Tomorrow I am heading out for a two week vacation and I am ready for it!

The last year has been very challenging, primarily because of our technology issues. We made the huge decision to move from our in-house core systems to an industry solution; we spent 4 months and half a million dollars converting from our old systems … and the new system bombed! We had to operate for eight months dragging that boat anchor of a system with us!!!

In September, after a compressed two month conversion we went live on Bullhorn … and suddenly we were back in the game. Two months later we are loving it … many thanks to Art, Barrie and their great team! While we still have work to do, our core systems are “singing and dancing” and the pressure tap has been lifted. We negotiated with our “boat anchor supplier” and they are now history as far as we are concerned.

The biggest problem when something major goes off the rails is that the management team focus is changed from where it should be to compensate for the problems. Now we are back on track and focusing on the right things! Its also a good time for me to take a break and charge the batteries before we execute on the next steps in our master plan!

I have now been blogging for almost two years and this blog has 415 entries … I guess that gives credibility to those people who think I talk a lot! During that time my goal has been to blog most business days and generally I have managed to keep that going, with just a few exceptions. I am not sure if I will be blogging “from the beach” but I will definitely be back the first week in December, so if you don’t hear from me before then … “Walk Fast and Smile”!

I had an interesting chat today with a young entrepreneur who is trying to take his company to the next level of growth. It is a small marketing and communications company with a number of individuals that have grouped together under one banner. In order to grow they feel that they need an injection of capital.

I am certainly no expert in this area, but whenever I have conversations like this it becomes apparent that after 11 years in business I certainly know more than a lot of people starting out. I relayed some of my experiences when starting Eagle, and talked about some situations that I had encountered along the way … all of which were cause for this person to think.

Here are some of the areas which seem to be a common “hurdle” or “news” to many people in that start-up phase:

1. Commitment. When asking people to invest in your venture one of the things investors inevitably will look for, is the level of commitment of the principals. Ideally investors want to see the principals so deep into this venture that failure is not an option! When we started Eagle we cashed in our RRSPs and remortgaged the house in order to have the capital needed. There is a lot of motivation in knowing that failure means starting over! I have had this conversation with many would-be entrepreneurs and it has caused several to reconsider. I don’t suggest that this is always the case, but I do believe it is the norm!

2. Talk Finance-speak! Most people starting companies are pretty good at their world, which in this case was marketing & communications, in Eagle’s case it was staffing. The person with the money wants to talk in terms of balance sheets and cash flow, projections and assets etc. It is critical that the entrepreneur can present their case in these terms. An eloquent sales presentation that talks about differentiators and messages, market share and technical superiority is probably also needed … but money guys like to talk about money. They want to know what you want and what you are offering as a return. The very first time I went to see a Venture Capitalist, when looking for financing to start Eagle, he asked me how much I was looking for … I didn’t know! Seems basic, but I’ll bet I’m not the only one who ever made that bone-head move!

3. Equity. Equity is a long term prospect, and investment money is needed up front. Sometimes there is an ability to give an investor an excellent return on their investment without having to give up too much, if any equity. My belief is that you should be sparing with the equity because as a company grows there will be plenty of opportunity to use equity as a lever to get in new blood, or merge operations with other companies etc. Of course if equity is needed to get the cash then do it!

4. The business plan. It really should be concise, but it should also encompass all of the key points of the business. I carried a little notebook with me for months and every time a new thought came I would jot it down … I still do! A business case can really demonstrate the depth of knowledge an entrepreneur has, which is comforting to investors.

5. Shareholder agreements. When the shareholders are also employees it is absolutely critical to ensure there is a clear division between their responsibilities as employees and their rights as owners. It would be very unfortunate for business discussions to be complicated by people playing the ownership card. I believe both roles need to be completely separate. I also believe that if an employee who is also an owner needs to leave the company by choice or otherwise then they should no longer be an owner. Shareholder agreements are a great topic of conversation but you need to get them right up front to avoid issues years later.

6. Leadership. The entrepreneur needs to instill confidence in any investors. In addition to all of the above they need to exude confidence and be very clear in their authority in the company. If an investor senses weakness in the leader then its not likely going to be a “horse” they will back.

I really enjoy chatting with new entrepreneurs but never have enough time for it! Starting a company is exciting, it is fulfilling, it is fraught with issues but the sense of achievement is a great feeling. Obviously it is not for the faint of heart but every now and then i meet someone who has what it takes, I think I met one today!

Recently Microsoft fired their CIO, Stuart Scott, very publicly and for “violation of company policies”. As can be expected rumours are abundant and speculation rampant about why. I have no interest in spreading those rumours or speculating, but I am interested in talking about the subject of getting fired.

Eagle has been in business for eleven years and during that time we have had to fire some people, and for various reasons. I would like to say that each time it has happened it was not a surprise, but sometimes it is! When that happens both parties have failed, (a) Eagle for not being clear about a person’s status and (b) the person because each of us is responsible for our own performance.

There are many ways to get fired, but in today’s environment with skills shortages, most companies try very hard to make it work. Having said that, my experience has been that it is very rare for someone to “surprise us” if we feel they are not going to make it. Hence the old management saying, “Hire slowly and fire fast!”

Here are some things (big rule violations) that are going to get you fired in a hurry:

1. HR violations related to discrimination, improper behaviour, aggressive behaviour etc.
2. Financial issues such as misuse of company funds, expenses, equipment etc.
3. Regular tardiness, missed days, cheating on time sheets etc.
4. Misuse of technology, surfing porn, using tech for personal purposes etc.
5. Insubordination, failure to follow direction from management.

While we have had a few people fall into the above categories, most people end up losing their jobs because they don’t perform to expectations.

Like any company Eagle has its way of doing things, its policies, procedures and corporate direction. Employees are expected to “buy in” to the “Eagle way” and work with the system to achieve our common goals. Input and suggestions are always welcome, but working against the system is not appreciated. When people are not “playing” with the team, AND are under performing then they are on a slippery slope. It always amazes me when we have these situations, surely the employee who is not delivering can see that if they “get on board” they have a far greater chance of success than “doing their own thing”.

This is probably the number one reason why people have been let go here. People who are under performing, and not “getting with the program”.

So … my advice to anyone joining a new company, struggling at their existing company or just wanting to get better, is to work with, and not against, your company processes … and master them. Once you are in that position (a) you have a far better chance of success and (b) you have the right to make suggestions for improvement.

I have no idea if any of this had anything to do with Stuart Scott but high profile firings are relatively rare and the event triggered these thoughts. Of course if you break the big rules you are toast anyway!

Today the deal was announced with IBM paying about $5 Billion for Cognos. There will be a number of reactions to the deal and it will be interesting to watch this play out.

I don’t think anyone was surprised that Cognos was bought, especially after the recent Business Objects deal with SAP, and the earlier Hyperion deal with Oracle.
I also don’t think that IBM was a big surprise, they have been named as a potential suitor at various points along with people like Microsoft, Oracle, HP and others. Certainly IBM is one of the big players in the software world with DB2 etc and the growth in the Business Intelligence market will help both their software and their services businesses.

There will be those people who “bemoan” the loss of Canada’s largest software company to a “foreign owner”.
There will be people in Ottawa who are concerned for their future … I expect that the core business will be a great asset to IBM, but what about the future of the finance department, the marketing, technical support, legal etc.
There will be people who are concerned about the fact that the big companies keep getting bigger, and the there becomes less choice in suppliers.

What is my take …

1. As a business owner my responsibility is to look after the interests of my shareholders and this deal provides the Cognos shareholders with approximately a 10% premium on the recent share price .
2. We operate in a global economy and IBM is a global company. Its Canadian arm employs a lot of Canadians and will continue to contribute to the Canadian economy. I don’t think this is necessary such a bad deal for a Canadian company.
3. I don’t think that Cognos could have remained independent in the face of its large competition and remained a viable player. This deal just ensures the future of its key product line.
4. There will be people who leave Cognos because of this deal … they don’t want to work for IBM; they don’t like change; they get a big payday with their shares/options; they get laid off … for whatever reason. Those people will bring value to the Ottawa economy as they integrate into other entities or as they create their own spin offs or start ups.
5. I am a little sad at a Canadian icon becoming a part of Big Blue, but that is an emotional response and not a business one. At the end of the day this is a good move for most!

I will not suggest for a moment that it is simple to succeed, however as the title suggests it is often the simple approach that works best.

Some points to consider …

1. The difference between winning and losing can be very small. In a race it can be fractions of a second; in a game it can be a “fluke” goal versus a missed opportunity; in business it might be a few dollars, or a few minutes or one person’s actions that make the difference.
2. When being chased in the wild by a grizzly bear you don’t need to be able to run faster than the bear … just the person who you are with! (a little humour)
3. It is often the salesperson who is “most focused” on their job who becomes the “top performer”. They don’t always work the longest hours but when they are working they are focused.

Success at any venture is within anyone’s grasp if they are very focused on that success. Here are a few tips to reach success:

1. Keep a detailed diary of everything you do in your workday, for a week. It could be a diary broken out into 15 minute segments, or it could be just a list of each task as you start and finish.
2. Analyse how you use your time. For each task ask yourself … did this task help me to be successful in my job? Could I have done this task more effectively? Would it make more sense for someone else to do this?
3. Look for time wasters. How often do you go for coffee, water, snack, washroom breaks etc? How long do you spend on these things? How often are you making personal calls or just chit chatting with colleagues? How many minutes over the course of a week could you recover?

If you spent every possible minute in in the week on a productive task that works towards personal success in your job then you would most likely be the most productive employee in your group! That would get noticed, lead to more success, promotions, increased income etc.

Most people don’t come to work … to work! They waste time in lots of ways, they do “make work” jobs, they chat with their friends and family, they go for endless coffees and waters taking their time in the process. They avoid the “heavy lifting” because it can be hard work … which of course is what they are paid to do.

There is a great sense of satisfaction in being productive, in getting a lot done and seeing the results. The simple way to reach that state is to focus on work … avoid the time wasters and just knuckle down. Try it … you might just discover that feeling of achievement, its cool!

Many years ago I received some sage advice from a lawyer friend of mine. I had been treated shabbily by a former employer and upon leaving the company they owed me quite a bit of money. I tried to talk to them about it and was ignored … so I went to see Dan.

His advice went something like this …

You have a good case, and most likely you will get a settlement. BUT … it will likely take a couple of years by the time it works its way through the courts, and the employer chooses to drag their heels. At the end they will likely offer to settle for something less than you are owed and you will have spent a good amount of money on lawyers in the meantime! That however isn’t the worst of it … for the next couple of years this black cloud will be hanging over you. My advice … write it off and get on with positive things in your life!

He was RIGHT! That is exactly what I did and it took a little while to get into the right frame of mind, but I had chosen to work for this company, I also chose to leave and they were the ones with the ethical issues … good riddance!

Fast forward maybe 15 years or so. Eagle contracted with a supplier to deliver a service a little more than a year ago. It has been a disaster, I have mentioned their customer service (or lack thereof) several times in various blog entries, they failed to deliver on so many fronts, they had a huge negative on Eagle’s productivity and we paid them close to half a million dollars over that time! The experience was unbelievable … they were unable or unwilling to address issues in any kind of timely manner and as mentioned in previous blogs their CEO even refused to answer my calls.

The good news … as far as Eagle is concerned is that they are now gone! We negotiated a mutual termination and I am not allowed to trash them … so I won’t mention their name. It is incredulous to me that a company can operate like these guys and stay in business, so I have no doubt that they hurt themselves every day.

Just a few words about the differences between our new supplier and our old supplier:

1. Our new supplier implemented our solution in 2 months with very little “touch up work” needed. The old supplier took 4 months and forced us to go live with major bugs, that were never fixed!
2. Our old suppliers CEO refused to take my calls … I spent time “partying” with all of the executive at the new supplier.
3. Our old supplier informed me that my point of contact into their company was the customer support centre … with our new guys I have great support at the very senior levels and they address anything quickly!
4. Our old guys took our cheque and disappeared into a black hole … the new guys had ever member of their management team who might possibly touch our account send me a message to introduce themselves.
5. Our old guys never delivered on their promises … our new guys always deliver!

Back to my original story … sometimes the best thing to do is to recognise that change is needed and move on. I would have loved to get a “pound of flesh” from these clowns, but at least i won’t have a black cloud to deal with and I have a new supplier that is GREAT!!!! At the end of the day I chose to buy from the old supplier and I chose to leave them … they are the ones with the ethical issues and good riddance!

My latest blog entries have focused on our industry … a couple of days ago I talked about its value, some time ago I laid out a staffing industry value proposition, yesterday I talked about the finances of an agency and not long ago I talked about the various stakeholders at play.

Today I want to focus on some of complications that arise when our clients get errant advice from the so called industry experts. The following are just some of the reactions …

1. Many agencies will bid “whatever is needed” just to “get on the supplier list”. This gives them access to orders which that may choose to work on them … or not! One executive at a competitor, talking about one of their largest clients told me, “When I get an email from XXX I just hit the delete button! The margins just aren’t worth it, but “other city” needs the business”.
2. Many agencies will work on the orders where they get the best return on their investment. If a client has low margins then the commission based employees of their staffing agency will focus elsewhere first … unless its an easy close.
3. The best candidates are likely to be presented where they will bring the agency the best return, so a low margin client may get lucky … IF no-one else is looking for that particular skill right now!
4. The rates paid to the contractors go up, because there is no incentive for the agencies to negotiate hard. The client does not save any money and the market rates go up generically.
5. Hiring managers get fed up dealing with non-performing agencies and find ways around the process. Rogue suppliers find their way back in to the account and they have (a) no restriction on their margins and (b) no mandated contract terms (which increases risk). This results in higher costs, as opposed to savings plus increased contractual risk.
6. Prime suppliers “farm out” tough orders to non-approved suppliers who get their regular (unregulated) margins and the prime supplier payrolls them, thus costing the client more than if they just paid regular margins to start.

It is a reality that staffing companies, like any company, will do what they need to survive and that does not always translate into what is good for the client. A win-win approach WILL result in best value for all concerned.

At the end of the day a client needs to strike the best balance between cost containment, risk containment and access to the resources they need. There are great solutions to achieve those goals but they involve a cooperative approach between agencies and clients … not a win-lose environment where clients dictate a perceived “best solution” to their agencies.

I have written a number of blog entries designed to educate people about our industry, its value and some of the misunderstandings people have. Recently I have been asked about the costs associated with operating a staffing agency and have actually seen supposed “experts” providing erroneous data to their clients.

One of our potential clients was incredulous that our margins were “exorbitantly high”. They were of the opinion, based upon input from their “experts” that we had no cost base and that our margins equated to profits. Unlike may industries the staffing industry operates with very low profits, both Statistics Canada and Staffing Industry Analysts have published papers showing that Staffing industry profits are in the 3 to 5% range.

So … if we have such exorbitant gross margins, how do we end up down at those kind of profits? First and foremost the “Cost of Sales” in the agency business is the cost of the contractor. Typically there is a mix of business between “regular” margin business and very low margin “payrolling” business, together they can drive overall company margins down into the mid teens. So 85% or more of revenues gets paid out to the consultants BEFORE the agency even receives payment from the client.

Keeping things very simple, working with 15% or so of revenues we now have Sales, General and Administrative costs to deal with followed by taxes.

1. Salaries … by far the largest cost to any agency is the salaries and bonuses of the staff. this includes sales people, recruiting staff, accounting staff, technology people, marketing, proposals, HR and administrative help. Anybody who runs a company today will tell you that salary costs go up every year, even when the client squeeze on margins gets tighter!
2. Infrastructure … like any company we need office space, technology, networks, phones, marketing costs, costs associated with proposals etc.
3. Financing … the agencies have a large “payroll” of consultants/temporary employees to fund each month and as we know clients have been pushing out payments such that net 45 day payments are becoming the norm and even 60 day payments are not rare. This requires the agency to finance the payroll costs.

Typical S,G&A costs might approximate between 10 and 15% of revenues depending upon the size and nature of the agency.

If we use 12% SG&A then our fictitious staffing agency has a net income before taxes of 3% of revenues. The taxman always like to get his piece of the pie and hence the end result to the shareholder is very skinny indeed!

Increases in interest rates, a recession, a lawsuit (frivolous or not) or loss of a key client can cause big issues when the profits are so slim. The staffing company owners are entrepreneurs who take on these risks and every time there is a recession we see many companies disappear.

If you are evaluating staffing companies and looking for best “value” then the best advice I can give you is to focus on what you pay for the contractors and temps, not on the margins of the staffing company. If you are paying the best price in the market why would you care about the agency markup, there are certainly no major agencies making out like bandits!

I have talked many times about this industry and the value that we bring to our clients and to the economy. The advantages of flexible labour are many and varied …

To the job seeker we provide:

1. flexibility in their schedule, important to many people for many different reasons;
2. opportunity for training whether it be in a new position, new industry or even for a first job;
3. the ability to gain supplemental income, important to students, lower income people, or those just wishing to be able to earn a few extra dollars;
4. for many we provide a bridge to a full-time position;
5. for many we provide a pay cheque, without which they could not pay their bills.

To the contract professional we provide:

1. access to jobs that are not available directly to the individual;
2. a means to maintain the independent lifestyle, while focusing on their core skills;
3. a fast way to get paid;
4. access to affordable insurance;
5. a pay cheque.

Staffing companies are governed by both Federal and provincial laws and as such meet and exceed guidelines for pay, work conditions and any other legal requirement. Temporary workers are not a disadvantaged group.

To the employer we provide:

1. flexibility to quickly adjust staffing levels to meet varying work loads;
2. access to key skills not otherwise readily available in the market place, whether it be contract resources, resources from other geographies or just scarce resources companies would not otherwise find;
3. a means to find, screen and hire new employees at every level.
4. risk mitigation when dealing with the issues around co-employment, intellectual property, insurance and any number of issues;
5. a means to bring in large numbers of temporary workers without all of the administrative headaches a large corporation would suffer doing it themselves.

I think that the value proposition is pretty compelling … and these are messages that our industry will be broadcasting wide and far.

According to the latest number from Statistics Canada (2004 numbers) our industry generates $7.2 billion in revenues. That means that we are a key contributor to Canada’s economy, providing work for tens of thousands of people, paying taxes into Fedetal and Provincial coffers, supporting charities, occupying office space and generally operating as good corporate citizens. How did that old saying go … Have you hugged a staffing professional today? (something like that anyway!)

This is my monthly very high level look at events in the ICT industry over the month of October. More details will be available at the Eagle website over the next day or two.

What was happening a year ago? In October 2006 there were no “blockbuster” M&A deals, although Oracle did pay $440 Million for Stellent and EMC paid $165 Million for Avamar. Both Oracle and EMC were active again in October 2007. Studies and reports released a year ago suggested that worker confidence was good, unemployment rates in Canada and the US were low and IT spending was relatively strong.

October 2007 was an interesting month in the M&A market with Oracle’s failed (for now) attempt to buy BEA, who felt the price was too low. Microsoft also valued Facebook at $15 billion when it took a minority stake for $204 million. SAP paid $6.8 billion for Business Objects in the latest BI move … is Cognos next? In what is a sure sign of convergence Nokia paid $8 billion for Navteq, a mapping software company. There were a lot of deals this month with IBM, Oracle, EMC, Google, Deloitte, Accenture, BT, McAfee, Adobe and others all active in the market.

Other than the M&A activity in October, a couple of surveys were interesting, Hudson show that IT workers are happier and more secure than ever and yet according to the US Conference Board CEO confidence is slipping. Bad news came to Canadian company NexInnovations which was forced to close its doors. Overall a busy M&A month, and not a lot of other technology news. The other big news in Canada was the Royalty Review in Alberta which targeted the Oil & Gas sector, which has been the driver of the hot Western economy for several years … the impact on the tech sector will be felt for some time to come.