Centralize Servicing, Thesis Paper Example

Executive Summary

The main idea of this business plan is based on the opening of a new personnel outsourcing agency “Staff Outsourcing”, that will provide services of staff leasing and outstaffing in Chicago, IL, and nearby areas. The agency will offer its services to small and medium-size developing companies situated in Chicago, IL.

The main vision of our company is that selecting and recruiting personnel is as much about the right job for the person, as it about the right person for the job. The motto of the agency is “We work for your success”.

The main long-term strategic mission of the agency is to become number one company on the market of personnel outsourcing companies for small and middle-size companies in Chicago, IL, region. This can be achieved trough the right positioning, professional services and personalized attitude toward all clients, and offering services at prices slightly lower than those of competitors.

Positioning of the agency will be based upon the slogan “smart hiring solutions for medium and growing businesses”. Such positioning will help to attract attention of the necessary market segments – small and medium-size companies operating their businesses primarily in the areas of FMCG, Advertising Industry, and Telecommunication.

According to the financial forecasts the break-even point will be achieved in the second quarter of agency’s operation, and the positive cumulative profit will be earned by the end of 2010. Thus all the financial investments will be returned in no more than two years. Although some financial risks are present, they can be easily avoided through the right management and direction of the agency.

Introduction

The main idea of this business plan is centered upon the creation of an absolutely new agency “Staff Outsourcing” that will provide professional services of outsourced human resources and personnel management for small and medium-size companies. The first office of the new company will be established in Chicago, IL.

Personnel outsourcing – deals with subcontracting a process of recruiting and hiring employees to a third-party company. In addition the third-party company becomes an official employer for these employees responsible for payroll, paying taxes to the government and executing some other personnel connected issues. In general, employees while working for a client-company will be officially hired by “Staff Outsourcing” agency. Personnel outsourcing is the performance of all or parts of functions on management of human resources of the company by third-party experts.

HR outsourcing consists of two parts:

• Staff leasing – the outsourcing company completes the process of searching and selecting necessary personnel for the client-company. Such personnel is then employed by the provider.
• Outstaffing – provider officially recruits some of the new employees for the client company. But in this case the client-companies find appropriate staff themselves.

The initial process of providing personnel outsourcing services has such a sequence of events: the outsourcing company will find a worker who meets the requirements of the client-company; this specialist would be hired by the outsourcing provider and effectively leased to the client-company to carry out some defined task (ex. it may be the replacement of the secretary, IT-specialist, accountant etc.)

“Staff Outsourcing” agency will start operating its business with providing recruiting, leasing, and outstaffing services to its clients, but as the agency will develop and grow it will start offering the services of personnel training and performance of administrative HR tasks.

The main advantage of staff outsourcing for the client-companies is that they can get professional personnel and free themselves from the problems related to human resources. Personnel outsourcing helps to improve financial indicators for companies with a limited headcount. In the conditions of the present economic crisis personnel outsourcing may help companies to save their staff and at the same time to reduce their budgeted expense items.

Overall Economic and Market Situation

Start up of the new personnel company has a number of benefits:

• no large launching capital requirements
• no need to hire a large team of workers
• no need for special equipment and premises
• no requirements to obtain special licenses

Two main problems that the business will front at the beginning of its operation are competition and the necessity to make a successful market entry and to attract initial clients.

Nowadays managers of companies realize that in order to compete they need to stay focused on strategic growth and building core services and products, but not on administrative tasks like payroll. Instead of hiring additional staff companies prefer to turn to outsourcing agencies. It helps them to save time, money and maximize their revenues. In addition, present crisis conditions stimulate employers to outstaff personnel in order to save the size of their professional employees’ team while cutting down the budget expense item for the personnel.

Corporate Culture

As our agency will be a newly established one there will be a need to build up corporate culture within the organization. The creation of such an agency doesn’t require a large initial staff, therefore there will be no more than 10 employees working in our office. Thus all employees of the agency will work as one team or even family, that’s why a democratic leadership style would be appropriate allowing synergy, creative and critical thinking, and understanding of a corporate mission by all employees.

Mission / Vision

The main mission of “Staff Outsourcing” is to provide professional services and personalized attitude to both our client-companies and to the job applicants. On one hand we will help companies to find employees and solve all HR connected issues; on the other hand we will provide job applicants with suitable for them jobs in stable companies with good reputation. The main vision of our company is that selecting and recruiting personnel is as much about the right job for the person, as it about the right person for the job. The motto of the agency is “We work for your success”.

Corporate Philosophy

As our agency will provide services for people, by people, and through people it is important to establish valuing people management philosophy. While providing our clients with highly professional services, we will also fulfill social mission of providing people with excellent employment opportunities.  Such corporate philosophy would be absolutely appropriate for a given business, as it is impossible to forget about moral and ethical aspects while dealing with people.

Customers

“Staff Outsourcing” will offer its services to small and medium-size companies operating their business in Chicago, IL., and nearby regions. For medium-size companies outsourcing services will be especially beneficial in the periods of temporary projects’ launching. For small and developing companies our services will be useful, because they’ll allow not hiring internal HR department.

Benefits of staff leasing and outstaffing for clients:

• High work efficiency with optimal staff expenses.
• Optimization of employees’ number in the company.
• Reduction / exclusion of expenses connected with staff firing at the end of the project term.
• Minimization of personnel recruiting costs.

The projected estimate of each service contribution to the profit of the agency:

Competition

As it has been written earlier the first office of “Staff Outsourcing” will be opened in Chicago, and that’s why it is important to analyze the competitive environment in Chicago. The competitive environment should be analyzed from two points: 1) competitive companies that provide staff recruiting services; 2) competitive companies that provide personnel outsourcing services.

• The major companies that provide staff recruiting services in our region are Robert Half International, Spherion Corp., Paige Personnel Service, Advanced Personnel Inc., the Quinn Company, etc.
• The major companies that provide personnel outsourcing and outstaffing services in Chicago and the nearby region are The Human Resource Store, HR Solutions, Cambridge Human Resource Group, FlexiCorps, etc.

At the primary stage of “Staff Outsourcing” creation and entry to the market, it would be difficult to compete with such stable and already known companies, that’s why the initial goal of the agency would be to attract and maintain first clients from among the small and medium-size companies that operate their businesses in Chicago, IL, region.  To do so the company will offer its services at a price a bit lower than that of competitors, plus our company will provide services of not only recruiting or outstaffing personnel, but of doing both.

Market projections

According to the International Association of Outsourcing Professionals one of the key outsourcing trends for 2009 is that personnel outsourcing will become more domestic, thus companies will be looking for necessary personnel in the areas nearby to their offices and production plants. Outsourcing spending in all business activities has continued to climb at 10% to 20% for the last decade – in good economic times or bad. The economic crisis will force a lot of personnel outsourcing companies to quite the market while the demand for these service swill stay the same or even increase, which gives a great opportunity for “Staff Outsourcing” to successfully enter the market.

Market Segmentation

The market for personnel outsourcing can be broken into two parts: the business market segment and the employee market segment. There are three major business market segments available:

• Large Multinational Corporations. Such companies have their own HR Departments within their offices, but still they subcontract third-party companies to help them in recruiting and training of personnel. Additionally, they usually outstaff part of their employees, especially when dealing with representative offices in other countries.
• Medium-size Companies. Such companies also usually have their own HR Departments, but they need third-party providers to help them in executing the search of personnel to fill in their temporary and permanent positions, they take advantage of personnel leasing and outstaffing for temporary projects that require highly professional specialists for temporary job.
• Small Companies. Such companies don’t usually have their own HR Departments, so they need services provided by the personnel outsourcing companies to deal with all HR connected issues while they can focus on the growth of their business.

Employee market segment includes all the specialists in business connected areas who are searching for a job in Chicago, IL, and nearby areas.

Targeting

“Staff Outsourcing” will target its services to both the business market segment and the employee market segment. In case of the employee market segment we’re interested in specialists of business related areas (accounting, HR, sales, marketing, etc.) searching for a job in Chicago and its surrounding areas.

In the case of the business market segment we will direct our marketing activities to meet two specific segments:

• The medium-size companies. For such clients we will offer services of personnel leasing and outsourcing.
• Small-size companies. For such clients we will offer the whole range of HR related services – selection of personnel, personnel leasing, help to comply with state and federal employment laws and management of employer risks and obligations.

Dealing with these two business market segments in the zone of our primary attention will be companies operating their activities in the segments of FMCG, Telecommunications, and Advertising Industry.

Positioning for competitive advantage

To position its services “Staff Outsourcing” will use a differentiated marketing strategy, meaning that differentiated approaches will be used to get different target segments.

Mission – become number one company on the market of personnel outsourcing companies for small and middle-size companies in Chicago, IL, region.

Brand positioning – should be clear, unique and differentiating from competitive companies for both segments – client-companies and employees: “smart hiring solutions for medium and growing businesses”

Objectives:

• Short-term objective/focus:
• stimulate service trial among small and medium-size businesses, with further possibility of long term contracting
• Long-term objectives/focus:
• Retention of long-term medium-size clients
• Short term hiring for small businesses

Product:

Services of professional personnel recruiting and outsourcing.

Place:

Company’s place should be an office located in the downtown of Chicago, which should be easily reached from any other city part. Office should be big enough, and have premium look to prove company’s successful position on the market.

Price:

The price for hiring staff should be average on the market, to ensure avoiding damping situations and unfair competition.

The price of personnel recruiting for the client-company depends on the period of time for which the specialist will be engaged in leasing.

1. For the period of 3 months – 30% of two monthly salaries of an employee.
2. For the period of 6 month – 60% of two monthly salaries of an employee.
3. For the period over 6 months – 2 monthly salaries of an employee.

The cost of leasing and outstaffing is based on the monthly / hour salary of an employee and all deductions to the budget provided by the legislation.

Promotion:

Channels for promotion of “Staff Outsourcing” were selected based on company’s need to have very targeted communication in specialized places, and low cost per contact due to low ad budget during the company’s start up period. Due to this the following channels where selected:

Internet:

• Specialized web resources for vacancies and CVs placement.

Print:

• Editions which have specialized sections for vacancies placement. It would help to generate recall which would be used to create candidates’ database.
• HR magazines, which usually place statistics relevant for HR people in middle sized companies. It would help to attract attention of potential Clients, and stimulated credibility among them.
• Business Magazines which are specialized in economics and politics overviews. Placement of ads in such editions will prove company’s status, and stimulate interest and credibility around our company.

Employment fairs:

• Will stimulate awareness about the company, and will generate additional candidates to place in our candidates’ database.

Budgeting, Forecasting, and Tracking Progress

According to the forecast positive cumulative profit could be achieved by the end of Sep 2010, when all investments would be covered.

Control

• In case of not reaching positive net profit by the 5^th month of agency’s presence on the market, general strategy and direction should be changed.
• In case of not reaching positive profit during the first quarter mentioned above, it is recommended not to proceed with staff board increase, in order to ensure that profit level is normal
• In case of not fulfilling business’ Key Performance Indicators (KPI) by the hired staff, it is recommended to recruit a new person to ensure positive indexes.

Possible risks

• Instable currency rate in the period of the world crisis.
• KPI’s for personnel could not be achieved on the planned level

Summary

The idea of creation and opening of a new agency for providing services of personnel outsourcing is very attractive from several points of view. First of all, such business doesn’t require large initial investments both financial and non-financial. Secondly, due to the world’s economic and financial crisis the demand for such services will stay the same or will even increase while competition will decrease. And thirdly, according to the financial forecast positive cumulative profit would be reached by September 2010, and thus the return of investments will be achieved in no more than 2 years. Therefore a conclusion may be drawn that creation of a new personnel outsourcing agency is a worthy investment.

References

International Association of Outsourcing Professionals. (2008, August). General Information on the Outsourcing Industry. Retrieved May 27, 2009, form http://www.outsourcingprofessional.org/content/23/196/1428/

International Association of Outsourcing Professionals. (2009, January). Top Outsourcing Trends for 2009. Retrieved May 27, 2009, from http://www.outsourcingprofessional.org/content/23/196/1428/

Fuller, C. W. (1997). Key Performance Indicators. Benchmarking: An International Journal, 4 (3), 165-174.

Ganapati, P. (2005). HR Outsourcing Costs Going Down. Retrieved May 27, 2009, from http://www.inc.com/news/articles/200503/hroutsourcing.html

Whalen, C. (2008). HR Outsourcing – Balancing the Value Equation. Retrieved May 27, 2009, from http://www.articlesbase.com/article-tags/hr-outsourcing

Rothman, J. (2003). 11 Steps to Successful Outsourcing: A Contrarian View. Retrieved May 28, 2009 from http://www.computerworld.com

Bardhan, A. D., & Kroll, C. (2003). The New Wave of Outsourcing. FCREUE Quarterly Report.

Holcomb, T. R., & Hitt, M. A. (2007). Toward a Model of Strategic Outsourcing. Journal of Operations Management, 25 (2), 464-481.

List of Local Companies. HR Outsourcing Chicago IL. Retrieved May 28, 2009 from http://articles.directorym.com/HR_Outsourcing_Chicago_IL-r800269-Chicago_IL.html#800269-Chicago_IL_1 Manual of the American Psychological Association (5^th Edition).