then trying to select which one wins. And they can’t figure out why they’re not getting quality people.
So, what we do is we go in and we talk to them about some of the other alternatives to that. And based on our discussion with them and our discovery process, we put together a customized X factor that could include a number of different things. It could be as simple as doing a structured interview and just temp-to-hire. And just temp-to-hire. You know just temp-to-hire produces twice the results of just a standard resume, unstructured interview? Just trying somebody for 90 days is twice as likely to predict the quality higher. So, even if they just did that, but you start adding a structured interview, maybe a work sample test or a personality profile that we talked about earlier, your quality scores and predictability go up dramatically.
Folwell: It makes complete sense. And I’ve seen that with our own company with that, no matter how many questions you ask or how well you ask questions, seeing how somebody works is ultimately what it comes to one of the most predictive ways of making sure you’ve got the right person. Do you guys with that, are you looking at outcomes for your customers then? Are you giving quality scores based off of all these measures, but you actually go backwards then and get quality-of-hire data and then….
Daniel: That would be great. That would require some great participation from our clients. I wish we were better at that. We probably need somebody that coordinated it. But no, we don’t go the full length. Ours is measured more by client satisfaction and testimonials, that kind of thing.
Folwell: But you’re standardizing the process, giving it a measurable…or making it objective, helping the client get to a spot where the likelihood of them having a higher quality is more than we’ve got right people.
Daniel: And to answer, so your original question on that was, one of the components of that X factor is a tool that, depending on how they answered, will provide a structured interview follow-up question for us and the client. So, let’s say they go through and one of the questions is, “David says that it’s okay to steal from your employer, and you marked ‘yes.’ Follow-up question is, so ‘David, when you said it was okay to steal from your employer occasionally, can you expand on that further?’” But it gives you the question to ask for each answer provided.
Folwell: That’s cool. Perfect.
Daniel: So, if I’m interviewing five people, I’m asking the same question to five different people, instead of 5 different questions to five different people.
Folwell: That makes complete sense. That’s really cool that you guys have implemented that. With that, I was going to jump over to the personal section of the interview. First question I’ve got for you is, what advice do you wish you were given before entering the staffing industry?
Daniel: Don’t do it. Oh, let’s see. We talked about training a lot. And I found it interesting. So, when I finally got into sales at Labor Ready, it was literally, “Okay. Hey, we’re going to go ahead and move you into sales,” period. Yeah. I was like, “Okay, I mean….”
Folwell: What does that mean?
Daniel: “What do I do? What’s your plan?” It was just like, just go get clients. And I had to figure it out. Now, subsequently, years later, they did quite an extensive overhaul on their training and flew people out to Tacoma, etc. So, I think they’ve long learned that lesson. But I think maybe before I got in the industry, was just to get on some kind of learning track, because there’s a lot of mom-and-pops out there that aren’t very sophisticated. And you were talking about some of the tools, not only with training but the technology stack, that we do right now, which includes the stuff that you guys do. That is going to be critical for people to compete in the long term. And I think that would be another bit of advice, which would be, “If you think you’re going to come in and sift resumes and work out of Excel and Salesforce.com and just sit around, you’re going to get outdated real quick and you’re going to get passed by real quick. This industry is converting very quickly into a lot of technology wrapping into the business.”
And I think I just saw an article. I don’t know if I cut it out. I read it on the plane. I thought it may have cut it out. Right here. But I think the average, small mom-and-pop has between six and nine technologies that they use, where enterprise is more 15, 16. And so, that’s one of the things that we try and do on the franchise side as well, is get small independent operators, even though their big USP is, “Hey, I’m local. How many times has a service person turned over in the last two years? I own this place. I’m not going anywhere. And the best part about me is I’m tapping into a larger resource, an enterprise system that’s going to give me all the tools of technology that the biggest players in the country have.” And if you want to be in this industry, you better be good at navigating some of the technology, because all the bigger players are doing it.
Folwell: I’ve seen that change in the last five to 10 years. It’s wild to see just going to the SIA conferences who’s exhibiting and the suppliers there. It’s changed in a lot more tech entering industry very rapidly.
Daniel: Yeah. Well, and the other turn you’ve seen, one of your earlier questions was some of the things that have changed on healthcare. But the other thing the big shift that has also occurred as you’ve seen is, back in the day if you had the clients, the people would come. Now, it’s the other way around. You have to be really good at getting the people in. And then if you have the people, you can get the clients because that’s what they want. They want the quality people. And so, you have to be good at coming up with different ways, different methods, using different technologies. Obviously, referrals. That’s obviously the number-one leading predictor of whether somebody sticks around or not, is through referrals. So, that’s all this kind of stuff that we’re tapping into and trying to get better at.
Folwell: That’s great. And in the last five years, what new belief, behavior, or habit has most improved your life?
Daniel: Belief? Gratitude. It all starts with gratitude.
Folwell: And how have you implemented that? Or what changes have you put into your life to make sure that you are focused on being…on gratitude?
Daniel: Just being cognizant of it there for a while, I would do three a day. I got this from one of my mentors, the little gratitude one, two, three. And you’re supposed to write on the cup. But I would keep it in an Excel spreadsheet. And the reason why I did that was the goal was to come up with three gratitudes a day and never duplicate. You don’t want…family, health, my business. Family, health, my business, that’s really easy to do.
When you put it in Excel, when you start typing, you start typing family, you’re going to know all I’ve already used that before. And so, that’s what I started doing. When you start getting hundreds deep, you have to really sit there and go, well, I’ve used family, I’ve used health, I’ve used business, I’ve used grateful for my pets and my dog and the weather. And you really have to start thinking, “What am I grateful for?” And when your mind can shift into that focus of, “Hey, I got to start looking for things to be grateful for,” it kind of changes your perspective, changes your personality. And it’s been a big improvement overall.
Folwell: That’s such a small nuance on…I’ve focused on the gratitude thing personally at different points in my career, different points in my life. And one of the things I’ve even had our team doing that consistently on our standups at one point. But one of the things that we always got stuck on was it was the same thing over and over and over, because it gets easy. And it’s like, well, it’s easy to say the same thing. So, that’s impressive to think about trying to make it something different and really expanding your thought about what you’re grateful for. That’s really cool.
Daniel: Yeah. When you start getting into you’re on number 1,000 and you’re trying to create something, you have to get really creative. And that’s kind of the point of it. It makes you think. Because you get, hurry, you’re doing your thing. It’s really just to come in there and put family, health, business, move on.
Folwell: I love that. What is the book or books you’ve given most as a gift, and why?
Daniel: The number-one I’ve given by far has been The E-Myth. That was kind of the propellant that, when we first started, that resonated with us. It made a lot of sense, Michael Gerber, going from that technician on. It was so good. Now, where we’re at today, the latest one has been Gino Whitman’s Traction, Rocket Fuel, anything to do with EOS, the Entrepreneur Operating System. We’re giving away Traction now to all our franchise owners. We just rolled out. We used to do so, it was E-Myth, then The 4 Disciplines of Execution. I used to give that one out a lot. And now, it’s Traction and The EOS System. And we rolled that out in January of this year. And we’re going to roll it out to our franchise owners at the franchise conference in September because it just hits on all cylinders. Really, I like the way it breaks everything down. It puts everything in 90-day rocks. And so, that’s going to be the one we give away here for the foreseeable future.
Folwell: That’s fantastic. We’ve also implemented Traction, EOS and our huge proponents of it. So, that’s really cool to hear. Last question I’ve got for you, and we’ll have closing comments, is just what failure or apparent failure has set you up for success later on in your career?
Daniel: Let’s see, what failure? It’s not that I’m trying to think of one. It’s that there’s been so many I’m trying to narrow it down, because probably we had an investor in 2010 when we bought the PEO and the payroll company on an investor. And this gentleman, very successful commodities trader, but what we learned was that was his life. He was used to being able to get in, get out, get in, get out, buy sell, buy low, sell high, in out, in out. And so, when you put his money in with us, it was literally, “Here’s the money, let’s buy the PEO. When do I start getting paid?” We’re like, “Whoa, this is a growing…we’re growing this.”
Folwell: In seven years.
Daniel: It’s not a dividend-type process. And he just couldn’t grasp that, that his money was going to be tied up for that. I don’t know where we got sideways on what our long-term vision was. But anyway, this gentleman caused me a lot of anguish and a lot of heartache. And man, we would get together and just clash. It wasn’t until the very, very end that I started looking at him in a different light. And again, back to the gratitude, I started looking at him more as a mirror than an opponent. And the anger that I saw when I looked to him was some of the issues that I needed to resolve. I thought he was a bully. I thought he was this. I thought he was this. And then, in self-reflection, I looked back and I thought, “You know what? That’s kind of the way I am.” And it really changed my perspective on how I was leading people, how I was talking to people.
And it was literally the moment I switched my mentality to, “You know what? I appreciate this guy for being in my life, for pointing these things out to me, so that I can get better.” Boom. We sold the business. He went his way. We went our way. I just saw him. Literally, I saw him down the street about a month ago, lunch. And he came over and said, “Hello.” Shook his hand, whatever. But man, during that period, that was a tough learning curve there. So, I don’t know this is necessarily failure, but it’s definitely a major struggle in my life, major heartache, major stress that really pivoted to the positive for the long term.
Folwell: I love your focus on perception and mindset, because I feel like that makes all the difference. So, that’s really a wonderful story about how to turn a challenge into an opportunity.
Daniel: If you change your question from, “Why is he or she doing this to me?” to “What am I here to learn?” your perspective on life will change overnight.
Folwell: This is great advice. Great advice. With that, Cary, any closing comments that you have for our audience today?
Daniel: I don’t think so. I think it was a great time to be in the staffing industry. I think we’re going to see more good than bad. I don’t think the industry’s going backwards anytime soon. I see more opportunity for us. And what we tell our potential franchise owners, the harder the administrations make it to be an employer, the better it is for us. And I certainly don’t see that going easier anytime soon. If we had the chance to do it, it would’ve happened at the last administration. And I think it’s just going to get more and more complex, which means more and more people are going to want to outsource it. So, it’s a good time to be in there. Stay focused. Keep growing. Stay on top of your technology. And keep riding it.
Folwell: Awesome. Well, thank you so much, Cary. Great insights today. Thanks for being on the show. I hope you have a great day.
Daniel: Thank you. I appreciate it.