Staffing firms can add value while maintaining healthy margins

Market forces and process innovations that have been driving change across industry verticals are snowballing, and the cumulative effect over time is gaining weight. In particular, organizations continue to face challenges brought on by rapid pace of change, including:

  • Customer pressure for a more directly connected experience with the supplier
  • Time pressure for shorter investment return horizons
  • Adaptive pressure for more agile innovation

One way to address these challenges and turn them into opportunities that I’ve seen is clients embracing the change and determining how they can build flexibility in an organization that allows for movement with the tide, rather than against it. The result is a shift already taking place, and one that will increase over the next decade, to a much higher proportion of temporary or variable staffing. By 2020, 40% of the total US workforce is expected to be contract or contingent workers.

There are new risks in motivating a more variable workforce, managing staffing contracts and maintaining control of strategic capabilities. I believe that the question of which functions to staff variably and which to keep “in-house” clearly depend on the type of business. For some, the IT space operates best with a variable workforce. For others, where IT is their strategic differentiator (think Amazon), they may want to look at the customer service side or at manufacturing to reduce the upfront investment. As those in the staffing industry know, chosen functions can be essential parts of the business, but should be less strategic. However, there is a key role for staffing partners to play in terms of knowledge transfer, which will become increasingly important.

Of course, at the end of the day, all companies are aiming to do more with less, and the solution of a variable workforce is one factor in the rise of procurement that I continue to see. It’s no secret that for both consulting firms and staffing firms, this is affecting our margins and that trend is not going to go away. So the question becomes, how do we meet the demand of clients and maintain healthy margins ourselves?

For one, I think the value that we bring is paramount to success. I’ve found that clients value staffing firms when we can help enable more focused investment into their strategic business functions and help offset risks associated with investing in some of the more legacy-related activities. A staffing contractor should never be seen as being more interested in profiting from the contract than in partnering with a client to innovate their brand. That’s often where I start to see push-back on some of the lower-cost models; clients aren’t getting the quality they are looking for.

Today’s business leaders are living in a world where there is a shorter time horizon for success. We can certainly help them achieve that goal, but we must find a way to overcome the cost pressures so that we can deliver true value to clients.