The Use Case Podcast: Storytelling about WorkStep with Dan Johnston

Music:    Welcome to Recruiting Daily’s Use Case Podcast, a show dedicated to the storytelling that happens, or should happen when practitioners purchase technology. Each episode is designed to inspire new ways and ideas to make your business better as we speak with the brightest minds in recruitment and HR Tech. That’s what we do. Here’s your host, William Tincup.

William Tincup:    Ladies and gentlemen, this is William Tincup, and you are listening to the Use Case Podcast. Today, we have Dan on from WorkStep and we’ll be learning about the business case or the use case cost-benefit analysis for wise prospects and customers choose WorkStep. So let’s just jump right into it. Dan, would you do us a favor and introduce both yourself and WorkStep?

Dan Johnston:    Yeah, thanks for having me on, William, and, of course. My name’s Dan Johnston and I’m the co-founder and CEO at WorkStep. And at WorkStep, we build software solutions that help enterprise companies hire, but most importantly, retain their frontline workers across the supply chain.

William Tincup:    That is fantastic. So hire, and retain. So let’s go into both those and, frontline. So we’re kind of focused on, I wouldn’t say vertical, but a type of worker.

Dan Johnston:    Yeah. At WorkStep we help companies solve the challenges that they face with their workers who don’t work behind a desk or computer on a day-to-day basis like you and I.

William Tincup:    Right. Right, right, right.

Dan Johnston:    Non-exempt, hourly frontline, everybody’s got a favorite term for it.

William Tincup:    Yeah.

Dan Johnston:    But every company has a challenge with both attracting, making the right hires, and retaining those frontline teammates, and that is where our software platform comes in.

William Tincup:    I love it, because it tackles two of the things that keep people up at night. So let’s deal with the hire side or the attract side. So where do your customers, where do they, see you and where do they use you on the attraction on the hire side?

Dan Johnston:    So honestly, WorkStep Hire was built out of a personal experience of mine. A little bit more than a decade ago, I managed a third party logistics warehouse. Of all things, we imported trampolines from China and shipped them off to DCs and E-commerce orders throughout the country. But that warehouse was basically 100% temp staffing. And really, what I saw was just how detrimental that model, that sort-of classic temp-staffing model was through the workers in our building. At the time I think we were paying our agency $18 an hour, and our workers were seeing 11 to 12 of that. For a worker taking home 11 to 12 dollars an hour, that spread is a very big deal, and they couldn’t move up within our organization because they didn’t actually work for our company.

And we were running training every day, basically, because of that sort-of built-in temp turnover. And so what we saw in 2017 was that there’s got to be a better way for these large-scale supply chain centric companies to staff their critical, essential, frontline roles without needing to bring in this staffing agency intermediary that basically garnishes worker wages and creates less efficient outcomes for both workers and employers. So that was the challenge that we saw and really our impetus for beginning WorkStep the company and also introducing the WorkStep Hire solution.

William Tincup:    I love that. Well, first of all, it’s disrupting a part of the staffing industry, not all of it, but a part of the staffing industry that needs disruption. It needs some innovation. So I love that. And it’s personal. I mean, you’ve seen it actually in action. And, again, I love the part of loyalty, and, again, employees, they didn’t even feel like employees. They felt like temp workers. They’re there to do a bit. They did it. If they didn’t come back the next day, they didn’t come back the next day. Like there was no penalty. So I love that you started there. How did you get into the retain side, or the retention side of that talent?

Dan Johnston:    Yeah. So a major thesis with WorkStep Hire was that we could use technology to create better fit matches for both workers and employers creating a win-win, right? If the worker finds a job and company that they can stay at for the long term, that’s ideal, right? For both their earning potential, their career, and their satisfaction. If companies can find a worker who will stay not just for 10 days, or 30 days, or 90 days, but multiple years, that is a win for the company. It reduces their cost of turnover, and it allows them to operate at a higher productivity per worker, less safety incidences, all these other benefits. And so to align our incentives at WorkStep to those incentives of the workers themselves in the company, we introduce this retention-based pricing model. So basically with WorkStep Hire, companies only pay us for matches placed that retain in their role.

And so we were, as an organization, very incentivized to help the customers we serve retain the placements that they were making from WorkStep. And so, as we worked with larger customers at greater and greater scale, we saw that this problem of retention management went well beyond what we were doing with their talent acquisition teams, and actually was a strategic priority all the way up to the C-suite in terms of, how do we reduce unnecessary turnover in our frontline populations and thus unlock a more satisfied frontline workforce, a more streamlined supply chain, and eventually a more profitable company. So that was that bridge from hiring to retention that we crossed.

William Tincup:    I love that. So do your customers see you as a platform or a marketplace? How do they see you?

Dan Johnston:    Well, that would be the best question for them, certainly.

William Tincup:    Sure.

Dan Johnston:    As a software platform that helps organizations improve frontline workforce retention through both retention management software, as well as the ability to match them to new hires that are great fit for their opportunities.

William Tincup:    Right.

Dan Johnston:    So we deliver the software. It does come with a worker network in the case of WorkStep Hire, but we’re a software-centric company.

William Tincup:    Right, right, right. It’s, I would assume, SAS, and SAS modeling in terms of the economics and the way that Works all plays out

Dan Johnston:    For the most part, yes, as it relates to retention management, we help companies reduce frontline turnover at scale.

William Tincup:    Right.

Dan Johnston:    And they pay a typically predictable set fee for that. With hiring specifically, it’s mostly success-based pricing ,like I described. So-

William Tincup:    Right, right.

Dan Johnston:    An organization that hires 10 people that retain pays for 10 people that retain, or if they hire a thousand people that retain, they pay for a thousand people. And that helps our customers ensure that they’re getting [ROI 00:    07:    41]. Right. And ensure that they are seeing that dollar for dollar savings against a temp staffing agency alternative.

William Tincup:    Well, I love that, because it’s… you put your money where your mouth is, right? So you’re going to get paid if and when those folks are retained, so you align your interest with your customers. That’s beautiful.

How do you… I mean, again, the part of the staffing market that’s kind of like Labor Ready, or the folks that are down that actually interact with that part of the staffing world, how do you get them to switch? If they’ve been buying staffing for forever, and that’s just kind of a part of, kind of what they’ve done, and they’ve always done it that way, how do you get them over? How do you move them over intellectually or emotionally? How do you move them over to software solving this problem?

Dan Johnston:    Yeah. It’s a really interesting question. It’s funny you mentioned Labor Ready, because I believe that was actually the firm that we used way back when, at the warehouse that I managed.

William Tincup:    Oh yeah. I had a friend that opened up like 70 different locations and, yes, he can tell me stories about it. But yeah. Yeah. That’s funny.

Dan Johnston:    So I mean, the way that we… Right, so, bringing in the talent that you need to meet your production and distribution schedules is mission critical to operating the business, right? So this motion of attracting, selecting, and retaining talent is a motion that has to happen. So it’s not a question of, “Do we build partnerships or vendor relationships in this arena or not?” It’s “Which do we build?” And so in the case that you’re describing where you are a customer who has historically used temp-to-perm as your sourcing mechanism, what we help that company see is that not only can you save money by going direct, right? Instead of paying a 50% markup on every hour worked and paying, in this market, $4,000 to $6,000 to convert a single temp worker to a permanent employee, we can deliver that same permanent employee match to your business for significantly less.

But moreover, we can deliver to you a partnership that gives you access to workers who will retain longer and be more successful in your organization, because the workers on WorkStep are looking for that direct hire, long-term career fit, not a temp placement. And then the software that automates processes, screens profiles, removes interview scheduling back and forth, helps you learn from feedback from those new hires that you are bringing in and understand what your drivers of turnover are. That’s all a bonus, right, because we’ve delivered to you a better outcome, i.e. a better matched worker at a lower price. So that solves your, sort of, day-to-day challenge. And then the software is just an accelerant that helps you get increasingly more value out of the service that we provide.

William Tincup:    That totally makes sense to me. And I think it would make sense to a lot of folks, especially folks that want to innovate. And we’ll get back to that in a second. So you’ve mentioned two phrases:     supply chain and frontline, which, of course, existed before COVID. These were not new terms. However, they’ve become completely mainstream because of COVID, good or bad. We can put that aside for a moment. So how… tell us about the WorkStep journey, pre-COVID and then, kind-of what you’ve learned as a result of COVID. Now, technically we’re still in COVID, and I understand that, but what you’ve learned about supply chain and frontline as a result of this global pandemic.

Dan Johnston:    Yeah. It’s a really interesting point, because when we started this company, certainly supply chain labor, wasn’t a topic du jour.

William Tincup:    Right.

Dan Johnston:    In mainstream business news. And, honestly, probably never thought that it would be.

William Tincup:    Right.

Dan Johnston:    But here we are, nonetheless. So in 2017, like I mentioned, my co-founder, Justin, and I, we saw these three trends that told us that this space was going to become increasingly important, and this pain point was going to become more and more meaningful for these large companies. And those trends were the boom of E-commerce and how that translates to jobs, moving from endpoints like retail stores to midpoints like warehouses, distribution, and fulfillment centers. That was already underway. Of course, COVID has pulled that forward, accelerating worker turnover, right? This trend, in terms of the annualized turnover rates in these industries, was already up and to the right for the last decade, but again, the last two years have been the highest turnover rates we’ve ever seen.

And finally, the widening skills gap, basically as technology continues to evolve faster than workforce training, where workers with the skills needed are becoming fewer and further between for these large companies. And so, in many ways, what COVID has done has just pulled forward all of those trends. It’s accelerated the growth of E-commerce, and therefore warehousing as a sector. It’s accelerated, at least temporarily, consumer demand, which is a pull on the entire supply chain. It’s heightened the pace at which folks are leaving their jobs. I mean, first you had layoffs in 2020, and then in 2021, the great resignation, and it hasn’t made it any easier for workers to develop the skills they need for the coming decades. And so I think holistically it’s made this topic much more front and center, but it’s really been a continuation of trends that were already happening.

Like the supply chain labor market was challenged in 2019, it was challenged in 2018, it was challenged in 2017. Anybody operating a large supplier distribution network would tell you that. And so it’s just been a pull forward.

William Tincup:    Right. It’s interesting because a lot of the trends that we see across both HR and recruiting, were already happening… Remote work, as an example. There was already remote work. That wasn’t a new concept. Although, everyone going home on a Tuesday and having to work from home, yeah, well that was kind of… That was new. So you’re right. It was kind of a pull forward for a lot of these things, both in HR and in recruiting. With recruiting and HR, in particular, you’re part of a much larger tech stack of technologies at that they buy. What are you asked to… What is WorkStep asked to integrate with, like where do you fall in their value chain?

Dan Johnston:    Yeah. So the way that we view our software is that we are… First of all, we work with predominantly large organizations, Fortune 500, Fortune 1000. Our sweet spot is companies with more than a thousand frontline workers. And so, given that customer set, we are certainly not in the business of replacing your core [HRIS 00:    15:    47], HR technology system. So whether you’re using Oracle, ADP, Workday, [Ultipro 00:    15:    56], et cetera, it’s not a rip and replace. What we do is we sit on top of that core database and we are that engagement layer for your HR and operations teams to solve those critical workforce challenges and then allowing the data to flow seamlessly back and forth between WorkStep and that core database that is serving a real purpose in terms of organizing your people, data, paying your people, tracking your benefits, but isn’t necessarily equipped to help you structurally improve workforce retention over time.

William Tincup:    Right. Do y’all get pulled into kind of VMS discussions or even procurement?

Dan Johnston:    I mean, the shortest answer is “It depends.” We could probably talk about this topic all day long.

William Tincup:    Separate, separate podcast. I would assume then, on the staffing side, on the hire side, probably, you’re going to interact with some of those things. Maybe not as much on the retention side.

Dan Johnston:    Yeah. I would say that broadly, I could continue that. It depends on the organization, the level of pain, and the hurdles that the buying company is required to go through to begin to assuage that pain.

William Tincup:    Yes.

Dan Johnston:    What I will say is that because COVID has accelerated these trends, we’ve also seen… And I’m sure you’ve seen this as well… Generally, historically, slow-moving buyers are equipping themselves in ways that allows them to move faster, at the very least for technology pilots. So what might have taken 18 months to set up in 2018 might take a quarter in 2022.

William Tincup:    Right.

Dan Johnston:    And that’s to everybody’s benefits. It’s to the company’s benefit, of course, it’s to HR technology, vendors benefits, and eventually it’s to the worker’s benefit as well.

William Tincup:    I love that. And I’ve seen the exact same thing. There was molasses before, and it’s like, okay. And again, these things were happening before. It’s just, COVID heightened. “Okay. We have to do something. We have to actually do something. We have to look at different technology. We have to look at doing things differently.”

Dumb question alert. Do y’all… I like to Telegraph those… Do y’all tinker with healthcare and are the hourly part of healthcare at all?

Dan Johnston:    We don’t directly. We help our customers measure satisfaction with their benefits programs, and we help them understand whether their benefits programs are one of the drivers of turnover, as well as help them benchmark their satisfaction with benefits against industry peers, but we don’t directly offer fits packages. We help them understand effectiveness. We can help them understand the effectiveness of changes and whether those changes are understood and whether those changes are actually having downstream benefits on satisfaction and retention, but we’re not a benefits provider ourselves.

William Tincup:    Gotcha. Gotcha. Gotcha. Gotcha. So second dumb question alert. Have you been approached by staffing, large staffing or RPOs to be their technology solution?

Dan Johnston:    It’s an interesting question. I mean, the short answer is we’re not interested in those conversations.

William Tincup:    Right. Right. Right.

Dan Johnston:    We have a very sort of multi-decade point of view of like what our place in the ecosystem is and what we can do as a platform for hourly workers in terms of being their predominant technology ally for this segment of the workforce that we see as being increasingly in need of one and how we can really help workers improve their job so that they can improve their life. And so that is a mission that we believe in very deeply. And, I don’t know if you knew this, but even just in the domestic supply chain, companies spend about 1.1 trillion dollars on both direct labor, temp staffing overhead, and cost of turnover.

William Tincup:    Yep.

Dan Johnston:    So this space is big enough.

William Tincup:    Yeah-

Dan Johnston:    For us to-

William Tincup:    You don’t have to go and conquer any other markets.

Dan Johnston:    Yeah. So in that sense, we’re sort of of the mind that “Let’s, row our race,” so to speak.

William Tincup:    Nice. Are you pulled into situations where there’s unions or non-unions? Where, again, does it even matter to you?

Dan Johnston:    We work with both union and non-union customers.

William Tincup:    Right.

Dan Johnston:    And of course, as you probably know, many large companies are a blend, where they might have some union sites and some non-unionized sites. It really, it’s not in a direct, indirect conflict. So, in fact, customers can use works that pertain to understand the differences in sentiment for their unionized employees versus non-unionized employees. They can use it to understand when workers are having challenges or get capturing value from those union relationships or to track the impact of changes to schedules or compensation that result from those union negotiations. So I would say it’s one factor that companies can use in their analysis of how to improve satisfaction and eventually retention of their frontline teams. But it’s not like it only works for unionized companies or it only works for non-unionized companies.

William Tincup:    Oh, I love that. I love that. And the flexibility for a large company that has both or a blend. Okay. So two questions left. One is buying questions from practitioners that you love, and the flip side that you’d like to retire. So when you’re interacting with a prospect and you just can’t get the seal… You get the feeling via the questions, a line of questions, et cetera. You just love certain questions. And there’s certain questions you’d just love to retire if you had a magic wand.

Dan Johnston:    Interesting question. So I think that what gets us most excited, and this might not be a specific question, but let’s see, maybe I can bridge it there.

William Tincup:    Sure.

Dan Johnston:    Is when companies clearly value their frontline teammates, like there’s a very clear business directive from all the way at the top that being a great employer matters. A. Because it’s the right thing to do from a human perspective, but B. Because it’s the right thing to do from a business perspective. And so when customers are asking us questions that relate to being an employer of choice or being a place that workers want to stay for their whole career and grow their whole career, that is what gets us most excited, because it’s aligned with our mission, and it also means that the story that we tell and the software we provide is going to resonate with them because that’s how we view the world.

William Tincup:    I love that, by the way. And that is, I mean, it is questions. It’s the sentiment that when they’re asking you and talking about these things, you can automatically pick up on, “Okay, they get it. They get it the way that we get it. We’re aligned. And now we just got to kind of figure out the guardrails, but we’re aligned. We don’t have to teach them to care about… Teach them how to care about employees.” I like that. Is there anything that you’d retire?

Dan Johnston:    Yeah. I think that the retire perspective is… I think that in the old world of HR, let’s just say service providers, there was a lot of, I don’t know, focus on sort of guarantees or like, can you get me 10 people tomorrow?

William Tincup:    Right.

Dan Johnston:    How many people can you get me on Thursday? And I think that, holistically, what we want to help companies understand is that we can help you today, but we can also help you be a better business a decade from now. And so when you think about your challenge in terms of “What does this do for me tomorrow?” It’s yes, we can help, but it’s not really the question that we like to answer. We like to say “How do we set up this relationship to help you improve your frontline workforce outcomes this quarter, next quarter, next year, and for the years to come” and not necessarily have it be set up in such a transactional way.

William Tincup:    Yeah. I can see that. I can also see speed in short-term thinking being kind of non-aligned with your mission. They’re not thinking necessarily about quality, they’re thinking about “I’ve got a need. I got to scratch an itch. I’ve got a need tomorrow,” which is fine. But if they’re not thinking past tomorrow, then they’re probably not… You know, long term, maybe short-term, but not long-term, kind of the folks that you… That really your ideal customer or persona. Last question is when prospects see WorkStep for the first time, what do they fall in love with? I call it the aha moment, but what do they fall in love with?

Dan Johnston:    Generally customers fall in love most immediately with either access to high quality batches on the higher side of the business or immediate visibility into the real time voice of the frontline. I think a lot of these customers come from-

William Tincup:    Oh, that’s nice-

Dan Johnston:    [crosstalk 00:    26:    52] In which they get workforce feedback via annual survey. Once a year, that sends in October, gets populated for a quarter, and they get the results in February.

William Tincup:    And they never read it. Yeah, yeah, yeah.

Dan Johnston:    And we get up and running right away. And the right manager at the right moment gets the voice of their frontline team on their computer or in their pocket, right when it’s happening. So if there’s a safety issue or a pay issue or a discrimination issue, it can be cited, understood, assigned, and resolved all in the same day. And that is really powerful for teammates that have typically not had that ability to move quickly.

William Tincup:    Oh, I love that. Drops mic. Walks off stage. Dan, thank you so much. This has been wonderful to learn about WorkStep. I absolutely appreciate your time and coming on the Use Case Podcast.

Dan Johnston:    Thanks so much, William.

William Tincup:    Absolutely. And thanks for everyone listening to the Use Case Podcast. Until next time.

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