Two Brothers, Two Methods

SCM-102
February 11, 2019

SID M O H A S SE B
HA S S A AN K H AL I D
DI V Y A S A T H Y A N A R A Y A N A N
Two Brothers, Two Methods:

“Happiness Index” vs. “Data & Analytics”
S
itting on his parked boat in the Newport Harbor in California, Rajat Khurana—Chief Executive
Officer of West Coast Consulting (WCC)—recalled the challenges he faced right after the mega
recession of 2008. “I was fearful of our future, questioning the level of risk we took to grow, unsure
of the financial challenges and the very personal impacts,” Rajat admitted.
WCC managed to survive the economic downturn, courtesy of Rajat’s operating philosophy of
putting people’s happiness over profits. He believed that his decision to focus on the happiness of
everyone within the ecosystem helped his company survive the economic ebbs and flows and continue
to grow. “We prioritized the happiness of our employees, clients and consulting talents over margins
and it paid off. Our approach was to ensure that employees do what they enjoy doing. People are more
productive when they are happy with their work,” noted Rajat.
Located about 2,600 miles away, on the east coast, was ARK Solutions run by Rajat’s younger
brother, Anuj Khurana. ARK was not only in a different time zone, but also had a completely different
way of doing business than WCC. ARK’s leadership approach emphasized process, automation,
workflow management and hard metrics to evaluate the employee performance and achieve service
excellence.
Two profitable companies, WCC and ARK, were

started by successful sibling entrepreneurs a few years
apart. Operating in the Information Technology (IT)
staff augmentation industry, both companies had
common missions, facilities, markets, and teams. WCC
and ARK enjoyed relatively mature process control,
workflow management tools, and operating key
performance indicators (KPIs). However, the companies
had contrasting operating philosophies and execution
approaches. WCC formulated an informal qualitative
factor—called the ‘Happiness Index’—to measure success, whereas ARK adopted a concrete performance
criterion to assess achievements of the organization and individuals. Two profitable companies—with
almost identical average net profits over the past decade—led by two brothers, broadly in the same
business, were competing with two different operating philosophies while sharing the same overseas
facilities. Faced with an industry in massive flux, Rajat had to make one key decision for his company’s
future: should happiness remain the key indicator of success or should he embrace his sibling’s approach
of focusing on measurable KPIs?
This document is authorized for educator review use only by Shameem S, Great Lakes Institute of Management (GLIM) until Sep 2023. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
SCM-102 Two Brothers, Two Approaches: “Happiness Index” vs. “Data &
Analytics”
WCC & ARK: The Beginnings

After working for five years as a technology consultant, Rajat started his entrepreneurial journey by
launching WCC in 1998. Building on his own experience, he focused on IT staff augmentation and
consulting; recruited qualified programmers for clients’ Information Technology (IT) projects; and
provided on- and offshore support. In 2005, he expanded his operations by opening an office in New
Delhi, the capital of India, the country from which he had emigrated more than a decade before.
Faced with execution and market challenges over the years, Rajat evolved his personal and
company philosophy to center around mutual trust with employees and clients. He had one central
performance theme of happiness delivered to clients, employees, and himself. This became his
benchmark of success. Rajat reasoned:
I have always believed in very little process control and did not advocate centralized
systems. I encouraged employees to use the tools and approaches that made them
happy, but also helped them achieve the broader business goals. First, our clients
and our people have to be happy. Only then great bottom line can be realized.
At WCC, hard key performance indicators (KPIs) were few and far in between. Management priorities
were usually established by managers rather than top level executives. Moreover, technology systems
and applications were not the strong back bone of the processes.
Anuj completed his MBA from Monash University in Australia and had consulting stints at Ernst &
Young and KPMG before starting ARK Solutions in 2003. Unlike his brother, Anuj believed in improving
outcomes through measurement and learning. Throughout his entrepreneurial journey, he focused on
building systems across every aspect of his company’s operation to facilitate insight gathering,
consistency of performance, and building the “ARK Way.” “It is an approach supported by elaborate
training programs, monitored and enhanced through measurement, and performance feedback loops,”
Anuj explained.
The Competitive Arena: Staffing Industry at a Glance

Staff augmentation, a sub-industry within the broader $150 billion 1 strong US staffing industry,
accounted for 20 to 25% of the overall market 2 (around $32 billion in 2015) which included recruitment,
outsourcing, and augmentation. Companies involved in recruitment helped clients find permanent
employment candidates for a fee. Outsourcing organizations served their clients by using third-party
offshore teams to accomplish specific tasks that were generally more economical to be performed by
contracted cheap labor. Staff augmentation firms (providers) aimed to fill a gap between permanent
recruitment and offshoring.
Before engaging a provider, companies (clients) had to decide whether to recruit permanently for
the position or to explore an alternative solution such as staff augmentation or outsourcing. Clients
first assessed the skills required, expected timelines and the proposed budget. This led to the creation
of the “requirement” - a clear description of client’s needs. If permanent placement was not viable from
a timing perspective or due to other considerations, and complete outsourcing was not desired, they
reached out to staff augmentation firms to identify matching talent for the position locally. These
Professor Sid Mohasseb, Adjunct Professor of Data Sciences & Operations at USC Marshall Business School; Hassaan Khalid,
Data Scientist; and Case Fellow Divya Sathyanarayanan prepared this case. This case was developed from field research
and published sources. Cases are developed solely as the basis for class discussion and are not intended to serve as endorsements,
sources of primary data or illustrations of effective or ineffective management.
Copyright © 2019 Lloyd Greif Center for Entrepreneurial Studies, Marshall School of Business, University of Southern
California. For information about Greif Center cases, please contact us at greifcases@marshall.usc.edu. This publication
may not be digitized, photocopied, or otherwise reproduced, posted or transmitted without the permission of The Lloyd Greif
Center for Entrepreneurial Studies.
Two Brothers, Two Approaches: “Happiness Index” vs. “Data & Analytics” SCM-102
candidates were based in the US and remained an employee of the staff augmentation company while
serving clients on a limited time basis (see Exhibit 1 for characteristics of different types of staffing
practices).
Following the recession in 2008, the overall staffing industry grew every year, usually exceeding the
rate of overall GDP growth in the US (see Exhibit 2 for staffing industry annual historical revenues).
The staff augmentation sub-industry historically moved in tandem with the economy and the overall
staffing industry (see Exhibit 3 for staff augmentation market size and Exhibit 4 for comparison of
staff augmentation sub-industry with the overall staffing industry).
With over 40 IT staffing companies, including staff augmentation firms, breaking the $100 million
annual revenue mark in 20151, the staffing industry was becoming competitive and fragmented. When
faced with a recession, the staffing industry experienced heavy decline in demand and downward pricing
pressure (see Exhibit 5 for industry perceptions during financial crisis), whereas talent shortages drove
premium pricing during strong economic conditions (see Exhibit 6 for premium pricing during
strong economic conditions).
The Massive “Niche”: The IT Staff Augmentation Industry

A subset of the broader staffing industry, Information Technology (IT) staff augmentation faced
multiple dramatic change cycles in technology, programming languages, and applications (including,
big data, cloud computing, processing speeds and Internet of Things (IoT)) over the past decade. In
2015, staff augmentation for IT based functions and related projects accounted for half of the staff
augmentation market at approximately $15 to $20 billion.1
Clients, Providers and Margins

Overall, IT staffing organizations (the providers) historically realized net profit margins between
4% and 10%.3 However, IT staff augmentation firms had lower margins.4 While some attributed this
tendency to competitive pressures among the providers, others claimed that comparative low cost of
offshoring was a likely factor causing pressure on margins. A complex process, staff augmentation
often involved multiple players in a single project. Even if a staff augmentation firm was hired directly
by the client, multiple players still existed. Usually, the clients formed a relationship with a larger well-
established player who offered a wide range of staffing services. These providers secured talents or
resources from one or many staff augmentation suppliers in order to deliver the project or satisfy the
client’s broader staffing needs. This resulted in further margin squeeze since the contracting firm shared
the fees paid by the client and protected its own margins. Clients generally aimed to work with a single
provider—or very few providers—who were responsible for managing subcontractors; they were often
unaware of the layers involved.
Qualifications and Decision Drivers

Regardless of the provider, talent and contracting layers, the client had to deliberate various factors
when deciding between an IT staff augmentation partner or permanent recruitment options. The factors
included5:
 Ability to retain/hire to meet the workload requirements within an acceptable time frame.
 Extent of needs to staff a project vs. the availability of the right talent in-house.
 Flexibility level of staff needs based on stages of the project/corporate initiative.
 Skillsets available vs. specialized capabilities critical to success but hard to acquire.
 Protections needed to preserve Intellectual Property (IP) & retain project/functional control.
If a company decided to augment its staff by engaging an external company, a wide range of providers
were available. Once committed to choosing a staff augmentation partner, companies (clients)
primarily considered the following factors6:
 Availability of the sought-after skill and quantity available with the provider.
 The provider’s ability to offer resources at the skill and experience level desired.
3
Analytics”
 If the project required on-site work, as most staff augmentation projects did, the capability of
the supplier to provide resources at the client’s work location.
 Understanding if the provider recruited from within their own workforce or subcontracted from
other organizations.
 Cost of recruiting must be comparable or less than hiring a full-time employee or going for an
outsourced solution. The difference had to be justified with execution or business advantages.
 Companies usually preferred using their own contract templates to allow for greater
flexibility. Suppliers who allowed that were preferred over those who did not.
Players and Market Shares

Given the rapid pace of change in technology, IT staffing needs constantly evolved. As new
technologies gained ubiquity, talent pools became tighter and companies started ramping up their
workforce, resulting in talent shortages. This market dynamic provided both a challenge in consistent
service delivery and an opportunity for new entrants.
Project and technology characteristics also drove some level of specialization amongst the players,
including local, state and federal government providers, “corp to corp” providers (subcontracting to
bigger players), managed service provider support (serving entities that enjoyed client technology and
outsourcing contracts) and direct to client providers.
Based on the combination of revenue and brand awareness, the top ten IT Staff Augmentation
entities made up close to 30% of total market share in 2016 (see Exhibit 7 for market share of top 10
staff augmentation firms and Exhibit 8 for top 10 staff augmentation companies). Most players in this
elite group included subsidiaries of larger staffing companies that provided diverse staffing services.
Larger players were mostly global in both talent acquisition and service delivery. An examination of
revenue versus employee base revealed a very wide range of revenue/employee performance levels, thus
indicating a lack of consistent reporting.
Talented “Employees” vs. “Talents” as Products

“Base” Employees – Finding & Delivering Talents
Base employees were those involved in running and/or supporting the operation from the
corporate office as well as managing and recruiting activities. The table below depicts the base
employee roles and geographical distribution of WCC employees.
Location of Base
Category & Broad Function Composition
Employees
Client managers responsible for capturing

project requirements, communicating with 25% to 30% of total base
California HQ clients, and managing recruiters in India as they employees
identified talents
Recruiters worked with US-based client

managers and identified the talent 80% to 85% of Indian base
(consultant) needed as they worked on client employees
opportunities or requirements
India Facilities
Administrative support which included human

15% to 20% of Indian base
resources, accounting, IT, and other support
employees
staff (shared with ARK)
WCC followed a strong “promote-within” philosophy. Close to 50% of the US recruitment/client

service managers came to the US after receiving a promotion in India. According to Rajat, this
philosophy ensured strong bonds between the employees in India and the US. “WCC, as compared to
the industry, enjoys a strong employee retention,” he noted.
The organization structure was rather flat, having minimal levels, with almost everyone directly
reporting to the CEO. The only exception was a vice president—a possible successor—who supervised a
few managers. Each manager led a recruiting team of three to five members working from India. The
teams operated under a modified metrics organizational model, with India’s operations (floor)
manager and facilities director managing workload and providing administrative and human resource
performance evaluation support. All delivery and work directions were provided by managers based in
the US. While the CEO did not interfere in operations and recruitment efforts, he fully controlled all
strategic and investment decisions, as well as financial matters.
Although client relationship managers in the US provided the same client services like those in the
Indian office, they were given a wide range of titles. Recruiters in India had the same title regardless of
seniority. “Elimination of various organizational levels reduced office politics,” reasoned Rajat.
According to some of the managers, various attempts to adhere to a conventional and rigid structure
were not fruitful. Rajat claimed that employee compensation provided by WCC in India was noticeably
higher than the local market, in order to attract more qualified individuals and retain them (see Exhibit
9 for compensation practices of WCC and ARK in India). The company believed that people were loyal
to the industry, and not a specific employer, and aimed to leverage that loyalty and industry experience
in its new hires. WCC generally targeted more experienced candidates who would then be given the
freedom to use their experience and personalized approach to achieve optimum productivity. WCC did
not have a very structured training program to onboard staff or show them a specific way they should
approach talent search, recruitment or negotiate compensation fees (see Exhibit 10 for impact of
training on employee performance and Exhibit 11 for comparison of employee tenures at WCC and
ARK).
“I didn’t want people to work for me. I wanted them to work for themselves and we constantly remind
the staff to work for their own future,” said Rajat. At WCC, there was a great deal of emphasis on
mutual trust and limited individual monitoring and control. “The company stayed with people through
tough times, if they saw people were working hard,” said one of the employees.
ARK trained new employees to meet the job demands and deliver value the “ARK WAY.” It had a
flat organization structure with well-defined roles and job descriptions. ARK’s “base” employees were
distributed in the US (Virginia) and India. The table below depicts the base employee roles and
geographical distribution.
Location of Base Employees Category & Broad Function Composition
Client managers, Executives, and

Virginia HQ 20% to 25% of total base employees
Recruiters
Client managers, Executives, and

45% to 50% of total base employees
Recruiters
India Facilities Administrative support which included

human resources, accounting, drivers
20% to 25% Indian base employees
and IT support, and was shared with
WCC
Analytics”
ARK offered an extensive library of training videos to help staff with their continuing education.
Training videos covered a wide range of topics, including talent search approaches, effective web
exploration methods, telephone etiquette and conversation effectiveness, pricing and conversation
negotiation, etc. According to Anuj, the company’s turnover rate was in line with industry averages—
ranging between 15% to 18%. ARK hired less experienced recruiters but paid them close to market rate
and trained them heavily during the initial one week on-boarding process. Anuj emphasized that the
company focused on the role played in service delivery (e.g. was the new employee a direct client
interface manager or behind the scene recruiter who searched for the engineering talent) versus the
geographical location (whether in India or the US). “Our emphasis has been on training, learning, and
measurement in order to achieve consistent performance and quality outcomes,” said Anuj.
Commission payments were aligned with WCC. However, ARK offered additional targeted rewards for
its employees based on clear performance KPIs. Both WCC and ARK provided transportation services
(pick-up and drop-off) along with perks common to technology employees in India.
Talents: Fulfilling Client Requirements

Contractors and employees were referred to as “talents.” They were recruited and secured to serve
on client projects. They fell into four broad categories:
 Employees receiving a W-2: W-2 is an official wage and tax statement sent by an
employer to the worker and the Internal Revenue Service (IRS) at the end of each year.
Employees receiving W-2 were hired by WCC and then placed on client engagements at a
negotiated rate. WCC provided these consultants with full benefits and had a dedicated
human resource team that helped them with their employment needs. Depending on market
demand, this group accounted for around 30% to 35% of all deployed consultants. This
group also included H1-B foreign workers (with a three to five-year tenure), mostly
sourced from India, as well as US permanent residents and citizens. A non-immigrant
work visa, H- 1B, has enabled US companies to recruit workers in specialty occupations
that require special technical expertise in fields such as: engineering, science, medicine,
architecture, etc. In contrast with WCC, 50% of ARK’s talent/consultant population fell in
this category. According to Anuj, long-term engagements and contracts led to a higher
level of W-2 employees. ARK’s consultants had an expected tenure of 2 to 2.5 years with
H1-B visa holders enjoying a longer tenure.
 Direct contractors: These non-employee independent contractors were placed on an
engagement with a brand client by WCC and were 1099’d at the year’s end. Like the
employee who received W-2 wage and tax statement, independent contractors received a
1099 tax form detailing their earnings. These consultants did not qualify for benefits.
Depending on client needs, this group accounted for around 25% to 30% of all deployed
consultants at WCC. These consultants were based in the US and enjoyed a valid work
permit as a US citizen or permanent resident. In the case of ARK, the remaining 50% of
the talent/consultant population were direct contractors.
 Indirect contractors: These consultants were subcontracted from other staff
augmentation agencies and placed on engagements with clients. Depending on the demand,
this group accounted for around 30% to 35% of all deployed consultants for WCC. These
consultants were US-based permanent residents or citizens and sometimes included H1-B
visa holders supported by other agencies. ARK, in contrast, did not employ indirect
contractors.
 Overseas talent and employees: These were employees or consultants based in India
who worked on client engagements, usually being managed by the client or its agent from
the US. Their work has been often referred to as “outsourced” as opposed to staff
augmentation. WCC historically, depending on specific client needs, provided such
outsourcing services. However, it has not been a major strategic focus for the company . On
the other hand, ARK did not focus on this category of employees.
Unlike WCC, which did not have a formal performance review process, ARK developed a rigorous
process of evaluating talents and/or consultants by seeking structured client feedback as well as formal
performance evaluation discussions. These reviews resulted in compensation adjustments and/or
disciplinary actions.
Coping with Client Needs and Industry Trends

WCC, like every other IT staff augmentation firm, had to constantly look for “relevant” talent that
fit the client “requirements.” Due to this market dynamic, WCC had refrained from choosing any particular
technology or platform specialization. Although the company maintained a database of over 35,000
qualified candidates, which was constantly refreshed and added to, there was no formal process of
getting ahead of the demand—recruiting and on-boarding consultants before a specific requirement
was secured. On the contrary, ARK developed a large resume depository—close to 1.5 million (with
over 200,000 passing a first qualification level)—by a constant deployment of web-crawlers and
automated search techniques.
The overall industry maturity or technology enhancement cycles drove the majority of talent
requirements. More market activity and capital investments led to a greater number of projects and
initiatives, which in turn increased the need for talent. New regulations and frequent innovations in
business models necessitated different mixes of employees and, hence, different hiring methods. At
WCC in 2006, the financial sector, conventional retail, and manufacturing industries were driving the
requirements. Ten years later, this shifted to an emphasis on e-commerce. The company’s revenue was
split between “corp to corp,” third party subcontracting, and direct client relationships. WCC mainly
served non-government entities located on the west coast of the US. ARK, on the other hand, focused on
long term direct engagements for corporations and state government clients. Managed Service
Providers—companies mostly located overseas that take on various IT related tasks, including service
and maintenance based on long term contracts—were also served as a primary focus. Only 10% to 15%
of ARK’s revenue was generated from 3rd party/subcontracting relationships.
At WCC, average client relationships ranged from five to 15 years. Individual engagement and
talent assignments averaged from nine to eighteen months with each client and about 10% to 15% of
projects lasted three years or longer. The average length of client relationships at ARK was estimated
to be around six years.
Client requirements handled by WCC fell into two categories: 10 to 15% in the “legacy” bucket -- older
than 20-year technology (such as older versions of software platforms and operating systems or
programing languages that are no longer commonly used) – and, the remaining 85 to 90% was
composed of newer technologies. Client needs handled by the company were mostly focused on software
or application development with particular concentration on Oracle, .NET, JAVA, mobile applications,
data analytics, Hadoop and leading-edge technologies used by Silicon Valley clients. In contrast, the
talent to technology focus for ARK included SAP, data warehousing, mainframe and cloud migration,
as well as application development in Dot Net and Java.
Two Companies, Two Business Styles, One Shared Facility

WCC employees operated from two high-end facilities in India: an office in Delhi and a newly
opened office space in the city of Noida, about 16 miles away from India’s capital (See Exhibit 12 for
Indian office). Offices were equipped with remote cameras and monitoring capabilities were available
for the US team. In the US, “base” employees of WCC operated—for the most part—from a facility in
Irvine, California. Consultants (talents) were spread across the United States and were often based at
client locations and/or worked remotely.
The two Indian facilities were shared by WCC and ARK, where employees from both companies
worked side by side. “Employees from both companies sat together, ate together, celebrated together,
and had the same general functional mission of recruiting and placing candidates, but operated and
accomplished the objectives differently,” said Munish Gandhi, WCC’s India operations manager. Based
in Virginia’s Reston City, ARK’s consultants in the US operated remotely or from the client site.
Analytics”
A Source of Divergence: Technology Choices

WCC made use of a wide range of independent tools. With the exception of the 11-year-old home-
grown ERP (Enterprise Resource Planning) system (SPARC = Sales Pipeline And Resource Capture), a
host of tools ranging from third-party recruiting software to personalized Google spreadsheets were used
at the discretion of individuals or teams. “SPARC was a leading-edge software with the alerts and triggers
required to operate efficiently when built. But after 11 years it was falling far behind times,” noted
Rajat. But he believed that, for a company the size of his, SPARC was still serving its purpose.
According to Rajat, there were two types of consultants in the staff augmentation industry: 1) smaller
entities who maintained relationships and 2) larger players who were transactional. He felt that human
relationships, not the tools, brought sustainability and growth.
The diversity of technologies used and the lack of standardization was a result of the independence
given to employees to use tools they were more comfortable with and focus on outcomes. The home-
grown ERP system was admittedly slow and not responsive to the workflow of activities. However,
“SPARC was a labor of love” as Rajat explained it. The tool was used at two key steps in the process: 1)
as a depository of qualified submissions (talent bios and details) and, 2) as a depository of contracts and
reference of deployed consultants.
While WCC had access to an automated call monitoring and tracking system, over time, the firm
had eliminated its consistent use for performance measurement purposes as telephone
communications were believed to be less effective. The use of email and text communication in
recruiting had far surpassed telephone. On the client side, use of Vendor Management (VM) systems—
particularly by the larger clients—to house talent requirements had changed the communication
dynamics. More automated controlled communications replaced unstructured verbal communications
and email exchanges. The transition brought the need for process change, forcing client relationship
managers to work with a whole host of client VM systems to access and process requirements. This was
a shift from entering all requirements into a centralized system for processing and prioritization. In
general, Rajat believed “more technology did not translate to better results and therefore major
investment in sub- optimally used tools should not be a company priority.”
As with their operating philosophies, WCC and ARK CEO’s had contrasting views on technology
and its role in their business. ARK had created and deployed a sophisticated and cross-connected
series of automated performance management solutions. The third-party ERP platform, JobDiva, was
used to capture requirements centrally, assign priorities, allocate them to recruiters, and submit for
interviews. ARK also utilized customized tools for pricing that sat on more than thirty spreadsheets
and allowed the recruiters to negotiate pricing with candidates based on various scenarios driven by
clients, benefits offered, or by type of employment (e.g., 1099 vs. W2). In contrast, WCC utilized broad
guidelines for pricing and allowed recruiters to negotiate.
Utilizing a SharePoint platform, ARK developed an interactive solution for tracking contracts. The
system offered an alert system which delivered insight on contract performance time frames,
consultant assignment, status and background. It also provided clear audit trails including resumes,
backgrounds, rates, etc. “Systems like these are not built for productivity. They are built to reduce
subjective opinions and facilitate learning with a side effect of productivity enhancement,” explained
Anuj.
ARK utilized the automated call tracking system, shared with WCC at the Indian facility, and had
developed metrics connecting call out volumes with bounce backs to measure conversation effectiveness
and outcome factors. The volume of “call backs” as compared to “call outs” reflected the effectiveness
of the recruiter’s message to get the candidate (potential talent / consultant) engaged in first or follow-
up conversation. Additional automation capabilities included API cross connectivity with client VMs to
extract requirements and avoid manual work, as well as web-scraping and automated extraction of
resumes—from a whole host of online locations —to build and update the depository of candidates. On
the client sales management front, ARK utilized Salesforce CRM tools. The company had in place a well-
defined color-coded system of priorities across its sales funnel, that allowed for controlled and targeted
outreach as well as account intelligence capture at pre- and post-sales levels.
8
Delivered & Realized: Value & Results

WCC: “Human-centric”
The basic value delivery activities in staff augmentation industry included:
 Capturing the requirement,

 Finding the right talent,
 Ensuring the correct fit and, lastly,
 Executing the contract and securing talent relationship.
There were other administrative functions like accounting and human resources, but the
uniqueness of each player in this industry lay in the details of their value chain and value delivery.
These processes reduced the time taken for candidate identification by ensuring candidate quality and
job fit, willingness of the candidates to work with the recruiting company, period of exclusiveness
offered by clients, and margins (see Exhibit 13 for WCC’s value delivery chain).
WCC’s requirement managers/directors had a wide range of individualized processes. They were
responsible for working with their assigned clients and captured and analyzed talent requirements,
sometimes on a daily basis for very involved projects. Each manager led a team of three to five recruiters
in India who were focused on talent requirements. The priorities were defined by each manager based
on an informal and experience-driven feel for “likelihood of close,” based on the client’s:
 Budget availability,
 Complexity of the talent request,
 Immediacy,
 Competitiveness,
 Location,
 Duration of engagement,
 Rates, and
 Margin.
The format for submissions to clients was standardized. However, the process of identification of
candidates and the subsequent communications was not standardized amongst the various recruiters.
Different recruiters used different technologies to manage the process at their choosing. Managers
generally trained people on their preferred process and tools, ranging from third party cloud-based
recruiting tools to collaborative Google spreadsheets. Since teams often had mistargeted skillsets or
overly demanding work requirements, the India operations manager coordinated the assignments or
re- assignments on a daily basis. Although recruiters received some formal training when they joined
WCC and had access to pre-approved recruitment websites, there were no formal or consistent
processes followed. Each recruiter essentially followed his or her own personalized method to locate,
reach out and negotiate rates with candidates.
The “requirement to contract” process was often time sensitive. Requirements were often
competitive among different staffing providers and talent availability was constantly in flux. WCC’s key
metrics—measured by senior management/owner—included submission of candidate names, number
of contracts issued (closed) as well as number of people billable at any time, and the duration of
contracts. Although managers and recruiters could track and utilize various performance KPIs within
their various teams companywide, the list of monitored KPIs was rather limited.
All WCC recruiters were located in India. Recruiters were responsible for searching and identifying
qualified talents against client requirements. They had similar performance targets: submission of two
candidate names related to a specific requirement that was approved by management or ten submissions
per week. Recruiters identified talent through referrals as well as internet searches and followed-up
through email, text or telephone (see Exhibit 14 for ratio of incoming and outgoing calls and duration
comparisons as a proxy for performance).
Analytics”
For WCC, the overarching philosophy was that success began with effort and that should be the
cornerstone of performance measurement. The Happiness Index was only qualitative and not
measured in any structured manner. “This is a ‘human’-centric business all around: from clients to
recruiters to candidates,” said Sachin Kaushal, WCC’s vice president of sales and business
development. The Happiness Index was neither a measurement of client or employee satisfaction nor
was it linked to any particular process output. The anticipated consequence of high Happiness Index was
low employee turnover and longevity, performance consistency, team cohesiveness, and perception of
reduced stress. According to Rajat, WCC cared about data, analytics and automation, but not at the
cost of lower employee happiness and higher attrition. For him, both client relationship and employee
retention were important.
ARK: Focused on “Data Analytics & Automation

ARK’s value chain—although at first glance looked similar to that of WCC—was different in many
ways:
 Roles, not geography, defined activities in the US and India,

 Progress was guided by a centralized workflow system,
 Pricing was guided by structured tools with pre-developed logic
 Priorities followed a standardized scheme and,
 Pre-defined performance criteria at various stages of requirements captured submission;
interview and contracting revealed performance, shortfalls and improvement
opportunities.
For ARK, every step of the process was measured, and every individual had access to performance
dashboards (see Exhibit 15 for ARK’s value delivery chain). Goals included: submission coverage (the
number of requirements addressed and the number of candidates submitted for that position to the
client), margins, time elements, pricing and negotiation effectiveness, response rates, submission to
interview (number of candidates submitted for review by clients that were actually chosen to be
interviewed), hire ratios, and outbound and inbound call activity with candidates. “We have been a
bottom line company. To succeed and grow, we had to first be a viable business at every granular
level,” reasoned Anuj. “The performance evaluation system was intended to inform management about
employees’ effort, proactiveness, assignment complexities and timely delivery, and overall productivity.”
The company also employed various KPIs to measure client, consultant (talent), and “base” employee
satisfaction.
According to Anuj, systems were designed to identify shortcomings and escalate for resolution. He
opined that 90% of issues that were elevated to this level were substantial and only 10% were
redirected back to the project team. “I had to take the blame for any major client issue and protect the
team from hits,” he said.
Structured vs. Unstructured Sales and Marketing

WCC enjoyed a less structured sales process. As CEO, Rajat took charge of building new
relationships. The relationship managers constantly aimed to service existing clients and identified
new opportunities within current ones. Opportunities were tracked individually, and an automated
centralized CRM system was not utilized. There was no formal outreach or cold calling programs in
place.
ARK, on the other hand, had an established sales team and structure. Corporate sales people were
responsible for driving external outreach (cold calling and new client frontier explorations) and
relationship expansion (finding more fruitful ground and opportunities within current client
organizations). An automated CRM system was used to prioritize discussions and help elevate sales
conversations using a classic sales funnel approach.
One Common Dilemma: An Industry in Flux

As new technologies and business models became even more critical to global businesses, during
the second decade of the 2000’s, various old operating philosophies and industry assumptions were
10
challenged. By 2016, the IT staff augmentation industry was experiencing massive change. Constant
technology evolution resulted in increased activity in the staffing market. Finding the right talent with
the right expertise at the right time became increasingly difficult. Utilization of a diverse global talent
pool posed concerns about cultural fit and performance expectations for both clients and the
providers. Talent suppliers faced competition from artificial intelligence (AI) powered automated
systems. Additionally, the industry experienced commoditization as it moved from a “consulting”
mode to a generic “contracting” mode. Margins were constantly negatively impacted, challenging the
old business models.
Even though WCC and ARK had different operating philosophies, both companies constantly faced
similar industry-driven challenges. Some of the key challenges facing the lead executives of WCC and
ARK were:
o Pace of change
 Change of technology was impacting talent inventory.
 Client expectations of skills went beyond immediate projects as clients were constantly
looking at the next conversion or connectivity to other technologies.
 Newer technologies promised shorter implementation cycles, potentially leading to shorter
term projects and talent hiring requirements. Long term contracts helped consultants earn
better margins.
o Cultures and performance

 The repetitive nature of the recruiting business impacted the efforts to maintain staff
motivation.
 Cultural pushbacks to the demanding performance environment in India, and mismatch
between the US-trained executives and front-line delivery/recruiting staff in India.
 Client to candidate cultural fit assessment to ensure longevity of contract and client
satisfaction.
o Volumes and margin

 Volume did not drive profitability. Each job position could demand a specific rate and
required provider time investments to fill. Variable costing was a major contributing factor
in targeting and selecting candidates.
 Coping with various possible “failure points” in the process. Expectation mismatches
(corporate HR vs. project managers), unfillable skill searches, automated system rejections,
budget fluctuations, Vendor Management automated system controls, provider
prioritization ineffectiveness, talent shortages, rate mismatches, speed of response by
talent, interview breakdown, client unavailability, project elimination, etc.
 “Mis-representation” led to unrecoverable time spent on identifying candidates. Applicant
mis-representation of background and capabilities intended to increase probability of an
interview, but ended up wasting the time of HR professionals as they sought to verify skills
and ensure fit.
o The broader transition

 Clients expected talents to be ready to start work without any additional training on
technologies, solutions and platforms—in more of a commodity form than specialized
expertise.
 The industry was transitioning from “consulting” to “contracting.”
 Automated systems drove decisions and relationships were consolidating.
Ultimately, the sibling-entrepreneurs had to decide the future direction of their companies and
embrace new strategies to navigate the storms ahead, with or without their unique operating
philosophies. Change looked inevitable.
11
Analytics”
Exhibit 1: Comparative Summary of the Key Characteristics of Various Staffing Practices
Characteristic Staff Augmentation Outsourcing Recruitment
Formality of contract Frequently low Normally formal Formal

(or none at all)
Longer client wide – shorter
Long
Length of engagement Typically, shorter for specific
(normally 2 to 5 years)
(months) positions
Short (days) – with terms
Time to engage
Short (days) Long (months / years) for post-employment of
/disengage
introduced candidates
None post search
completion – search often
Number of suppliers Many One or two
completed by one
company
Activity Managed by Supplier Client

Client
Can be either on site or
Location of staff Within client office
Within client office off site
Measurement of success Service level agreement Individual search outcome

Individual project tasks
Entire service provider A firm mostly closely
Individual contractors company or a focused coordinate by HR dept
Service Provider
employed by contracting division or team of the based on a focused
firm same position.
% of salary after
Pricing Mostly Fixed fee onboarding / with some
Time and Materials
search fees
Right to hire supplier’s staff
Infrequently NA
Occasionally
Co-employment concerns No No
Possible
Flexibility Low Low

High
Overall program Strategic Strategic

Tactical
Source: A Practical Guide to Staff Augmentation and Outsourcing, by Christine B. Tayntor5
12
Exhibit 2: Staffing Industry Annual Historical Revenues
Staffing Industry Revenue

160 150
148
140
140 132
126
120 113 116 114
112
104
100
Sales (USD billion)
100 92
79 80 81
80
60
40
20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Statista
Exhibit 3: Staff Augmentation Market Size

Staff Augmentation Market
35,000.00
30,000.00
US Dollars in Million
25,000.00
20,000.00
15,000.00
10,000.00
5,000.00
-
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Estimated Market Size
Source: Statista & Yahoo Finance
Note: Based on total market projections, the staff augmentation estimates have been calculated using estimated market share for
professional staffing agency Kforce.
13
Analytics”
Exhibit 4: Comparison of Staff Augmentation with Overall Staffing Industry
Estimated Staff Augmentation and Staffing Industry Market Sizes

160,000.00 30.0%
140,000.00 25.0%
US Dollars in Million
120,000.00 20.0%
100,000.00 15.0%
80,000.00 10.0%
60,000.00 5.0%
40,000.00 0.0%
20,000.00
-
2007200820092010 2011 2013201420152016
Year
Staff Augmentation Subindustry Percentage Estimated Staff Augmentation Market Size

Staffing Industry Market Size
Source: Dunn & Bradstreet and Statista
Exhibit 5: Industry Perceptions During Financial Crisis
In the next six months, do you plan to request rate reductions from your IT staffing suppliers?
28%
Top 10 companies Rest of the industry
72%
Source: Forrester Research report on ‘IT Staff Augmentation Trends: Hourly Rates for Key IT Positions’
14
Exhibit 6: Premium Pricing During Strong Economic Conditions
How much of a premium would you pay for high-demand skills like virtualization,
cloud computing, SAP, Oracle, .Net, IT security, JAVA/J2EE, or SharePoint?
30%
% of Surveyed Client Respondents
25%
20%
15%
10%
5%
0%
5% 10% 15% 20% 25% 30% >35%
Premium Pricing Percentage Tolerated by Clients
Source: Forrester Research report on ‘IT Staff Augmentation Trends: Companies Set their Sights on 5% - 10% Reductions’
Exhibit 7: Market Share of Top 10 Staff Augmentation Firms

Market Share of Top 10 Staff Augmentation Firms
28%
Top 10 companies Rest of the industry
72%
Source: Dunn & Bradstreet, Hoover Library and Statista
15
Analytics”
Exhibit 8: Top 10 Staff Augmentation Companies
 Teksystems
 Insight Global
 Modis
 Randstad
 Experis
 Kforce
 Judge Group
 Yoh IT
 Vaco
 Harvey Nash
Source: Dunn & Bradstreet’s Hoovers Library
Exhibit 9: Compensation Practices of WCC and ARK in India
Average “Base” Employees Salary (Non admin)
Normalized Values (INDIAN RUPEE)

Current Employees (Still Employed)
Starting Salary Present Salary
ARK 51,544 56,233
WCC 54,027 60,821
Former Employees (No Longer Employed)

ARK 51,501 54,604
WCC 53,667 55,458
Source: WCC & ARK
16
Exhibit 10: Impact and Influence of Training on Candidate Submission
Source: WCC & ARK
Exhibit 11: Comparison of Employee Tenures at WCC and ARK
Based on Representative Sample

Average Employee Tenure (in Days)
No Longer Working Still Working at
Department at Company Company
ARK 315 Days 430 Days
WCC 360 Days 563 Days
ource: WCC & ARK
17
Analytics”
Exhibit 12: Indian Office
Source: WCC
18
Exhibit 13: WCC’s Value Delivery Chain
Source: WCC
19
Analytics”
Exhibit 14: Ratio of Incoming to Outgoing Calls
Source: WCC & Ark Solutions
20
Exhibit 15: ARK’s Value Delivery Chain
Source: ARK
Endnotes
1
“List ranks largest IT staffing firms in us by revenue,” Staffing Industry Analysts, July 18, 2016,
https://www2.staffingindustry.com/site/Editorial/Daily-News/List-ranks-largest-IT-staffing-firms-in-US-by-
revenue-38639
2
Calculated on a pro-rated basis of K-Force income statement and market share
3
Entrepreneur Press and Krista Turner, “How to Price Your Staffing Services,” Entrepreneur, June 12, 2014,
https://www.entrepreneur.com/article/234665
4
Based on profit figures of market leaders from Dunn & Bradstreet’s Hoover’s library
5
Tayntor, Christine B. “A Practical Guide to Staff Augmentation and Outsourcing, Information Systems
Management (2001): 84-91. https://doi.org/10.1201/1078/43194.18.1.20010101/31268.10
6
Huntley, Helen. “Ten Best Practices When Using External Staff Augmentation, Contractor or Temporary IT
Resources, Gartner, October 2013, https://www.gartner.com/doc/2608117/best-practices-using-external-staff
21

Two Brothers, Two Methods

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Two Brothers, Two Methods

Uploaded by

Copyright:

Available Formats

SCM-102

February 11, 2019

Two Brothers, Two Methods:

Two profitable companies, WCC and ARK, were

WCC & ARK: The Beginnings

The Competitive Arena: Staffing Industry at a Glance

The Massive “Niche”: The IT Staff Augmentation Industry

Clients, Providers and Margins

Qualifications and Decision Drivers

Players and Market Shares

Talented “Employees” vs. “Talents” as Products

Client managers responsible for capturing

Recruiters worked with US-based client

Administrative support which included human

WCC followed a strong “promote-within” philosophy. Close to 50% of the US recruitment/client

Location of Base Employees Category & Broad Function Composition

Client managers, Executives, and

Client managers, Executives, and

India Facilities Administrative support which included

Talents: Fulfilling Client Requirements

Coping with Client Needs and Industry Trends

Two Companies, Two Business Styles, One Shared Facility

A Source of Divergence: Technology Choices

Delivered & Realized: Value & Results

 Capturing the requirement,

ARK: Focused on “Data Analytics & Automation

 Roles, not geography, defined activities in the US and India,

Structured vs. Unstructured Sales and Marketing

One Common Dilemma: An Industry in Flux

o Cultures and performance

o Volumes and margin

o The broader transition

Characteristic Staff Augmentation Outsourcing Recruitment

Formality of contract Frequently low Normally formal Formal

Activity Managed by Supplier Client

Measurement of success Service level agreement Individual search outcome

Flexibility Low Low

Overall program Strategic Strategic

Exhibit 2: Staffing Industry Annual Historical Revenues

Staffing Industry Revenue

Exhibit 3: Staff Augmentation Market Size

Estimated Market Size

Source: Statista & Yahoo Finance

Estimated Staff Augmentation and Staffing Industry Market Sizes

Staff Augmentation Subindustry Percentage Estimated Staff Augmentation Market Size

Source: Dunn & Bradstreet and Statista

Exhibit 5: Industry Perceptions During Financial Crisis

Top 10 companies Rest of the industry

Exhibit 6: Premium Pricing During Strong Economic Conditions

5% 10% 15% 20% 25% 30% >35%

Premium Pricing Percentage Tolerated by Clients

Exhibit 7: Market Share of Top 10 Staff Augmentation Firms

Top 10 companies Rest of the industry

Source: Dunn & Bradstreet, Hoover Library and Statista

Source: Dunn & Bradstreet’s Hoovers Library

Exhibit 9: Compensation Practices of WCC and ARK in India

Average “Base” Employees Salary (Non admin)

Normalized Values (INDIAN RUPEE)

Former Employees (No Longer Employed)

Exhibit 10: Impact and Influence of Training on Candidate Submission

Source: WCC & ARK

Exhibit 11: Comparison of Employee Tenures at WCC and ARK

Based on Representative Sample

ARK 315 Days 430 Days