NEW YEAR'S RESOLUTION: INCREASE EFFICIENCY AND BOOST PROFITABILITY

As 2005 comes to a close, a little stability wouldn’t be a bad thing. What a year…Mother Nature’s onslaught of hurricanes, the war in Iraq, the volatile oil markets and a somewhat unpredictable corporate performance environment. Then again, we’ve learned many lessons from this year’s turmoil and industry challenges that make us still more effective and prepared so that we can manage our businesses at peak efficiency for optimal return.

Through it all, our industry remained resilient turning in, on average, a decent double-digit growth profile. Granted, we all still face the thorny challenges of workers compensation, unemployment, managing for profit and providing turnkey solutions. But there are options that continue to be developed that will help employers and staffing services manage our challenges more effectively in the coming year.

Noteworthy trends have emerged that we think will continue to be the primary drivers and more pressing issues for the coming year. Some may disagree on the extent to which these factors will influence everyone in the staffing industry, but they merit attention and some strategic consideration:

Start-up Businesses

As readers who are business owners know, there is a delicate balance between having a large enough staff candidate pool and sufficient cash flow. Because start-ups are highly unpredictable, but in great need for support to keep the pressure on the market and drive the early stages of business sales and marketing, we found 2005 to be very strong in this sector. Start-ups also require different, innovative solutions that are highly customizable and cost-effective. Business owners can’t afford to waste a penny so they are among the most insightful customers. And, well-built relationships will be long-standing if the business succeeds. The key will be in how the relationship is managed – that can be a delicate dance because business owners will expect vendors to “invest” a bit in their early days. That investment can take many forms – from discounts and deferrals to candidate selection procedures and technology development and deployment.

Return On Investment (ROI)

For all businesses, but those with vulnerable margins, in particular, the return on the staffing resource investment must be increasingly strong. Every business leader needs to ask the critical question, “What is our return for this dollar?” “What could I do instead that would net me [and my shareholders] greater value?” That return needs to be realized in the form of cash flow strength as well as reduction in expenses, boosted productivity, enhanced reconciliation and predictive management and accounting tools that will help drive the business forward. Management decisions must be made regarding equipment and maintenance. For example, does a company host internally or externally and why? How much of the staffing activity should be managed in-house versus by a specialist vendor?

Strategic Partnerships

Tied directly to ROI is the creation and deployment of partnerships that can be mobilized easily. With increasing pressure on all budgets to deliver more value, our industry is benefiting from new, untraditional and multi-tiered partnerships that cross industry lines. For example, we are more enabled, productive and efficient now with the help of new communications and software platforms that offer customers truly one-stop-shop solutions that include forms, software hosting, hardware, time and attendance, and funding support with one relationship manager as a contact point.

Acknowledging the role of streamlined, value-added partnerships, Henry Graeber, CSP President of the Florida Staffing Association, said “As the number of employees grew at several of our client accounts, we knew that the traditional ‘group timesheet’ we were using had been outgrown and was to hard to manage. So we turned to our operating systems partner COATS, asking if they could provide us with the ability to import employees’ work hours directly into our payroll system from some type of on-site time clock. COATS had already anticipated this enhancement and partnered with StaffMetric to provide the import feature as well as a bio-metric time clock system that works directly with the new COATS System. The new platform was fully beta-tested and implemented immediately.”

Partnerships also mean service providers need to take an increasingly active role in their clients’ overall business dynamics. That means having the instincts and resources to be sure clients have what they need under any circumstances. In the case of natural disasters, professional service providers, like us, do well by clients to follow a disaster preparedness outreach plan and follow-up protocol to be sure we help our clients as much as we can along the way. In the case of Hurricane Katrina in the Gulf region, we were able to help companies ensure minimal loss and downtime.

Unemployment and Workers Compensation

By far our industry’s greatest challenge and “Black Hole” is unemployment and workers compensation. Certainly, this is a high priority subject for the American Staffing Association (ASA) and its many programs, which strongly promote ethical, professional standards of behavior across the industry. For example, ASA and NAPS have worked to develop a coded template for client agreements, which is expected to become the industry standard. That type of standardization may help to equalize the state-by-state variances in labor law. In the case of unemployment, our economy in the third and fourth quarters stabilized somewhat on a national scale (Katrina and Rita fallout aside), which is good for individuals and their families. The challenge to our industry is finding and deploying productive, reliable employees who do not abuse the system between jobs. In many states, where employees are favored in labor law, it is difficult for employers and staffing firms to make the case that workers are unfairly using the system to their advantage. Our daily constitution is to find motivated, ethical workers and keep them employed. They are our stock in trade driving our economy and value to our clients.

As to resolving the frequency and type of workers compensation claims, many industry players are working hard to establish systems for detecting and managing fraudulent behavior that drives up costs and clogs the legal system.

Certainly finding workers compensation provider is a critical beginning, but the issue of cost is still huge. We need an industry-wide fraud prevention program that employers, agencies, workers and the attorneys and arbitrators can adopt. There are some excellent services that help our industry manage claims, and sometimes engaging workers compensation specialists can pay off, but again, it is a somewhat unpredictable variable that still needs more rigid procedures that square with employers, staffing firms and states fairly.

Demonstrating Value

As with any service-based business, demonstrating value takes many forms. The business leaders in the staffing industry at all points in the equation – employer, staffing agency, vendors – need to continually assess value according to different market dynamics. For instance, while we are in business to make a reasonable profit, that does not mean we don’t innovate pricing programs and service arrangements to accommodate clients in difficult situations as an investment in their future. To help with firms and employers hard hit by natural disasters, for example, our firm immediately offered deferred and discount payment programs that relieved our clients of additional expense and hardship so they could focus on rebuilding their lives.

Denice Skinner of DenMar Staffing in Lafayette, Louisiana reports that having been so close to Hurricane Katrina's devastating path, they understand first-hand the importance of a strong technology partner. “It takes years to cultivate data in the staffing business, backing up that data and having a means to restore it is critical. Imagine what the situation would look like for staffing businesses along the gulf coast had this been 20 years ago and today’s technology was not available; imagine the data loss and incalculable expense to rebuild business. As the storm approached, our technology partner COATS called to help. Smart technology and partners who really care are critical to the staffing industry.”

Looking Ahead, New Features

As with any business, innovation is the key to our industry’s success. We must continue to leverage the right technology to suit individual staffing firms and employer needs. Ultimately, that means increasing customization of core systems and back-office procedures. It means working with the legal system to engender full understanding of the mutual liabilities and exposure many of us have by virtue of working in the human resources industry. Unfortunately, many people are simply unpredictable and manipulative. But, we know that new procedures and systems will become available to help alleviate some of these pressures.

Partnerships, again, will spell success for many of us; partnerships that link direct and ancillary providers. In our case, we partner with marketing, hardware, hosting, printing, time and attendance, funding specialists, and more.
In all cases, the price of entry is largely a commitment to providing fast, focused, reliable solutions that will keep our industry advancing as efficiently as possible.
The Technology Edge To succeed in the coming years, we will all need to become more expert at Web-based recruiting and Web-based solutions that offer flexibility and access round the clock. In that vein, employers and staffing firms alike need to obtain the tools to find the most highly desirable candidates in your marketplace – the ones your customer will want to hire time and again. The goal is to recruit and build long-term relationships with candidates who drive demand and thereby increase billings.

As we ring in a new year, here’s to all of us in the recruiting and staffing solutions industry for a prosperous and healthy new year! 2006, here we come…

Tom Sarach, Jr. is the Vice President of Operations for COATS, Inc., based in Virginia Beach, VA. He can be contacted at 757.499.3808, or by email at tsarach@coatssql.com.