Burger King was starving for a new staffing recipe. Hunger sated.
By Russ Banham
Back in the late 1990s when he was a consultant in the strategy formulation practice at Accenture, Patrick Beharelle happened to read The Service Profit Chain. He subsequently met its author, James L. Heskett, and the two of them spent the better part of a day together. Although he didn’t realize it at the time, the experience would shape the rest of his business career.
Today, Beharelle (pronounced Burr-ell) is the CEO of PeopleScout, a Chicago-based recruitment process outsourcing (RPO) services provider that presents a somewhat atypical value proposition to prospective clients. In large part, the proposition is drawn from the philosophy of Heskett—now the Baker Foundation Professor, Emeritus at the Graduate School of Business Administration at Harvard University—and the key tenets of his best-selling book from more than a decade ago. “The things he said and wrote just resonated with me,” Beharelle explains. “They trumped all other key measures of success.”
The trump card in this case was the relationship between employee loyalty, satisfaction, and productivity, on the one hand, and customer loyalty and satisfaction, on the other. When this relationship blooms, revenues and profits blossom. Based on five years of research, Heskett evaluated several major companies such as Southwest Airlines, Banc One, and Taco Bell, and came away convinced that satisfied customers contribute to employee satisfaction and vice versa.
Given his consulting background, Beharelle has slightly amended The Service Profit Chain to suit the parameters of an RPO engagement. According to his satisfaction metrics, PeopleScout has more fans than Justin Bieber. For three years running, the firm has maintained a 100 percent client retention rate and 100 percent positive client referrals, plus more than 80 percent of clients have expanded their project scope in the last 12 months. On a 5.0 scale, overall client satisfaction as measured by a third party organization was scored at 4.7, and it has exceeded 98 percent of client service level agreements (SLAs) in the past year.
That’s just client satisfaction—half of Heskett’s paradigm for success. The other half, employee satisfaction, is along the same lines—not surprising given the $20,000 bonuses Beharelle hands out like taffy for jobs well done. “It’s not a trivial amount of money folks receive here for extraordinary service—not like $500 for a nice dinner with the family,” he quips. “We wanted to create a program outside the normal bonus for an RPO firm, and we budget for it at the beginning of the year. Rather than link the bonus to financial performance metrics like other firms do, we link it instead to client satisfaction surveys and attainment of the SLAs.”
As for the progeny of this employee satisfaction–client satisfaction relationship—solid revenues and profits—Beharelle touts a 103 percent top-line growth rate at PeopleScout, year over year. “I think we’ve hit on something pretty profound here,” he says. “I really do.”
Jose Tomas would not disagree. Chief people officer at Burger King Corp., and the Miami-based restaurant empire’s president of Latin America and the Caribbean, Tomas struck a three-year contract with Beharelle for 800 store management hires per year just a few months before 3G Capital acquired the company for $3.3 billion late last year. 3G Capital, a New York-based private equity firm, took Burger King private when the deal closed, then set about to alter its culture. “While we still have values here like work being bold, accountable, empowered, and fun, 3G added a fifth value—the concept of meritocracy,” Tomas says. “It’s a pay-for-performance culture that means you get paid for what you deliver and not on your tenure here.”
He elaborates that Burger King’s employee performance evaluation and measurement standards have changed to address the completion of stretch goals and other deliverables. “Also, we’re evaluating employees each quarter now, rather than annually,” he adds. “All this was completely new.”
Serendipitously, Burger King’s newly meritocratic employment culture jibed quite nicely with the philosophy in place at its recently engaged RPO provider. The two companies had signed a deal initially calling for PeopleScout to help Burger King’s human resources group develop a methodology for hiring district managers and restaurant managers, and then seeing this through to the candidate selection process. Previous to the engagement, Burger King’s field human resources managers did all the sourcing, screening, selection, and onboarding of the management positions, which absorbed undue time and effort.
“In our industry, there tends to be a lot of turnover—on the order of 25 percent annually—so our people were constantly out there looking to hire replacements,” Tomas explains. “We brought in PeopleScout to assist the field teams in their recruiting efforts. They’re the ones focused on recruitment, with a goal of developing and implementing systems and job candidate selection tools to reduce turnover.”
After the 3G acquisition, PeopleScout’s mission was enlarged to help the HR organization address the cultural shift in employment practices. “The first thing we asked them to do was to focus on hiring recent college graduates, bringing them in with no restaurant experience and then developing this talent, putting them through field rotations,” says Tomas. “They created the models to partner with specific universities and handled this ‘soup to nuts,’ ultimately presenting us high-level candidates for the selection process. At the end of the day, we hired 50 recent college grads to serve as management trainees.”
A newer charge for the RPO firm is recruiting and hiring a slim, new layer of management that heretofore did not exist—experienced business coaches for the field operation. These fulltime positions are part of Burger King’s cultural transformation under 3G Capital, a liaison of sorts between Burger King as the franchisor and its franchisee restaurant managers. The new coaches’ focus is to assist managers by guiding them toward enhanced sales and profitability and improved overall operations.
All that was fine and well for Burger King, but the fast-food company gave PeopleScout 60 days to hire 160 business coaches—all across the country. Here’s where the RPO provider’s emphasis on Heskett’s relationship-based delivery model truly bore fruit.
Typically, PeopleScout overstaffs its RPO teams by 30 percent to provide superior customer service. Obviously, this causes some financial pain, given the additional labor costs and their impact on margins. But Beharelle doesn’t wince at the prospect of premature financial discomfort to reap greater gains in the future. “Business relationships get cemented because of early impressions, which are formed very quickly,” he says. “Besides, most of the surprises happen in the first six months of an engagement anyway, with volumes more or less than expected. Having extra arms and legs in this early period ultimately pays dividends long term.”
As it turned out, though, even with a 30 percent increase in worker appendages, more limbs would be needed to fulfill Burger King’s hiring desires. Tomas concurs that he tossed a plateful of needs at PeopleScout. “This was something on our radar screen that we all of a sudden asked them to handle, post-acquisition,” he says.
This is where PeopleScout’s scalability proved its merit, as it has for other clients. “The account manager scaled up his team to deal with the onslaught of work in a matter of a week,” says Beharelle. “It was a real heroic effort—for which he later received a tidy bonus, incidentally. The client, meanwhile, ended up engaging us in a multiyear contract.”
Happy account manager, happy client, more business—see?
People Make the Difference
It’s not the first time PeopleScout had its hands full. “We just did an engagement where we were supposed to receive 150 requisitions to work on during a 90-day window, and when we got to the ‘live’ date, instead of 150 we received 330,” Beharelle notes. “It was 100 percent larger than we initially thought. We overstaffed by our usual 30 percent, but that still left us short.” Needless to say, employees are putting in whatever hours are needed to make the client smile.
One can suggest that PeopleScout is putting the “human” back into human resources. Certainly, Beharelle has a soft spot for his associates and the employees of the companies that the firm serves. Indeed, PeopleScout makes firm commitments in writing to prospective clients that it will go beyond the pale in serving them, to “provide an exceptional experience to your candidates and staff.”
This is one of 10 commitments that it signs off on with “partners,” its preferred term for clients. Others include: “We will be accountable to you—when we make a mistake, you should expect to be ‘wowed’ on recovery”; “We will be honest with you in all dealings”; and “We will have a formal contingency plan in place for volume spikes, scope expansions, and unexpected team attrition.” The latter, as the reader already has been informed, is a commitment the RPO provider has made good on more than once.
Of course, the firm’s value proposition begins with its own staff. Without their satisfaction, Heskett’s concept stumbles; they will become less productive and loyal, customers will suffer, and revenues and profits will slide. Three years ago, when Beharelle arrived at The Seaton Corp., the parent company of PeopleScout, as its chief executive (he also claims the CEO title at the firm’s StudentScout and Staff Management subsidiaries), “things were not doing so well,” he confesses. “What became apparent to me was that much of the RPO industry was driven by the talent of employees, who were working directly with the client. They were the linchpin of success in the RPO engagement, yet few companies recognized it.”
His first objective, he says, was to “work with our management teams, spending a lot of time and energy around how to get more talented, loyal operations directors. If you have the wrong person in this role, there aren’t enough hours in the day to dig out of the mess you’ll fall into.”
Beharelle hired nine highly experienced operations directors over the course of the next few months. These individuals, in turn, built what he calls a “pipeline of talent” at PeopleScout, leveraging those individuals already receiving a paycheck from the firm. “We started with a foundation of ‘Let’s develop talented, satisfied, and loyal employees to deliver world-class RPO services to our clients, and the net result will be improved client satisfaction and loyalty,’ ” he explains. “This then will lead to higher levels of client loyalty, more renewals and project expansion, and more and better referrals, resulting in a market-leading position.”
The relationship-based delivery model was off and running. An early client partner was Gerdau, a major global producer and supplier of specialty steel, with more than 45,000 employees worldwide. Claudia Pires, director of organizational development in the Tampa, Florida office of the Brazilian company, says Gerdau senior management had just put the finishing touches on a strategic plan seeking greater efficiency by centralizing staffing functions. “We had two ways to go—outsourcing or doing this internally,” she explains. “We decided to go for a full-scope, 100 percent RPO engagement. We didn’t have the experience to do this in-house, and PeopleScout had the experience we needed.”
Like other clients of the firm, Pires was impressed by the level of customer service. “We needed them to be flexible insofar as adapting their technology to suit our systems,” she comments. “They said, `Just give us x number of days to come back to you with a solution,’ which was fine with us. They rallied their troops, visited our sites to learn our process and speak our `language,’ and then trained their people to fit our culture. All this happened from the get-go. When we asked the same things of the four other vendors who had responded to our RFPs, none were open to it.”
Proof in the Pudding
Okay, so lots of RPO providers emphasize client satisfaction and are willing to go the extra mile and promise results beyond expectations. But unlike many, the PeopleScout delivery model results in clients that are, indeed, highly satisfied with its performance—hence those beguiling satisfaction metrics.
Just how happy is Burger King, for instance? Well, the company conducted a survey of its hiring managers, in which it asked them to rate the quality of the candidates PeopleScout had shepherded their way. The survey (actually separate surveys of each hiring manager) is conducted within 30 days after a person is hired. As Beharelle sees it, “Usually within 30 days, you know if you have a good hire or not.” Since the engagement started, the aggregate results indicate that 88 percent of hiring managers had considered the new hires an “upgrade.”
Tomas says he was not surprised by the survey results. “It goes back to the core—to acquire talented people you need talented recruiters,” he explains. “For our team previously, recruiting was a part-time job. For PeopleScout, this is fulltime. Their whole purpose is to provide us with seasoned recruiters who know what they’re doing, who then spend quality time sourcing, screening, and presenting the best candidates in the marketplace.”
He adds, “That’s the beauty of RPO. For me to staff up and down to recruit people when we need them makes no sense. For them, being scalable and flexible to deliver quality candidates is everything.”
Pires agrees that flexibility and scalability is a PeopleScout strength. “We recently expanded the scope of our original engagement with them to do college recruitment, not knowing they had this expertise initially,” she says. “We’re only six months into the engagement, and they’ve already filled 70 percent of the positions we opened with them. It’s always a learning process on both sides, but we’re very satisfied so far.”
Down the line, Tomas expects more opportunities to leverage the skills of PeopleScout people. “We will have other jobs in the field they might be able to get involved in,” he says. “From a change management standpoint, they’re helping us out tremendously.
They’ve already helped our district managers and area directors to understand the kinds of people they should be looking for—if they happen to contact them by phone or email or even walk in the door. They’ve been coached on the right selection methodology, the profile that we are looking for. Frankly, having them at hand is like having an extension of our HR recruiting team. We couldn’t be more pleased.”
As for the commitments that PeopleScout signs and promises to all its clients, Tomas says they’ve made good on all 10 of them. “When we give feedback, they change on a dime for us,” he maintains. “Had we not done the RFP and found them as our RPO provider, we’d be in trouble right now. We’re hiring more people today than we’ve hired in a long time. I didn’t have the staffing levels or expertise here to accomplish what we’ve accomplished.”
Tomas doesn’t come right out and say it, but one senses he believes he’s cut a whopper of a deal.