Forced to Face the Web

Change Web

A year and a half ago, David Dunkel blew up his company. Now he's attempting to reassemble the fragments and to remake them into something that is faster, smarter -- and totally Webified. Whether he and his executive team succeed will depend entirely on their ability to navigate a chastened dotcom world, where speed and innovation alone no longer guarantee success. As Dunkel's experience shows, big ideas are great -- but success depends on crisp and reliable execution.

Dunkel is chairman and CEO of kforce.com, the Web-based reincarnation of a staffing-services powerhouse formerly called Romac International. Kforce trades in the new economy's hottest commodity: high-end human capital. Working out of more than 100 offices across the country, kforce's 2,300 recruiters seek out free agents and job hunters -- most of whom are specialists in either information technology or finance and accounting -- and match them with employers, who in turn pay a commission on each hire.

As the battle for tech-savvy talent intensified in the mid-1990s, Romac (which didn't become kforce until January 2000) went on a growth streak. Revenues for the Tampa, Florida-based company, which went public in 1995, swelled from $46 million that year to $746 million in 1999. (The latter figure incorporates revenues from Source Services, another staffing firm, which merged with Romac in 1998.) But at the peak of its success, Romac was blindsided by the Web.

Dunkel, 46, who joined Romac in 1980 and became CEO in 1994, is a boomer version of a chief executive, southern-style. A self-described "devout Christian," he plays guitar in an Allman Brothers-Led Zeppelin cover band and keeps a photograph of the Three Stooges on his desk. He's also a fast-forward sort who calls it as he sees it. Not so long ago, what he saw was that the Web would have little impact on the staffing industry.

"I went to an industry forum in 1995, and this guy stood up and talked about how the Internet would have a huge effect on recruiting," recalls Dunkel. "I sat there and thought, 'No way.' In my view, recruiting was far too sophisticated to automate. I said the Internet will never change the fact that people will always be at the core of recruitment. I was right about the people side, but I was wrong about the Web."

Was he ever. By 1998, the rules of recruiting had changed. Dunkel watched in alarm as job seekers flocked to the online bulletin boards of born-on-the-Net companies such as HotJobs.com and Monster.com, bypassing staffing professionals who still depended on phones and faxes. Realizing his mistake, Dunkel dispatched one of his most trusted advisers, Ray Morganti, to compile a white paper on the Internet and its effect on the staffing industry. The report only increased Dunkel's sense of alarm: Morganti issued a flat-out warning that staffing companies must pivot to the Net in order to cut costs and to make job hunting more convenient.

"High level of urgency; it's worse than you thought; markets moving fast" is how Dunkel characterizes the report. "Ray argued that the Web is a big threat to our business. Online competitors are moving into our space and attacking our value proposition."

In the spring of 1999, Dunkel gathered nine of his go-to executives and took them on a two-day off-site to his New Hampshire farm. Ostensibly, the goal was to map out a counterattack against the Web's job-posting sites. But Dunkel had already made up his mind. Romac was finished. The challenge now was to become the first old-line staffing company to embrace the Web. They would build something entirely new.

A Slugfest on Golden Pond

Dunkel's spread in Holderness, New Hampshire overlooks Squam Lake, where the movie On Golden Pond was made. Perched on a ridge top and surrounded by deep woods, the place takes up 350 acres. A small herd of buffalo grazes on its fields. But the mood wasn't exactly serene when the off-site got under way.

Inside the ranch house, Dunkel and his team were locked in a pull-no-punches brainstorming free-for-all. The goal was to "wring out" a strategy for moving Romac to the Web. More than a few of the combatants emerged from the dawn-to-midnight sessions with (metaphorical) bloody noses.

"The biggest fights were over cannibalizing the company," recalls Dunkel. "There were fisticuffs over that -- not literally, but there were some very violent disagreements. One camp argued that if we moved the business online, our recruiters would quit. The other side said that if we don't go online we won't have a business. I just laughed -- and started some more fights."

Joe Liberatore, now 37, who went on to become president of kforce Interactive and then chief sales officer of kforce.com, was firmly in the online camp. With his goatee and semi-spiky haircut, Liberatore is very much a new-economy dude who tends to lapse into MBA-speak. "Threat component" and "disintermediate the staffing advocate" came up several times in conversation.

But when asked to describe his mood at the off-site, Liberatore speaks plainly. "Fear," he says. "We'd all been so immersed in executing our traditional business that we missed the big changes that were springing up on the Net. We were in danger of losing our oxygen supply -- the one-on-one relationships we've built with candidates and employers -- to these job portals."

As Liberatore saw it, the Monster.coms of the world had made it painfully clear that traditional staffing companies were built on a vastly outmoded distribution model. "A staffing firm interviews 10 candidates, and the good ones place 2 out of the 10," he says. "So 8 people are disappointed with the service. Moving the business online would make us much more efficient at matching the right candidates with the right companies -- which in turn would give us a real shot at balancing supply and demand."

"In the end, every staffing decision comes down to convenience and price," adds Dunkel. "And as we thought it through, we all came to realize that the Web was radically changing the economic-value proposition of hiring people. As information on companies and candidates becomes more pervasive, there's going to be more efficiency -- and therefore more convenience. By using the Web to drive convenience, our productivity will come up, and we'll have pricing power."

Romac's senior team came to a rough agreement that the company must race to build a big Web presence. If it didn't, the online job boards would become the critical "first point of contact" for companies and candidates. But Dunkel and Liberatore were convinced that companies like HotJobs and Monster had vulnerabilities of their own.

Romac's own research showed that while people are finding jobs on the Web, many of them aren't getting jobs on the Web. In a Yankelovich Partners survey of 1,000 people that Dunkel had commissioned, 40% of respondents said that posting a résumé online is equivalent to sending it into a black hole -- never to be heard from again. And more than one-third of them complained that there's no good way to follow up with a company, or to get feedback, if they don't get hired.

Dunkel and his team saw an opening against the job portals. They would use the Web to improve the company's ability to connect with candidates and employers. But they would also leverage Romac's 2,300 recruiters to build online contacts into real relationships. In a sense, Romac's recruiters would now become advocates for the job hunter. They would lend a human touch to the high-tech job search.

Romac would enable anyone applying for a job on the company's Web site to consult with a recruiter by sending email, by calling an 800-number, or by visiting a Romac office in person. Recruiters would shotgun the job hunter's search, standing ready to answer questions like "Who's interested in me? What happened to my résumé? Why didn't I qualify for that job?" The goal would be to convince people that Romac offers something that the job boards don't: long-term, personalized career advice.

It was a bet-the-company move. Romac would shift its business to the Internet and launch a multimillion-dollar ad campaign touting a new company name: kforce.com ("kforce" is an abbreviation of "knowledge force"). The risks were huge. It had taken 35 years to build the Romac brand. Investors and employees were sure to wonder why the company wanted to torch its good name. After all, this was no Internet startup with nothing to lose. It was an industry leader with 2,300 employees and almost $750 million in annual revenues. Dunkel refused to fool himself about what lay ahead. "I knew," he says, "that we'd have to write off the balance of 1999."

Burn that Brand

Immediately after returning to Tampa, Dunkel assembled a skunk-works team consisting of staffing and IT veterans and told them to "execute the charter" -- that is, to work secretly to build a prototype of kforce.com. The team had six weeks to nail that goal.

"If we hadn't set them up as a skunk works, the boot of the bureaucracy would have just crushed them -- and I would have been powerless to stop it," says Dunkel. "The day-in-day-out effort to execute the traditional business is hard enough. We couldn't ask people also to give their heart over to building a new concept. It's not possible to do both. So we set up this separate unit and told it to work in warp drive. We had to move fast, so we could stake out our territory as the first staffing company to move online. By moving swiftly, we'd get mind share."

Led by Liberatore, the team put in a marathon stretch of 18-hour days, producing a working model of kforce.com by June 1999. The site's most innovative feature, dubbed "SkillMercials," suggests a digital reinvention of a video dating service. Job seekers create a script online and post a 60-second streaming-video clip touting what they have to offer to employers, who in turn view such clips at kforce.com. (A company can likewise make a pitch to job seekers by cutting its own "OrgMercial.")

While the skunk-works team raced to produce a prototype, Dunkel worked furiously to build momentum for the company's change effort. On any given day, he played many different roles. "I was a strategist and a salesman," he says. "I was also a cajoler and a butt kicker -- a counselor, an adviser, a consoler. You name it, I did it."

On June 8, Dunkel unveiled the beta version of kforce.com and announced Romac's makeover to the world. Wall Street was less than impressed. Some institutional investors quickly fled, fearing that kforce's startup costs would take a hefty bite out of earnings. Within months, Romac's share price plunged dramatically. Amid this meltdown, Dunkel got a phone call from his retired father, Al, who was one of Romac's cofounders.

"I expected him to say something like 'It's all right son. We believe in you,' " he recalls, cracking an amused grin at the memory. "Instead, it was 'What are you doing? What's the matter with you?' And there was my mother in the background, telling him to leave me alone."

Dunkel quickly embarked on a salvage mission to persuade kforce's remaining large shareholders to give him a shot at reinventing the company. Their criticism was as harsh as his father's phone call. "I heard it all," Dunkel says matter-of-factly. " 'This isn't the company we invested in.' 'You stink. Why didn't you tell us this in advance?' 'We've talked to 12 other CEOs in the staffing industry, and none of them think the Web will have a big impact on recruiting.' And on and on."

And how did he respond?

"I asked them four questions," says Dunkel. "Number one: Is the Internet here to stay? Number two: Will the Net radically transform the economy? Number three: Will the Net impact the staffing business? And number four: Is it not the responsibility of a CEO to articulate a strategy for addressing the threats and opportunities posed by the Web?

"Then I said, 'If you answer no to any of the first three questions, the meeting is over, because we have nothing more to talk about,' " Dunkel continues. " 'But if you agree with the first three, then you have to agree that the decision we just made was necessary. And I believe that not long from now, you'll look back and see that every CEO in our industry has adopted a plan for moving to the Web.' "

He was right. In the 20 months since Romac rolled out kforce.com, nearly all of the traditional staffing firms have announced Web strategies of their own. That's not all. While the offline recruiting companies are racing to the Web, some of the pure-play Internet entities are making a grab for old-line recruiting outfits. A case in point is TMP Worldwide Inc. (owner of Monster.com), which has acquired several "unplugged" staffing firms since 1999, including the Highland Search Group LLC, Stratascape Inc., and System One Services Inc.

"Soon after we made our announcement, I sat on a panel at Goldman Sachs with the CEOs of HotJobs and Monster," recalls Liberatore. "And the CEO from HotJobs took the posture that they're going to get rid of us, because we're an added cost that doesn't need to be there. Now it's clear to everyone that technology has a big part to play, but expert recruiters are still a key ingredient."

Still, members of kforce's senior team had no time for feeling vindicated. They had an even bigger worry than Wall Street: How to get buy-in from their own people?

Coke, Popcorn, and Fear

Kforce kicked off January 2000 with a video simulcast for all of its employees. It rented 30 movie theaters throughout the United States so that far-flung staffers could watch Dunkel pitch the company's makeover from the historic Tampa Theatre. They downed Cokes and popcorn as kforce's senior team laid out its Web strategy and raised the curtain on a television-advertising blitz targeted for Super Bowl Sunday. Afterward, people were pumped. But privately, many of them feared such a radical change.

Dunkel announced the Internet initiative right around the time that Merrill Lynch decided to offer online trading, thereby putting pressure on full-service brokerage firms to cut commissions. Kforce's recruiters likewise feared that moving online would eat into their commissions. Many staffers even worried about losing their jobs.

"All we heard was 'You're going to cut our commissions. You're using the Net to replace us. You're going to lay us off' -- all sorts of nonsense," recalls Dunkel. "We dealt with it by relentlessly communicating the message that the online portals are a big threat to our value proposition, and we must do this. We used fear of the online threat as an impetus for change."

It's ironic that kforce's recruiters thought they would lose everything to the Net. As it turns out, those recruiters are absolutely critical to making the Internet initiative work.

About 40 recruiters work the phones at kforce's operations center, which takes up an entire floor at one of the company's facilities in Tampa. The whole place crackles with the energy of the New York Stock Exchange, as each recruiter dials in more than 100 calls a day to IT and finance pros in "second-tier" markets like Las Vegas, Nevada; Nashville, Tennessee; Richmond, Virginia; and Sacramento, California -- cities where kforce lacks a field office. At least four times a day, the din of voices is punctuated by the clanging of a bell, which signals that a recruiter has "closed a deal" -- in other words, that a job candidate has accepted an offer.

The pace never lets up, since a recruiter typically has just three hours to fill a job opening (most openings are for short-term projects and assignments). Meanwhile, the competition is intense. Everyone in the operations center knows how everyone else is performing: Recruiters are divided into teams, and each team posts each "deal" on a 10-foot-by-5-foot scoreboard. And everyone lives by a motto that is tacked to a bulletin board: "Intensity. Passion. Attack. Today."

"We're a sales organization," explains Richard Bramel, 45, vice president of the operations center and a 17-year company veteran. "We work with intensity to complete our goals; we have a passion for what we're doing; and we attack -- that is, we're always, always closing."

But thanks to the Web, kforce's David Mamet - like sales culture is morphing into a kind of digital Dale Carnegie. Recruiters aren't just commission-driven salespeople anymore. They're expected to connect with job seekers by phone, fax, or modem, and to follow up with insightful advice. In fact, candidates are now customers. Employers are clients. And recruiters don't "do deals" -- they "nurture relationships."

"The staffing industry has been seen as almost a necessary evil," says Liberatore. "It has not been customer-focused. It has been a sales-oriented business, not unlike the car industry. When you walk in to buy a car, the dealer is focused on selling, selling, selling. He's not necessarily interested in making sure that you get the car that best meets your needs.

"We're telling our employee base that this is what the world thinks of the staffing industry. But we're also telling them that the Web gives us a unique opportunity to change the way we do business."

It remains very much in doubt whether that opportunity will result in lasting success. The company's third-quarter revenues rose 5.5% -- to a historic high of $202 million. But at press time, its stock (which had traded at $38 per share as recently as 1998) was trading in the low single digits.

"The investment community's attitude is 'Let's see some results,' " Liberatore says. "The challenge is to deliver."

Dunkel believes that the worst is now behind him -- that kforce has succeeded in integrating the Web into all of its operations and that it is embarking on an "advanced state" of execution. Still, he concedes that during the inevitable dark hours, "You wonder if you've done the right thing. I was distressed by the impact of the initiative on our stock price. And my biggest worry of all was whether we could get this organization through the change: Can we hold the pieces together long enough to make it all happen?"

But he refuses to second-guess himself. Dunkel understands that you can't move forward if you're looking back. "I'm an entrepreneur, and I don't believe in going halfway on something. We knew the risks. And we knew we'd incur a lot of wrath. But I have no regrets about scrapping our business model. If I have to, I'll scrap it again tomorrow."

Bill Breen (bbreen@fastcompany.com) is a Fast Company senior editor. Visit kforce.com on the Web (www.kforce.com).

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