Disrupting Outplacement: RiseSmart

When RiseSmart first entered the recruiting industry in 2008, it set its sights on a specific niche. One year later, RiseSmart shifted its business model to include outplacement. The difference between the two places presents a case study in disruptive business.

RiseSmart is a provider of Web-enabled outplacement and job search services. The former helps laid-off employees find jobs faster. The latter helps professionals find jobs in the $100k market.

"Our initial thought was that we would need to make significant traction with a B2C offering in order to build interest in the B2B solution," says Sanjay Sathe, founder and CEO of RiseSmart. "But the moment we introduced Transition Concierge in the second half of last year ... we had an extraordinary amount of interest, and were signing up Fortune 500 companies almost immediately."

For RiseSmart, the timing couldn't be better. Layoff announcements had risen to 48 percent (U.S. Bureau of Labor Statistics) and U.S. job cuts were on pace to exceed 1 million this year (Challenger, Gray & Christmas). At the same time, 81 percent of employers were engaging help from external outplacement providers (The Value of Outplacement, Reed Consulting).

Why was the timing right? Traditional outplacement relied heavily on psychological testing, use of personality and skills assessment tools, hands-on career counseling, and the provision of an environment where an executive could feel comfortable while making networking calls. The newer model, called the "Market Model," included market research, proactive job/tech development, hands-on campaign management and skills training.

RiseSmart, on the other hand, applied its existing technology to outplacement in order to focus on the job seeker's most pressing need: finding a job. Not only did employees appreciate faster outplacement services, but employers also realized a significant cost savings by expediting placement over counseling or skills training.

The net result was $4.6 million in additional Series A financing, including $2.8 million from Storm Ventures and $1.8 million from Norwest Venture Partners (NVP). Since last year, the company has raised $8.85 million in institutional investments.

“RiseSmart’s Transition Concierge is disrupting the cost structure for corporate outplacement providers, while leveraging technology to deliver superior value to a growing roster of Fortune 500 clients," said Sanjay Subhedar, managing director of Storm Ventures. "The company has gone the extra mile to provide an excellent customer experience to both corporate clients and transitioning workers — and that has paid off in word of mouth and new business referrals.”

According to Sathe, the model is by design. As employees recently laid off by a Fortune 500 company have a positive transition experience, they are likely to tell others about the experience. From a marketing perspective, the B2B service not only disrupts existing outplacement sources, but it also provides the company a cost-effective approach to market its B2C service.

That's not to say the strategy hasn't had some challenges. Moving from a B2C-focused business model to a B2B business model means a smaller universe of customers and competitors.

"The biggest [challenge] is that many of these big players have very entrenched relationships with corporate HR departments, which can be difficult to overcome," says Sathe. "But the biggest positive is that it enabled us to become very focused on what we needed to do to differentiate ourselves from the big players; we have brought innovation to an otherwise stodgy industry that has introduced very few new ideas over the past 20 years."

The primary differentiation is that a 2009 survey Institute for Corporate Productivity showed that employers invest an average of more than $5,000 per executive or manager to provide external outplacement support for a period of three to six months. RiseSmart has succeeded in cutting those costs in half.

At the same time, while the compelling price point has helped RiseSmart open doors, the less tangible benefits for employees and employers establishes a reputation for excellence. Ninety-two percent of respondents expressed overall satisfaction with RiseSmart Transition Concierge service and 88 percent said it was likely they would recommend the service to friends.

The results are in stark contrast to the rest of the industry. The lackluster performance is understandable, with dissatisfaction increasing exponentially with every month those employees remained unemployed. In contrast, the RiseSmart Transition Concierge service is delivering the average worker 10.6 highly relevant job leads per week.

"Many of the jobs we screen are recruiter posted," adds Sathe. "We expect to expand our relationship with recruiters to enhance Job Concierge and Transition Concierge over time."

It also serves as a reminder that not all marketing measures include advertising, public relations, or social media. While communication assists business, the right marketing model can transform an entire business overnight. And sometimes, at least in the case of RiseSmart, those changes can disrupt entire niche industries.

Shifting Niche: RiseSmart vs. TheLadders

Almost one year ago, two companies set out to differentiate themselves from other job search sites within the same niche: TheLadders and RiseSmart. Each wanted to dominate a subscription-based job site niche that focuses on jobs starting at $100k.

However, with the economic downturn, pursuing qualified employers or qualified candidates in a race toward a shrinking middle seemed increasingly futile. As TheLadders entrenched itself in offering employer-driven job search resources, RiseSmart set out to find a bigger court by adding outplacement to its core services.

Play From A Bigger Court To Win A Niche?

"Traditional outplacement services have simply become too expensive in the minds of many companies," Sanjay Sathe, founder and CEO of RiseSmart, said in a release. "Employers are frustrated with these services, because they cost a lot but typically don't demonstrate measurable results for employees. During a time of financial pressures, they've become a target of budget cuts."

The move makes sense. Whereas outplacement consulting firms represent a $3 billion industry to provide transitioned employees with career counseling, RiseSmart expanded its business model to include outplacement services that directly targets employers without giving up its candidate-focused service. For RiseSmart, it establishes a beachhead in the outplacement industry and nurtures employer relationships when the economy eventually reverses course.

The move benefits employers too. Rather than funneling employees to outsource companies that sometimes emphasize new careers, RiseSmart clients are directing laid off employees to a service that finds them jobs. If job placement can be expedited, former employees who have relationships with coworkers at the their former company boost morale despite layoffs.

Outplacement Services Can Improve Employee Relationships.

"Businesses sometimes forget that employees who are laid off are still part of the internal culture," one human resource executive, who recently managed several hundred layoffs, told me. "Just because they pack up their desks doesn't mean they break off all the relationships they made while working at a company. The morale of former employees and their ability to secure new jobs directly impacts the employees that remain."

While it's not formal communication, the message resonates with internal audiences. It shifts the focus from internal rumors back toward satisfying customers because employees know even if they are laid off, there is a plan to place them. Providing a sense of security may be critical during economic uncertainty.

Companies that do not provide a sense of security may jeopardize their own future. While the recession has temporarily lowered employee turnover, as many as 40 percent of employees at companies mishandling layoffs could seek new employment when the economy improves. High turnover rates typically cost between 150 to 250 percent of an employee's annual salary, with high-performing employees being among the first to go.

Relationships In Bad Times Create Opportunities In Good Times.

RiseSmart might not be the largest subscription-based job site that focuses on jobs starting at $100k, but it is playing smart. If it continues to cater to qualified candidates while developing relationships with employers during an economic downturn, it may overtake some middle ground as the economy improves. The move positions the company as a link.

Contrary, TheLadders added 400 new companies and recruiters in the fourth quarter, reinforcing its employer model. The number of candidates hoping to secure these jobs spiked 63 percent last year. The move positions the company as a middleman.

In reality, both companies are still battling for premium position in a niche market. RiseSmart may have expanded its court, but it still pokes fun at the competition. Recently, RiseSmart pointed out that as clever as the commercials from CareerBuilder, Monster, and TheLadders can be, none of them reinforce human side of job placement.

Other Voices Taking Note Of The Extended Matchup.

Mashable: RiseSmart is Job Hunting for Lazy, Laid-off Execs

Cheesehead: RiseSmart Gets $3 Million In Funding

AlarmClock: High End Job Search Site RiseSmart Raises $3M

Battling For Niche: TheLadders vs. RiseSmart

“Marketing is too important to be left to the marketing department,” once said David Packard, Hewlett-Packard, who worked hard to combine research and development with marketing, with the knowledge that marketing does not end with the marketing department.

The concept, in part, was tied to an understanding of how marketing can help differentiate products in the marketplace. Specifically, when two companies enter a similar niche, message differentiation can mean the difference between winning and losing. Considering HP was founded with an initial investment of $538 in a garage and later became the first IT company to exceed $104 billion in sales two years ago, there might be something to that.

Two job sites take aim at the $100k+ job niche.

Today, in the recruiting industry, there are two companies attempting to differentiate themselves from other job search sites, but within the same niche: TheLadders and RiseSmart. Each is hoping to dominate a subscription-based job site niche that focuses on jobs starting at $100k.

Based upon marketing messages, they seem to be operating from different sides of the same equation. Don’t let their similar identities fool you. Their communication suggests one is pursuing qualified employers whereas the other is pursuing qualified candidates in a race toward the middle.

Currently, TheLadders benefits from better brand recognition after launching a national ad campaign. The campaign features a championship tennis match in which madness ensues when everyone in the stands attempts to join the game. While clever, the campaign seems to target employers despite being “representative of the challenges job seekers face on other sites.” The distinction is more apparent in print, with one headline saying “Quick, Find The Most Talented Player.”

RiseSmart, which recently called TheLadders campaign elitist, is looking to cater to candidates by offering what they call a “RiseSmart Concierge” program that adds a human presence. The idea is to have someone help the candidate further narrow the job search beyond the algorithm.

The human assist comes at a price. RiseSmart currently offers its services for $54.95 per month (or $43.95 with a new member discount; $109.95 for three months). TheLadders is offering candidates a subscription-based service for $30 per month (or $180 per year). The Ladders also has a free “limited access” to job listings feature, enticing employers with 2 million members. RiseSmart aggregates several other listing sites, enticing candidates with 1 million jobs. So who will win? First one to middle court.

Some other voices taking note of the $100K+ niche market:

• The Recruiting Fly
• SpringWise
• Forbes