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by Rich Becker (writer), November 04, 2009

When RiseSmart first launched almost two years ago, it positioned itself as a job placement service for professionals in the $100k job market to compete with companies like TheLadders.com, Monster.com

For many entrepreneurs in the job placement services, an ever increasing supply of candidates and ever diminishing of positions might have seemed like the perfect storm. But not RiseSmart CEO and founder Sanjay Sathe.

"We couldn't afford to do the kind of ad campaign that TheLadders.com did," said Sathe. "So we had to find a different model and rely on word-of-mouth and viral marketing."

While developing a B2B service solution had already been part of Sathe's long-term plan, the recession helped push the idea forward, with plans to leverage the company's B2C offering in order to build interest in the B2B solution. Almost immediately, Sathe found the opposite to be true.

"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," says Sathe. "Obviously, the timing of the recession had something to do with that, but it was also clear we were filling an unmet need."

As layoff announcements rose 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), 81 percent of employers were engaging help from external outplacement providers (The Value of Outplacement, Reed Consulting). For outplacement, business was booming.

According to the Wall Street Journal, Right Management posted a 36 percent increase to $158 million in revenues during the second quarter alone. Lee Hecht Harrison, another big provider, jumped 57 percent to $119 million.

However, these services also seemed to be missing the mark in that their high satisfaction statistics did not count laid-off employees who leave mid-program or those who never find jobs. In fact, some employees reported they felt disenfranchised with traditional outplacement services, which generally earn more revenue, the longer employees are unemployed.

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

"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."

Specifically, 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 disrupts both in that by applying its existing technology to outplacement, it fulfills 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.

In 2009, this approach resulted in 92 percent of respondents expressing overall satisfaction with RiseSmart Transition Concierge service; 94 percent expressing satisfaction with the resume and cover letter rewrites provided by the service; 88 percent expressing satisfaction with the level of personal, one-on-one support provided by the service; and 88 percent said it was likely they would recommend the service to friends.

While overall satisfaction and cost savings attracts employers in need of outplacement service, the latter statistic fuels B2C business. Word-of-mouth from satisfied employees promises the company will receive referrals and repetition.

"If laid-off employees of Fortune 500 companies have a great user experience, a good percentage of those people are going to tell others about us," said Sathe. "We also expect the crossover to come back to us whenever they are in transition or looking to change jobs."

Is the model working? Storm Ventures and Norwest Venture Partners seem to think so. They recently awarded $4.6 million in additional Series A financing, which includes $2.8 million from Storm Ventures and $1.8 million from Norwest Venture Partners.

Read more articles on: risesmart , recruitment , disruptive business models

Rich Becker is a writer for BrooWaha. For more information, visit the writer's website.