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Staffing: Strategies for a Hyper-Volatile Labor Force

Staffing: Strategies for a Hyper-Volatile Labor Force

By: John Rossheim

Economic volatility feeds the market for the labor force -- as well as new staffing  solutions. Yet in the volatile 2010s, the risk of adding labor costs -- even temporarily -- scares off many prospective staffing clients and thwarts staffing activity.

What best practices will help staffing firms, large or small, prosper in the best of times, and make the best through the worst times? Let’s sample a variety of perspectives.

Sell hard in any market. Whether your clients and prospects are hiring or not, keep selling. Whether business is sparse or you’ve got all the accounts you can handle, sell hard. "No matter how good the market is treating you, you still have to market your services. You have to find 20 to 30 minutes a day to make outbound calls to prospects," says Chad Oakley president of search firm Charles Aris Inc. of Greensboro, N.C.

Diversify by industry, job function, client size. Specialization, especially in IT hiring, can be a very profitable strategy for staffing firms, but only as long as they stay ahead of the innovation curve. A better strategy for a broader range of economic conditions may be diversification.

What strategies helped WinterWyman get through the recession? Scott Ragusa, president of contract staffing for the Waltham, Mass., company says two kinds of diversification helped his staffing solutions firm through the recession.

First, “we serve clients in multiple functional areas: finance, technology and HR." Second, “we have a diverse client base, with companies of many sizes and industries."

Never take your eye off your key contributors. Keep your best people as happy as possible, regardless of the state of the staffing industry and the broader economy. "There will be times when you have to downsize, but there should be a close-knit cast of characters that you can't lose," says Oakley.

Don't let underperformers take you down. Especially when times are tough, your decisions about who keeps their job and who gets laid off should be based solely on merit; seniority alone won’t keep your firm afloat.

"You need to rank your people based on the quality of people they recruit and their productivity," says management consultant Peter Cohan, an instructor at Babson College in Wellesley, Mass. "You need to get rid of the worst performers, and keep the best."

Rates stuck? Turn up the volume. In these times of both high unemployment and record corporate profits, you may need to keep billing rates relatively low, while working hard to boost volume.

"Some staffing firms are increasing volume even as they reduce billing rates, which can work out pretty well for them," says David Lewin, a professor at the UCLA Anderson School of Management and a practice leader at managing consulting firm Berkeley Research Group.

Price each deal individually. Don’t lock yourself into a pricing structure that could bring you down if economic conditions change. And don’t limit your upside potential with promises that billing rates won’t rise in the longer term. "We have always approached each assignment uniquely," says Ragusa. "We've never prepared a rate sheet."

Keep ahead of political, regulatory trends. Your business can be deeply affected by government action on many fronts. Staffing firms that stay current on legal and regulatory developments stand to gain on their own account, and will shine with clients. For example, there’s the employer mandate, a key part of the Affordable Care Act (ACA) and health care reform.

"What we're hearing from our member staffing firms is that they're trying to become as expert and informed on the ACA, so they can advise their clients," says Berchem.

Beware small entrants who could take your business. Many smaller staffing firms failed or were forced to combine during the 2007-2009 recession. But new firms are being born every day as the recovery continues. And if you’re a small to mid-sized agency, they could eat your lunch -- especially because under the ACA, if they have fewer than 50 employees, they won’t be required to provide health insurance.

“Barriers to entry for the staffing industry are relatively low, so although there is consolidation, there are always players coming into the market," says Steve Berchem, COO of the American Staffing Association, a trade group in Alexandria, Va.

Carefully consider offshore labor. With higher education booming in Asia and labor markets gaining more transparency across national borders, "staffing firms need to think about going global," says Cohan.

Not that the offshoring of temporary labor is a slam dunk. For example, "lower wages abroad would mean lower bill rates, so staffing firms have to think about whether that would still be profitable.”