In Staffing Industry Review’s December 2012 edition, the “Straight Talk from the Customer” was an article about rate benchmarking and “beating the market” to achieve significant cost savings. While I don’t doubt that this has worked for the author as he states, I’d like to offer a few counterpoints to highlight some concerns that I don’t think he addresses, and why this is certainly not an approach that makes sense or will work for everyone else.
I have always and consistently had a problem with anyone who is overly fixated on price. I am not unrealistic, I know that cost is a significant, maybe even the most important factor for many clients, but if it is the only factor, if you do not recognize that price affects quality, then you will likely sacrifice quality in the pursuit of ever lower rates. In the author’s case, he felt he “could improve process effiencies for the suppliers, making it easier for them to do business with us, and reduce the supplier base to drive more volume to the top performers.” Depending on your business and the type and range of contingent workers that you hire, you may be an attractive client to a few suppliers and this may work for you but my experience with promises of greater volume in exchange for heavily discounted rates is that it doesn’t usually pan out. Both sides end up unhappy as the supplier doesn’t get the business it needs to sustain the rates and can’t attract the right talent, and the client doesn’t end up with the quality of workers needed.
This reminds me too much of reverse auctions, another cost cutting idea that doesn’t deliver the right results in the staffing business (you can read my thoughts about reverse auctions here). People are not a commodity and pricing strategies that treat them as such are not going to be successful. Most savings will be short lived or quality will suffer. This also reminds me of a column by SI’s Bryan Pena, Supplier-Client Relationships Are a Two-Way Street, in which he encouraged staffing suppliers to reject unworkable financial arrangements and for both suppliers and buyers to enter into mutually beneficial relationships (my thoughts on the topic can be found in True Partnerships are a Must for Successful Staffing Providers).
What my years in staffing for a niche industry like IT have taught me is that quality becomes even more important and less able to be sacrificed in those instances. The more specialized and sought after the skills you need in a contingent worker, the more likely it is that price and quality will go hand in hand. Market conditions are not just something to be beaten; it’s better if they are understood and adapted for. Remember that costs do not operate in a vacuum. For example, Glassdoor’s Q4 Employment Confidence Survey reveals that “nearly one in five workers will look for a new job in the next 3 months” and “that salary and compensation are the most important factors that influence their decision to accept a job offer.” Glassdoor’s Rusty Rueff commented:
"While the past few years have tilted to an employer market, we're leveling out and employees are finding their position to stand upon. It is now more important than ever for companies to engage with employees to find out what will keep them satisfied and strategize new ways to attract and retain their workforce, or face an impending growth in their turnover rate."
This suggests that it is going to get harder to attract and retain top talent and this type of activity and salary expectations will eventually drive real salaries upward – not all but many. In the high tech industry we’ve been dealing with some fairly confident employees all along; many hot skills have never really experienced true unemployment even at the worst of the recession and we’re in a full blown battle for talent today. Thinking that you can endlessly tinker with rates and margins and keep the quality talent you need is unrealistic, especially if you employ a highly skilled, highly educated contingent workforce.
I am realistic and I know that salary costs cannot be unfettered and it is critical to work with your suppliers to ensure that your price/quality ratios are in line with what you need. You should also ensure that you are doing everything else you can to make your company attractive to employees – permanent or contingent, particularly if your compensation strategy is on the low end. I will close today’s column by sharing two articles that discuss some intangibles that keep top performers happy and loyal, regardless of money.
No matter what kind of business you run, we can all learn something from these articles and many of the ideas don’t cost a penny! Now that is the kind of cost savings that I can get behind! If you’re not going to win based on salary, what are you going to do instead to keep up in the talent wars? Share your ideas with us at Staffing 360!
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