The lean growth machine

CWS founder, president and CEO Jeff Nugent (Photo: KC Armstrong)

Little about the company's office screams “fast growth.” Located in a nondescript industrial park in Mississauga, Ont., Contingent Workforce Solutions Inc.’s spartan headquarters are about as far removed as they could be from the hip, buzzing downtown lofts stereotypical of successful startups. But looks can be deceiving. .

The offices remain unfinished because CWS has taken them over only recently—its fourth move, to ever-larger spaces, in three and a half years. So far, the firm occupies only half the rooms, but it’s planning a hiring spike. And it opted for the suburban locale to keep its tiny staff happy, as most live nearby and prefer a short commute.

The space may not be glamorous, but it works—quite well, in fact. From 2008 to 2010, as most businesses struggled to weather the recession, CWS grew its revenue by a staggering 10,330%, enough to top this year’s PROFIT HOT 50 ranking of Canada’s Top New Growth Companies. The firm, which provides software and consulting services to help clients manage temporary and contract employees, topped $10 million in sales last year. And Jeff Nugent, its founder, president and CEO, expects sales to soar further as his firm penetrates markets at home and abroad: “We see a whole whack of growth happening.” .

On the surface, the CWS story is straight out of the Startups 101 textbook. Chapter 1: Identify a pain point caused by a market trend. Chapter 2: Create a solution that customers are willing to pay for. Chapter 3: Provide that solution in a way that makes money. Yet few firms that take these steps come close to five-figure growth over two years. What has set CWS apart is not only the masterful way in which Nugent and his team have applied the formula, but the creative approaches they’ve taken to build a firm that is both exceptionally lean and completely scalable. This was Nugent’s goal from the start, when all he had was his own money and a conviction that the market needed a new way of doing things. .

Nugent founded his firm armed with extensive knowledge of the sector it serves, starting with a job straight out of university as an independent sales agent for an IT-staffing firm. There, he helped temporary workers—in high demand in the lead-up to Y2K—comply with the administrative requirements of the companies they were working for. As well as familiarizing Nugent with the bureaucratic peccadilloes of the contingent-labour world, the job gave him insight into the support that employers and employees need in such arrangements. .

Following Y2K, Nugent was struck by the fact that demand for temporary workers, far from declining, grew and

spread across the economy. As belts tightened all over, companies looked to divest expensive overhead (read: permanent employees). Concomitant with this shift, growing ranks within the labour pool—especially boomers and Gen Yers—became keener on temporary and part-time work. .

By the mid-2000s, Nugent began thinking about how a new business might support the boom in contingent workers. He knew that plenty of staffing agencies had emerged to help contract employees find work. But employers, too, needed to adjust to the changing landscape. And the more Nugent observed his clients, the more he realized how few had reliable help in managing their temporary labour. .

Most firms managed contract workers on a one-off basis; they had no high-level view of how many such workers they were hiring, whether they were paying fair market rates and—since contract workers don’t pay CPP or EI premiums—whether they were risking raising a red flag with the government. “It requires a different set of expertise to manage contingent workers,” says Krista Uggerslev, an associate professor at the University of Manitoba’s Asper School of Business who specializes in workforce demographic changes. “Some organizations may have a person in-house that has that knowledge, but certainly not all.” .

This knowledge gap, Nugent reasoned, was increasing the likelihood of regulatory non-compliance and decreasing the efficiency and cost-effectiveness of hiring contingent workers in the first place. “That was my ‘Aha!’ moment. I realized there was a need, at the enterprise level, for services that manage clients’ entire contract workforces,” he recalls. “I had expertise in that space. I saw the trend happening and thought, ‘With my skill set, I could do it.’”

With this revelation, Nugent started sketching out the shape of a new venture that would offer a combination of software and consulting services to serve this market need. The more he worked on his plan, the more excited he became at its potential. But it wasn’t blind optimism—especially since the new business initially lacked external financing. When Nugent found that bankers were unwilling to finance a start­up with no assets, he dipped into his savings to open CWS’s doors in February 2008. With three kids at home, Nugent found it “terrifying” to do so, but he had enough confidence in his plan’s viability to go ahead. .

Knowing how important it was for the new firm to boast top-tier knowledge about contingent-labour management, Nugent made it an early priority to hire highly talented staff. He paid a premium to hire some professionals with significant expertise—but only on an interim basis, to keep the expense short-term. “It killed me to pay the higher rates,” admits Nugent. “But when you’re going after program-management contracts, you need to have senior people to give you credibility. Plus, they build a company’s infrastructure in a very expeditious manner.” .

The seasoned pros helped attract “really solid” intermediate-level staffers, who learned quickly from their mentors. When the senior staffers’ contracts ultimately expired, the intermediate employees knew the business well enough to take over. .

But they remain few in number. The plan was never to hire hundreds of people to enter data and field calls. Nugent thought that in order for his firm to profitably handle the myriad sets of information required to manage workers, it would have to automate this process. He tested some well-known vendor-management system software, but none fit. So Nugent, who says he’s “somewhat IT-savvy,” decided the company should craft its own. To offset the cost of developing the software, CWS applied successfully for federal Industrial Research Assistance Plan funding.

CWS’s combination of hyper-talented employees and smart technology have proven to be the foundation of the firm’s success. The company’s model is relatively simple: its staff advise clients what they must do to streamline their management of their contingent workers and comply with regulations. And CWS’s software, called Simplicity, automates everything from time-sheet management to tax compliance, all while giving clients a real-time view of their spending on contract workers. .

Still, as most companies selling a new offering find, it was tough at first to convince clients they needed it. Frustratingly, several times Nugent got a pitch all the way up to the top decision-maker, only to have it dismissed as “not a priority.” The firm’s first sale ultimately came via a referral from an old staffing-agency contact of Nugent’s, who thought his client might benefit from CWS’s services. This broke the logjam; once the firm could demonstrate the benefits of its work for one client, others were quick to try it out. Early adopters ranged from SMEs to giants, including the Canadian arms of U.S.-based multinationals drawn to the company’s Canada-specific focus. .

The software has been instrumental in allowing CWS—which employs just eight full-time equivalents—to punch far above its weight. It does very little hand-holding with clients; the software is intuitive enough that, after the installation period, customers can use it with minimal input. This frees up CWS’s staff to provide more high-value consulting work. “If you look at our employee base, as compared with our revenue stream, it’s all due to our streamlined process and automation,” says Nugent. “That has been crucial to our scalability.” .

So successful has Simplicity been that CWS recently decided to spin it off as a separate operating unit. As more and more clients have fallen in love with the software, staffing agencies have become interested in offering it as a value-added, says Nugent: “Some approached us, saying, ‘We don’t need your services, but can we use your software?’” CWS has seized the opportunity by white-labelling Simplicity. .

But isn’t Nugent worried about cannibalizing his own client base? Not enough to turn down the new—and bustling—business he’s getting from agency clients. Besides, the spinoff opens up another seam of prospects: enterprises that have enough HR expertise in-house to manage their contingent workers but want the software. .

So far, CWS’s growth has been entirely organic, and Nugent expects that to continue. Thanks to some no-cost social-media prospecting, the firm is starting to sell more beyond Canada’s borders. Nugent is in talks with a potential partner in the U.K. he connected with on Contingent Workforce Strategies, CWS’s LinkedIn group. (With 1,600 members, the group is the largest source of thought leadership about contingent labour on LinkedIn, says Nugent.) Markets in Europe, Asia and elsewhere in the Americas also are on the radar.

“When I started the business, would you have heard me say that we’d be going global? No,” says Nugent. “That has really come out of opportunities that presented themselves through social-media channels.” As well, several U.S.-based multinationals with which CWS does business in Canada have expressed an interest in implementing programs elsewhere.

The opportunities are equally rich within Canada. Nugent is confident that CWS, whose impressive domestic client roster includes heavyweights such as Sobeys and Bank of Montreal, has only just begun to tap a massive potential market. The more that companies turn to contingent workforces, he figures, the more educated they’ll become on the importance of managing them effectively. .

“We’re very early in the days of implementing these programs in Canada,” he says. “We’re only at the tip of the iceberg.” And with a lean staff, a completely scalable product and plenty of room to grow, CWS is poised to take it all on.