STRONG ECONOMY BENEFITS ALL, CHANGES RULES OF THE ROAD

Riding the wave of the current strong economy, every single one of us in the staffing industry has a huge opportunity (and challenge) to demonstrate new value for our clients and to expand our business. Granted, there are significant challenges that require us to rethink our work habits and procedures, but if we gaze in the mirror honestly to evaluate how we can improve our current operations and client relationships, we will grow. The market favors us.

When addressing 2005 strong staffing performance in February of this year, ASA president and CEO Richard Wahlquist said, “The demand for a flexible work force was complemented by strong gains in permanent placement activity, reflecting staffing customers’ confidence in continued economic expansion. This is good news for businesses and good news for job seekers.”

Combining the Fed’s latest interest rate hike, strong market indicators for the overall economy and business performance registering continued strength, the U.S. economy is gaining steam as an employee’s market. The strong market conditions ultimately benefit everyone in the equation – employers, staffing firms, employees – but, simultaneously, new pressures on the bottom line are forcing staffing providers to rethink their business processes to generate the greatest margins.

This article provides a snapshot of the critical market dynamics at work today and the kinds of effects staffing companies and their clients can expect during the next year, some of which they maybe experiencing already.

1. Quality skilled talent is harder to come by – In keeping with the macro-economic trend across all industries, demand has spiked among client employers for finding the smartest, best skilled and most reliable workers at all levels. Today’s need has stepped up the pressure directly on the nation’s staffing firms, who are working more intensely to find those talented people. And, to do so in record time. Even with the aid of technology, the placement process is time intensive and value-driven: if we place the wrong person, we risk compromising trust in a hard-won relationship or even handing off a client to a competitor. The cost of that loss is compounded by the direct and indirect front-end “investment” we make to search, evaluate, train and place candidates.

Our industry’s solid performance follows nearly three years of double-digit employment growth. Wahlquist added earlier this year, “We have moved into a period of solid, stabilizing, and sustained demand, even as staffing industry employment growth continues to far outpace overall employment growth.”

2. Rationalizing increased costs – Our customers, the employers, will soon find themselves in the position again to seriously consider higher pay for employees and the willingness to pay for excellent service, assuming new value is realized. With the current imbalance of demand and supply, and as staffing firms work harder and faster to fill orders with a smaller candidate pool, we are facing the need to recalibrate our compensation models. We need to do this in order to fairly cover our increased time-related costs for recruiting the right candidates from an ever-leaner pool. As staffing providers, we need to eliminate our lower margins by creating an environment where we have many customers vying for the same candidates. There is simply a greater demand on our time to research, find and recruit those winning employees. And, as our expenses surge in support of recruiting efforts, improved margins become necessary and transparent. Importantly, the firms that succeed in matching quality, skilled talent with positions, will deservedly earn the increased margins. This is the benefit of free enterprise and healthy competition in a fair market environment.

3. Seizing change to succeed – The requirement for examining areas in our firms to help control or improve recruiting efforts will soon be a burning priority for all of us, if not by now. The numbers tell the story: based on data from ASA’s 2005 quarterly surveys, U.S. annual sales for temporary and contract staffing totaled $69.5 billion in 2005, exceeding the industry’s previous sales record in 2004 by 8.5%. And, according to the survey, average daily employment in the fourth quarter of 2005 totaled 3.1 million, exceeding the 3 million threshold for the first time since the survey program was started in 1992. Temporary help sales in the fourth quarter also hit a new high of $18.5 billion.

As part of the reassessment and realignment staffing firms need to rethink their technology strategy. Firm leaders need to ask if they can achieve their desired growth performance with existing technology. Do they need to upgrade? Replace existing platform with a more streamlined system that will deliver exactly what they need? What IT functionality do they need to adopt to be more competitive and deliver new value for clients? We all need to ask how we can improve reporting, documentation and reconciliations with clients? Are firms tracking the right metrics for clients and employees? And, staffing company owners need to be frugal and focused on acquiring and deploying only the technology they need, not buying beyond their means in favor of some fictitious, albeit alluring potential capability that may never materialize. Technology can help spotlight new opportunities that will help staffing firms and their clients to be as efficient as possible.

After all, our collective mission is to provide our clients with flexibility and access to diverse talent. It’s up to each of us to decide how we deliver on the promise and what tools can help us grow most effectively.

As it says on the ASA website, “In today's rapidly changing business climate, efficiency and effectiveness are crucial to your organization's survival.”

Tom Sarach is the Vice President of Operations for COATS, Inc., based in Virginia Beach, VA. He can be reached at 757.490.1700, or by e-mail at tsarach@coatssql.com.