An Analyst’s Report From KellyOCG Analyst Day


KellyOCG recently hosted around 10 industry analysts to hold briefings and discussions with key KellyOCG executives. This was the second such event in the U.S. and appears to represent a deliberate communications strategy to focus and educate analysts on this distinct business unit within Kelly Services Inc. Indeed, KellyOCG’s Senior Vice President and General Manager Teresa Carroll did mention how financial analysts accustomed to analyzing traditional staffing businesses were grappling with how to evaluate KellyOCG, a services and solution provider business — which, from our perspective, is a key part of the emerging contingent workforce and services supplier landscape.  

Before covering my takeaways from Analyst Day, some context may be helpful. What is KellyOCG? How does it line up in the entire Kelly Services business?

KellyOCG Context: Financials

According to Kelly Services’ 2015 Annual Report, OCG offers “integrated talent management solutions to meet customer needs across the entire spectrum of talent categories.”

“Using talent supply chain strategies,” the report explains, OCG helps customers "plan for and manage their acquisition of contingent and full-time labor, and gain access to service providers and quality talent at competitive rates with minimized risk.”

We’ll peel this onion below, but first let’s have a look at KellyOCG’s three-year historical P&L, which is broken out within the Kelly Services Annual Report (an atypical practice).

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Some key points to emphasize:

  • On average over the last three years, OCG has accounted for 11% of total revenue and a substantial 48% of total earnings from operations for the total company.
  • The business unit is exhibiting healthy growth in revenue, gross profit and earnings.
  • Notably, for 2015/2014, earnings from operations grew by 75%, and expenses as a percentage of revenue actually declined by 5%.

These financials speak for themselves in terms of performance and the significance of the OCG group within the overall business.

KellyOCG: Now and Next

Analyst Day kicked off with Teresa Carroll’s presentation on OCG’s market position and solutions. Carroll spoke to OCG’s differentiated position as a service and solution provider aiming to address “the talent problem” by “helping customers build their talent supply chains.”  

Perhaps the key element of the OCG strategy is this building of talent supply chains (for non-employee and employee talent) based on OCG’s solutions, services and worldwide network of resources (i.e., nearly 5,000 supplier partners across 120 countries, with active programs in 42 countries).

Carroll summarized the distinct services and solutions that comprise OCG’s offerings today:

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She noted that RPO and CWO (also known as MSP) were the fastest growing.

Other OCG executives addressed RPO, BPO, CWO and Advisory Services (a relatively new offering) specifically in separate presentations:

  • OCG’s RPO (contingent and perm hires) was reviewed in its current state, and the next generation of OCG RPO (RPO 2.0) was discussed (including the establishment of an in-house ATS)
  • OCG’s BPO offerings were discussed in considerable detail. OCG’s Business Process Outsourcing offerings (ranging from call centers to legal services) were something I was not aware of prior to this event.
  • OCG’s CWO discussion emphasized its key role in building and operating clients’ talent supply chains (a role complemented by Advisory Services).

Key strategic focus areas were also unpacked during the day:

  • IC/SOW (self-explanatory)
  • Talent Communities — What appears to be OCG’s label for online talent marketplaces and other platforms that aggregate talent. The CEO of HourlyNerd, one of OCG’s partners in this area, was also on-hand to provide an overview of its unique platform model.
  • Supply Chain Analytics — This appears to be a major initiative that has received significant investment (which no doubt will continue). The point was made that supply chain analytics goes beyond talent analytics as information and intelligence that enables supply chain planning, execution and optimization. A demo of the analytics suite — in its current state — was also provided; it was impressive and powerful.

A number of other developments in the categories of strategic investments were also discussed. In addition, there was a client panel and opportunities for OCG executives and analysts to exchange views and receive feedback. Clearly, it was a very informative day, the details of which cannot be covered in a summary post.

Spend Matters Takeaways

KellyOCG’s Analyst Day was an open presentation and discussion that enabled, at least for me, a much more complete and detailed understanding of where OCG is today and where it is heading. From it, we have formed the following views:

  • OCG exhibits the characteristics of a successful business (financials, core business focus areas and strategic programs in line with market realities, a rational approach to technology and strong, experienced executive leadership).
  • OCG, with its talent-supply-chain-building strategy and portfolio of solutions and services (both present and developing), appears to be evolving into what we see as one type of next-generation provider (a comprehensive supply chain solution and services designer, executor and manager) in the contingent workforce and total talent management space.  
  • Notably, OCG is moving with what we see as an industry “a shift in emphasis” from staffing of workers to services (from SOW to RPO, BPO and consulting all the way to talent supply chain construction and management).  

It is impossible to predict if Kelly OCG will continue its successful execution and superior performance, but it definitely seems to be proceeding solidly along the right paths. The future, we believe is not staffing, it is in services and networked-resource-based providers.  

We are also left speculating (given the financial visibility into OCG, its apparent strong support by the corporation, its attention to the views of analysts, etc.) if a future spin-off could be a possibility. Either way, Analyst Day has caused us to “take stock” and conclude that for now the business unit is pointed in the right direction strategically with strong execution capabilities.

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