This series is focused upon describing how offshore teams are transforming the landscape of accounting practice. This is the second episode in the series, where Mike Goossen, CPA and Shawn Parikh, President of Entigrity will discuss and explain - How Offshore Staffing is the solution to 70% of your Staffing Problems?
#BKOT 02: BUILD A KICKASS OFFSHORE TEAM
HOW OFFSHORE STAFFING SOLVES 70% OF YOUR PROBLEMS
Hosted by: Mike Goossen, CPA, Vice President, Entigrity Offshore Staffing
Guest: Shawn Parikh, Founder & CEO, Entigrity Offshore Staffing
MIKE: Hello everyone and welcome to the BKOT podcast episode number TWO. I am Mike Goossen and today we're here with Shawn Parikh. Also while I talk about a little bit of our last session we talked about why should you consider offshore staffing? A little bit of the history of offshore staffing and how it came about? Why did Entigrity get involved with this industry and bring it to the market? And how offshore staffing has fits for firms of all sizes and shapes? Now today we're going to talk about in episode number two is the benefits, the direct benefits of offshore staffing. Also a little bit about how you find, select and pick the staff that you're going to use. And then lastly a little bit about the impact. What are the big the major impacts and opportunities and results of being taking advantage of offshore staffing? So Shawn would like to start off a little bit about what are some of the benefits that you'd like to share with us about the process and participation in offshore staffing.
SHAWN: So Mike you already know this, well, offshore staffing has, you know, it's been in business for quite some time. And some of the perceived advantages are obvious cost savings around offshore staffing because of the big currency arbitrage you have, you know. About 70 Indian Rupees is equal to one U.S. dollar. That's the kind of difference you'd have which obviously you know has a big big arbitrage down the hiring people. So that's about cost savings that you have anywhere from an average of 50 percent to 70 percent you're going to save on labor costs when it comes to hiring an offshore staff compared to a local staff.
MIKE: Yeah that's very possible, Shawn.
MIKE: Shawn, question! I mean some people say know well how can they how can you hire someone so cheaply or how is that. So how does that relate a little bit to the lifestyle the people that work for you I mean because in America you know they're thinking wow that's awfully cheap? How is that? How does that work? What's the balance that is? Is it good for the people in India that are working for you or what's the (deal), for us?
SHAWN: Well you know our colleague Chris came in last year to India. And the first thing that he did was to shop, shop and shop. He went to all kind of malls and all kinds of places and did all of the shopping. Everything was so cheap. So essentially the cost of living is very-very different. I mean you'll get coffee and probably in terms of U.S. dollar that’s (equivalent to) 10 cents there, which is typically $2-$3 here in the normal store like Dunkin Donuts or any similar place. So that's a kind of cost of living difference. So, I mean people think that it's a cheap labor. I mean if would you give them $8 or $9 or $10 an hour but the cost of living is like that. A normal account… yeah go ahead.
MIKE: So it's closer, I understand to almost like, equivalent to $25 an hour here in the States. Would that be a fair assumption?
SHAWN: Closer to what?
MIKE: Close to, say $25-$30 an hour in comparison to the United States.
SHAWN: In terms of living, yes.
MIKE: So it's a good job. It's why I'm saying it’s a good job for the individuals that are working with Entigrity.
SHAWN: Yes, so definitely it is a white collar job, these are executive jobs that they are doing and they are in a very good and better standard of living.
MIKE: Yeah that's great.
SHAWN: So it's not like that when they're making $8-$9 an hour and they are not having such a great lifestyle. So yes. Coming back to the cost and quantities that you are talking about, of course there's a huge cost benefit. But apart from that there are many other benefits like there are significant reduction in the payroll taxes because now you're not responsible for any kind of payroll taxes or any kind of social security, Medicare, IRA, any kind of paid leave. So that kind of helps add a little to the savings. Apart from that what is more important here is, you don't need (to expand) any more infrastructure. And you are an accountant Mike. So, I know you come across a lot of your colleagues saying that I am running out of space.
SHAWN: What do you do then?
MIKE: One of the most expensive parts of an organization, which is it is that is the office space and I go into firms all over the country and the firms are full. And there is no place for them to go and they're like how am I going to hire two more people I have more growth I can't. So maybe they might stop growing to some extent because of their just due to lack of space.
SHAWN: This is really ridiculous. I mean America is so big and people are complaining about space.
SHAWN: I mean just to give you just that just to give you this number and this is really interesting Mike. Because I live in both. I mean I've lived in both the parts of the world and people will often ask me question you know how comparable is America and India are to understand what is the difference? And I kind of keep it very simple. America is three times in size that India is.
SHAWN: And India is five times in population then America. That, kind of justifies everything. Still America has a lot of space constraints, real estate constraint, and challenges when it comes to staffing that you run out of space you're growing but you can't hire additional staff.
SHAWN: Well, that’s where offshore staffing can be very very very beneficial. Even though you increase your capacity you’ll not have to really worry about increasing your space. Or you know overheads. One of the key benefits is around compliance and law, you know, of late with the #MeToo campaigns and some of the laws around labor employment hiring people has become more and more difficult in America. You're exposed to all kinds of lawsuits or litigations. So this is making things difficult for businesses even in genuine situations. There are a lot of paper formalities. So, you know, offshore staffing to an extent saves you or protects you from all those challenges around hiring people. So that's kind of our added advantage but really significant advantages around offshore staffing.
MIKE: Right. And then I think some of the other reductions is, there is the whole idea of the, we'll talk a bit more about it is ‘the whole retention and recruitment of staff is simpler through the offshore approach because when you're looking for a new position. If I need a new staff accountant so I have to go out in the market through the various Internet courses. I get hundreds, if not thousands of resumes, I have to go through all of those things I have to look at all those things in and remote staffing opportunities for that type of employment is so much easier because well, it just takes less time to find somebody.
SHAWN: Well Mike you know we work with 500+ accounting firms today and we have done several of clients service in order to kind of understand what kind of results we are producing to them, through our store staffing. And I mean you put the name there, when it comes to local staffing on all three fronts whether it's recruitment retention and replacement. Offshore staffing has a big edge. Let us touch upon all of them one by one.
SHAWN: So let us take recruitment. You know, we have been talking to our clients and the feedback that we have received. On average there is 50 to 80 hours of savings. In recruiting per person when it comes to offshore staff over local staffing. So over and above the recruitment fees that you pay to agencies and staffing companies. Right. And you want to know how? I'm sorry I'm having a bad talk today. So when it comes to local staffing you have to go through hundreds of resumes. No. Step one is first of all identify the job description and the job requirement.
MIKE: Sure sure.
SHAWN: Let us understand how. Where the step one is basically you first of all identify the job description, go and post on different kinds of job boards, may be indeed or LinkedIn that you are using. Source hundreds of resumes of thousands of resumes from them. I mean they are good portals but you know most of the accounting firms don't have their HR department or for that matter don't even have a full time HR. I mean either the admin or office managers doing this work. So that's the kind of situation in small and midsize accounting firms that we see and even after sourcing those resumes and you know identifying the agencies to work with them you have to undergo tremendous amount of drilling with the whole dozens of interviews you spend. A lot of them are so irrelevant according to the requirement.
MIKE: Yeah. Just that whole process of recruiting like you've just described is so true. And the amount of time it takes away from our clients away from our billable time. Away from all those issues. It's a significant cost to an organization beyond simply the time it takes to do that work. And so the thing that also plays into the points is OK. So now I've hired someone how am I going to retain these people. And that's a very difficult challenge. You want to be able to create an environment where they retain.
SHAWN: Mike, before we go into retention we are still forgetting that we are paying a heavy duty charge on recruitment.
MIKE: Yeah that’s a significant cost to… right.
SHAWN: They charge anywhere from 8 percent to 15 percent of the annual package. I mean I was talking to my client in New York and he told me that he I mean he's planning to hire a temporary staff for a tax season and their rental company called Robert Half are just charging sixty five dollars per hour for a temp. You know with about 2 to 4 years of experience and I said that’s crazy. So when it comes to recruitment even for temporary situations the amount of thick costs that you're paying on recruitment. On the contrary when it comes to offshore staffing and you partner with a company like Entigrity, see we always tell our clients that we do our best. I mean first of all we only work with accounting. So we have a complete understanding of you know all sizes of firms, what their requirements are. Some of the firms needs a specialized person and some of the firms need a Jack of All Trades kind of a person. So we go deep into the understanding of the requirement and at the end of the day they take probably five to eight candidates. And that’s not all.
MIKE: And there and there are going to still have to be, so if you want to go with Robert Half's person at $60 an hour or $65 an hour versus an Entigrity person then that doesn't change the amount of up the orientation the onboarding time is still the same right. There's no advantage to one person over the other as far as saving me. They're going to be up and running the same amount of time. Right. I mean so they're going to come to you with the experience, they're going to come from Entigrity knowing the software that you use all those kind of criteria. So the startup time is going to be the same or maybe even less than you would going out to Robert Half because there's always that orientation onboarding time.
SHAWN: I mean when it comes to requirement Mike what happens is this. See when you go to a specialist in an industry you understand the needs very fast and very precisely. Today I know for example how many tax software are used in the industry whether it is UltraTax or CCH Pro FX or you talk about Lacete or Drake or ProSeries you know. So we understand the requirement of the software. We understand the requirements workflow management software not just accounting and tax software. So then that is the level of precise understanding that we have, that we can capture which a general recruitment agency doesn't know about that.
MIKE: Yeah actually it's gonna be faster as far as getting them up to speed with an offshore Entigrity staff person. Right. It'll be they'll be quicker to quicker to productivity. That's it. If I need a tax person for the tax season I want someone up and running as quick as possible. As a firm. Right.
MIKE: And so now that we've hired somebody. And we're going along the line of we want to keep them both local or remote what are some of the differences in contrast there and so something that you know I'm quite aware with when it comes to Entigrity is that the the the one thing that's different. There's a difference in how people approach their jobs and work so at Entigrity I understand the contracts. So when someone joins Entigrity as an accountant at whatever level they sign an agreement on a contract it's their expectations to work for at least three years two to demonstrate a commitment to Entigrity for at least three years through a contract not just a verbal thing. And correct me if I'm wrong but I understand Entigrity's average tenure now is at four years. Right. So you have your average employee who's been there for four years or more.
SHAWN: Compared to an industry average of about 1.5 years we have above 4 years. Yeah. Typically in America we have seen that we have a commitment that contract. I mean as far as employment is in some way I mean at our offices in India you know you already to there right. So you know that for I mean this is a minimum commitment that a person who joins in the company
MIKE: And that's at all levels, right?
SHAWN: That's at all levels, right.
MIKE: Because obviously in CPA firms normally you don't have a commitment of term until you're like in higher level management or partner level. So just a staff accountant coming in you have him for a month you have him for a year you never know because there's just that you just don't do it that way in the States.
SHAWN: Mike, I mean it's like in a funny situation you know I know you have been working on several places but it's a situation you should you should capture the expression of a boss on an order or a partner when a longtime manager or somebody comes there and says I will quit
MIKE: I won't get here's my two weeks’ notice right. Yeah...
SHAWN: Yeah hit it with two weeks’ notice. So you know. Yeah. So longevity is a big.
MIKE: And that's even different because your culture your staff your company processes they have to give you a three month notice right.
SHAWN: Yes. There is a notice of at least three months. Yes. Apart from that that you know like transition time is much better. Three months gives you enough transition time and we’ll cover that aspect when we come to our third segment which is replacement but what I would like to highlight is what we focus on is longevity of the staff which is so very important especially in accounting industry. They you know it takes one year just understand the process and the requirement and how the firms operate and the nature of your clients. So it just takes a little time and then you know you're gone. So it doesn't it doesn't work like that. You need to have that longevity in a firm or in your work and that's what we try to focus on and not that these people are forcefully staying in the company. Of course there are some great policies, some of the processes in place some amount of great policies that we have implemented in the company which kind of compels them to remain with Entigrity of course. Entigrity compared to you know, companies in India is a sizable company. So that also has some kind of you know retention benefits. Rather than a firm with five seven ten or fifteen people we are a much larger organization. Which brings me to the third segment Mike which is replacement.
SHAWN: So we talked about recruitment, we talked about retention third and the most important thing is replacement you know however, difficult it maybe somebody might leave even within Entigrity.
MIKE: It happens
SHAWN: It happens and you have to replace somebody and suddenly this nightmare comes of going to the old recruitment cycle again. So finding resumes interviewing so many people and then again going through that whole big ideas process.
MIKE: It's a painful process.
SHAWN: So one thing you know after that the new incoming employee might be so heavy duty retraining or having own understanding of what work is to be done and the risk is what if that new gentleman is not good enough.
MIKE: Right. Yeah. So not as much well known. So, how is that being a part of that a remote staffing, how is that different? What's the change?
SHAWN: See, let me give you some numbers here. So replacement is the universal reality. It's not that I don't want to say that there are no replacements on our site. Out of every ten firms one firm has to undergo replacement to be realistic. Our attrition is about six to eight percent. Replacement could be… so replacement is a reality. It’s not that replacements do not happen but the good thing is as you earlier mentioned, I mean as you mentioned earlier there is a three months of notice period that somebody has to serve, so that there is a proper hands on, you know, transition that happens.
SHAWN: So if somebody is going away, and we guarantee you replacement in two weeks. So there is a proper three months of transition which somebody gets. And you know the good thing is we don't charge for that three months. To the client because we think that it is our responsibility as much as it is for the client to retain the person. We don't take any charge for that three months during the transition.
MIKE: Oh you mean you don't charge a client for their time for their hours is that what you're saying or you're not charging an additional costs for retreat for finding a new person. What costs is the person going to save during this time.
SHAWN: Well we don’t charge for... So let's say there's a person already working for you and he needs to be replaced. So we will immediately put somebody else alongside him so that both of them are working hand-in-hand so that the person is passing the knowledge. I’m not going to be charging for the second person for next three months. Till this person remains in the firm. There's no additional cost to you.
MIKE: So there might be two people working together. So that training, handoff process, no additional costs for that just a regular whatever the regular month weekly rate is that's what it stays.
SHAWN: We don't charge anything.
MIKE: I understand that, so, that's really great. So me as a, as a user the person who is participating and has hired a remote staff person all the replacement responsibility is on Entigrity to bring me additional people. I picked that new person I said Oh yeah I like it. I like this guy. And then that person joins the existing employee that's worked with me for a year and they transition together and it's seamless to me. I just keep the process going I keep sending the work that gets done. And then hopefully by the end of a month or two then not hopefully in a month or two then the new person is up to speed in a way it goes, the other person leaves and then we're as far as me as the buyer I'm happy. The process work is getting done. And that's the goal. Yeah. OK.
MIKE: So we've talked about these three things and I think those are significant difference. There is a reduction in recruitment time. There's a greater, better retention reality within your organization compared to the average firm here. When there is a replacement necessary it's relatively simple. You take the responsibility it makes it easy. It's all I do is pick the new person everything's so that all sounds really good on top of the benefits we've already discussed. So what are some of the actual? Will you go to you have more you want to add?
SHAWN: Yeah. No I didn't want to I mean what I'm saying is people perceive offshore staffing as a cost saving tool. Is so obviously when it comes to our client I want to put out a number here that there are thirty to sixty percent increase in profitability when it comes to offshore staffing or when they have implemented offshore staffing, you know, over a long period of time in their firms. So there is definitely a big advantage but it's not just that it is much more than that. Let me give you some more facts Mike.
MIKE: Yeah, go ahead.
SHAWN: So, I mean some of our clients on an average has 150 to 300 billable hours of workload reduction in owners’ or partners’ time and about 250 to 500 billable hours of workload reduction at a staff level. And that is significant productivity gain in significant capacity increase which only helps you in acquiring more business and growing. So it is definitely a big advantage in increasing capacities. And when you increase the capacity it definitely gives you a competitive edge. You know we are to grow. And you know sometimes you perceive that also staffing is backend stuff. It doesn't help you growing, well, offshore staffing, I mean it is history across all of our clients that they have been growing very consistently at a compounded annual rate of about you know 20 to 30 percent. And this seems like a small number. I mean just to give you an example if you consistently grow for five years for 25 percent you'd be doing three times than what you're doing now which is like you know, if you are doing 500,000 in revenue you would be doing $1.5 Million and that's a big jump in revenue. So all in all it's not just about saving money, it's about increasing your capacity, significant workload reduction and definitely building a great competitive edge.
MIKE: That's right. And that's and that's great when you see that. Those are some significantly large numbers and have great impact on a firm in a big way. Some of the underlying impacts not just some of the numbers of profitability and growth and those sort of things. What about you think about my reaction is what about the people who were there at the beginning of this process those that were getting the benefits of the workload reduction benefits increase or capacity. So my current level of employers my current level employees I mean, my CPAs, my staff are going to have a better work life balance because they're not going to be so stressed out. They're going to be able to focus more attention on the client relationships as opposed to just get the work done. So that's going to change. Its cost saving, it's its capacity, its relationships, its quality of life, all these things are impacted as we grow our offshore staff team. And that's kind of gives you back the and kind of gets back the name of our podcast here, you know, Build a Kickass Offshore Team where, you know, where your offshore team has such a huge impact on the operations of your firm. And your ability to grow. And so I really see that and that's one of the things that when I give presentations about this or if I'm at exhibits or events and conferences and we talk afterwards the one of the biggest things that I hear about is mostly you know I am so stressed out as a CPA because I have so much work to do. I need more help either I can't find it or I can't trust it.
SHAWN: You should be reacting like this, you know that much. I mean that so CPA like.
MIKE: I can’t help it, I’m a CPA, so. So I just see there’s a huge it seems, I don’t want to say that’s a no brainer but it’s a real good if someone says he wants to say that if they want to contact you guys, contact us I should say and take a staff and start small and start working with it and see the benefits and start to feel them and I think they might want to increase that to where they have a team as opposed to having just one part time person. So it’s okay, right?
SHAWN: Typically put, Mike, as we say, there is no downside, but just significant upside. That’s what we say all the time.
MIKE: Minimal risk. Okay, that kind of brings us to the end of our topic for today. Thank you Shawn. Again this is Shawn Parikh and Mike Goossen saying thank you for attending our BKOT web podcast and we’ll see you next time.
Entigrity™ is a trusted offshore staffing partner to over 500+ accountants, CPAs and tax firms across the US and Canada. Our flexible and transparent hiring model gives helps firms of all sizes to hire staff for accounting, bookkeeping, tax preparation or any other task for 75% less cost. As a firm 'run by accountants, for the accountants', Entigrity captures the hiring needs of accounting firms most precisely, providing staff that works directly under your control and management, still you are left with least to worry about compliance, payroll taxes, overheads or any other benefits.